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International Annual Review 2012

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Service: Tax, Global Indirect Tax, Global Compliance Management Services
Type: Regulatory update
Date: 6/8/2012

South Africa - VAT inclusivity vs. VAT exclusivity

June 8: The South African value added tax (VAT) law generally deems the price charged by a vendor to include VAT.

VAT inclusivity, however, has often been disputed in South African courts.

Court cases

In one case, the court held that with respect to a “VAT silent agreement” (which determined that the purchaser was liable for transfer duty, if applicable), that the price included VAT and that the seller had to issue a tax invoice. It could not be implied that a purchaser agreeing to pay transfer duty would not object to paying VAT instead.
Another case concerns the recovery of VAT when the supplier was not a registered VAT vendor when the contract was concluded. The supplier wanted to recover VAT on becoming registered for VAT. The court held for the supplier.
In another case, the seller leased his farm to the buyer with an option to purchase for R700,000. The buyer exercised the option indicating the price as R700,000 inclusive of VAT. The seller no longer wanted to sell and the buyer sought judicial relief. The seller argued that the option was invalid and that it did not mention VAT, whereas the deed of sale recorded the price as inclusive of VAT. The seller claimed that if the option terms were inconsistent with exercise terms, it could not have been exercised validly. The seller contended that the option implied VAT exclusivity and that any VAT liability would be for the buyer’s account. The court held that the law did not imply VAT exclusivity and that there could not have been tacit terms implied by the facts to the effect that the price would be exclusive of VAT.

To read a 2012 report on these cases, prepared by the KPMG member firm in South Africa: VAT Inclusivity versus VAT Exclusivity

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© 2013 KPMG International Cooperative ("KPMG International"), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.