Import VAT – When and how to claim


vat 1Author: Cliff Watson, Tax Director Grant Thornton Johannesburg

The question of when to claim the VAT paid when importing goods has been on the mind of all importers in recent years, as so many have been getting this wrong and suffering penalty and interest charges as result. The question has also been on SARS’ radar and became one of its focus areas when doing VAT audits. The main issue driving these concerns is that VAT legislation was amended twice in a 12-month period.

Situation prior to 1 April 2014

Up to 30 March 2014, a vendor was entitled to claim the VAT paid on the value of goods imported to South Africa only when the goods have been invoiced or paid, whichever was the earlier, during that tax period.

The documentary requirements to substantiate the VAT claim included submitting proof that the VAT amount was paid to SARS before submitting the VAT return relating to that claim. In essence, this meant that the vendor could claim the VAT in the tax period the goods were imported, while the clearing agent only paid Customs via its deferment account in the next tax period, but before the vendor submitted its VAT return.

Situation between 1 April 2014 and 1 April 2015

VAT legislation was amended from 1 April 2014, which further limited the period during which import VAT could be claimed.

Since the change in legislation, the import VAT could only be claimed in the tax period during which the goods were imported and provided the VAT was paid to Customs during the same tax period. Vendors using the services of a clearing agent could only claim the VAT in the tax period that the clearing agent paid the import VAT through its deferment scheme. Generally, this resulted in vendors only being able to claim VAT in the following tax period, which affected their cash flow negatively.

Situation after 1 April 2015

The VAT Act was again amended from 1 April 2015 to once again allow vendors to claim the VAT during the tax period when goods are imported and released in terms of the Customs and Excise Act.

However, the documentary requirements to substantiate the VAT claim again include proof that the VAT was paid to SARS before the vendor’s VAT return relating to that claim is submitted. In other words, vendors can claim the VAT during the tax period in which the goods are imported and released by Customs, but the VAT payment (either by the vendor, or via the clearing agent’s deferment account) can take place in the next tax period but before the vendor submits its VAT return.

Clarification of documentary evidence

The documentary requirements remained more or less intact but now include the bill of entry/release notification or other Customs prescribed documents, as well as the receipt for the VAT payment to SARS in respect of the import.

Practically, it remains a difficult task to obtain the payment receipts from clearing agents and vendors will have to gain the cooperation of their agents in order to avoid penalties and interest charges from SARS or any negative cash flow implications for not being able to claim the import VAT timeously.

If you’re uncertain about when or how to claim input VAT on imports, contact us for advice.