Imports, Exports and SARS

Trading on a global scale has for many years been seen as the ultimate form of expanding your business’ reach, output, and client base. As with all forms of business, imports and exports come with certain accounting and tax implications that need to be accounted for accurately and transparently.

What is seen as an import and/or export?

Both goods and services can be imported and exported. An easy way of looking at imports and exports are as follows: The country producing the good or service is the export country and the country receiving the benefit of that good or service, produced by the other country, is the import country. VAT Considerations

Most businesses are accustomed to the basic treatment of VAT at 15% for both VAT input claimed, and VAT output charged. Unfortunately, VAT treatment of imports and/or exports have certain rules, as set out by the VAT Act, that need to be adhered to, and thus VAT treatment can range from 0%, to 15%, to no VAT treatment at all depending on the transaction’s specific characteristics. Furthermore, the import and export of goods require a business to be registered for Customs, which in turn has its own rules when it comes to VAT.

And, to top it all off, SARS tends to review and audit the VAT submissions of clients that deal with imports and/or exports – which means that the accuracy of returns is a top priority when trading on a global scale.

Income Tax Considerations

In the simplest form of imports and exports, the country importing the good or service will be incurring an expense, and the country exporting said good, or service will be generating income. Although this might seem quite simple to account for, it’s crucial to understand that different countries account for income tax in different ways. Some account for income tax on a source basis, some on a residency basis, and some on a mixture of both. Thus, you could be accountable for income tax in both the import and export country. Furthermore, income tax agreements exist between some countries and must be considered when calculating your income tax liability.

Best Practice

It’s clear that there are quite a few tax implications to keep in mind when dealing with imports and/or exports. And SARS could impose various penalties should the tax not be accounted for correctly. The best practice would therefore be to seek guidance from professionals, such as Business Services, to guide you in accounting for your imports and exports correctly. This will save you time and money and grant you the opportunity to do what you do best – business.