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How VAT Works on Exports from South Africa (And How to Reclaim It)

If you're exporting goods from South Africa, it's important to understand how VAT works on those exports. The good news is, in most cases, you can export your goods without paying VAT and even reclaim some input VAT. Let's break it down.

Exports are Generally Zero-Rated for VAT

When you export goods from South Africa, those exports are usually "zero-rated" for VAT purposes. This means that VAT is charged at a rate of 0% on the goods you're exporting. Some examples:

  • You're a clothing manufacturer in Joburg shipping t-shirts to a client in Europe
  • You run a wine farm in the Cape Winelands and export a batch of Pinotage to the USA
  • You make machinery in Durban that you sell to a company in Zambia

In these cases, you don't charge or collect any VAT from your overseas customers. Score!

Why Exports are Zero-Rated

So why does South Africa let exports go VAT-free? There are a few good reasons:

  • It keeps SA exports competitive in international markets by not adding extra taxes
  • It prevents double taxation, since the importing country will charge their own taxes
  • Zero-rating exports is the international norm and aligns with SA's trading partners
  • It encourages companies to export more by removing a tax burden

Direct vs Indirect Exports

Now, there are two different ways exports can work from a VAT perspective: direct and indirect exports.

Direct exports are when you as the supplier are responsible for delivering the goods to your overseas client, either yourself or by hiring a transport company. In this case, you can zero-rate the export, as long as:

  • You export the goods through a designated commercial port within a certain timeframe
  • You keep the required documentation as proof

Indirect exports are when your foreign customer collects the goods themselves or arranges their own transport out of SA. With indirect exports, you usually have to charge the standard 15% VAT, which your customer can then claim back from the VAT Refund Administrator (VRA).

However, you may be able to zero-rate an indirect export if you can prove the goods were delivered to a designated harbor or airport for export. It's up to you if you want to take on this risk though.

Reclaiming Input VAT

So that covers VAT on the exports themselves. But what about all the input VAT you incurred on your business expenses related to those exports? The great news is, you can usually deduct that input VAT from your output VAT and get a nice refund from SARS

To claim back input VAT on exports, you need to:

  • Have the relevant tax invoices
  • Keep the required export documentation as proof, like
  • Customs documents
  • Transport documents like air waybills or bills of lading
  • Proof of payment from your overseas client
  • Submit your VAT return to SARS within the appropriate period

If you used a transport company for a direct export, they need to give you an invoice and keep the customs paperwork to support your input VAT claim

Some Fine Print

As with anything tax-related, there are some important bits of fine print to keep in mind:

  • There are time limits on when you need to export the goods and submit your documents to SARS to claim input VAT, so make sure you know the deadlines
  • If you accidentally charged VAT on exports, you need to reimburse your customer and submit corrections to SARS to avoid penalties
  • Certain exports, like some services provided to foreign clients, may have special rules, so double check if you're not sure
  • Direct and indirect export rules also apply to sales from customs-controlled warehouses

The Bottom Line

In summary, most goods exported from South Africa are zero-rated for VAT, whether through direct or indirect exports. You generally don't charge VAT on exports, and you can reclaim input VAT on your related expenses.

Just make sure you follow all the requirements for documentation, timelines, and designated ports. When in doubt, chat with a tax professional to make sure you're ticking all the right boxes.

Now go forth and conquer those international markets!

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