total zero-rated purchases used exclusively to make zero-rated supplies.
The transport of fare-paying passengers by road or railway is exempt, excluding transport by way of a funicular railway or a game-viewing vehicle. The transport of passengers from South Africa to a destination outside South Africa (and vice versa) is zero-rated. The zero rate also applies to the local leg of an international flight, e.g. a connecting flight between Cape Town and Johannesburg en route to New York. The supply of accommodation and meals (e.g. in hotels) is subject to VAT at the standard rate.
Travel agency fees charged for arranging a tour package will be zero-rated if the tourist is outside South Africa when the tour package is arranged and standard rated if the tourist is in South Africa when the tour package is arranged. Tour operators must keep accurate records to establish which part of the package relates to exempt supplies (e.g. travel in South Africa), zero-rated supplies (e.g. travel to a place outside South Africa) and taxable supplies (e.g. hotel accommodation).
Transfer of a business
The sale of an enterprise (or part thereof) to a registered vendor is zero-rated if the parties have agreed in writing that:
the enterprise will be sold as a going concern at 0%;
the enterprise will be an income- earning activity on the date of transfer; and
the assets that are necessary to carry on the enterprise are disposed of to the purchaser.
If the purchaser of an enterprise, sold as a going concern at 0%, acquires the enterprise partly for non-taxable purposes, output tax must be paid to the extent of the intended non-taxable application (if more than 5% of total application).
The supply of services to a warrantor for consideration, in respect of goods under warranty, is zero-rated if:
the warrantor is a nonresident and non-vendor;
the warrantor is outside South Africa at the time the services are rendered; and
VAT was paid on the importation of the goods under warranty.
Other indirect taxes
Customs duty is payable on the importation of goods into South Africa at the time of entry for home consumption. The rate of duty is often determined as a percentage of the value of the goods (ad valorem), at a rate ranging from 0% to as high as 60%. Additional ad valorem customs duties are levied on a range of luxury items.
South Africa is a member of the Southern African Customs Union, the other members being Botswana, Namibia, Lesotho and Swaziland. Import duties are not levied on movements of goods between these countries.
Depending on the origin of the imported goods concerned, preferential tariff treatment may be applied. Furthermore, a number of duty relief schemes are available, depending on the type of customs-related activities in which an importer or exporter engages.
Excise duty is payable on the following locally manufactured goods with a corresponding customs duty (at the same rate of duty) on imported goods of the same class or kind: fuel products, tobacco products, malt beer, traditional African beer, spirits (liquor) products, wine, other fermented beverages, ad valorem products and environmental levy goods.
The rate of excise duty is levied on either an ad valorem or a specific basis (i.e. per litre).
An environmental levy is charged on certain locally manufactured and imported plastic carrier bags and flat bags (e.g. grocery bags) at a rate of 4 cents per bag. The levy is not payable on plastic bags used for immediate wrapping/packaging, refuse bags and refuse bin liners.
Transfer duty is payable on the transfer of immovable property, unless the supply of the property is subject to VAT. The person acquiring the property must pay the transfer duty, at the following rates:
if the property is acquired by a person other than a natural person, the rate is 8%;
if the property is acquired by a natural person and the value of the property:
does not exceed ZAR500,000, no transfer duty is payable;
is ZAR500,001 – ZAR1 million, the rate is 5% on the value above ZAR500,000;
exceeds ZAR1 million, the transfer duty is ZAR25,000 plus 8% on the value above ZAR1 million.