Just to be clear, to defer something means to postpone it. While this might be construed as procrastination, it provides a financial benefit in the customs and value-added-tax (Vat) environment. The South African Revenue Service (Sars) deferment scheme provides a deferment holder with a definite financial benefit. If you have not been benefiting from the deferment scheme, there is no time like the present to investigate, particularly since, on February 5, Sars invited comment on the proposed amendment to the scheme by February 27.

In terms of Section 39(1) of the Customs and Excise Act (Act), the commissioner of Sars may allow the deferment of payment of customs duties, subject to certain conditions and for such periods as he may determine. This deferment arrangement also applies to the Vat levied on importation in terms of Section 13(6) of the Vat Act.

The payment of customs duty and Vat may be deferred for up to 30 days. At the conclusion of the deferment period, the deferment holder is allowed a further seven days to pay all the customs duty and Vat that would have been deferred for the 30-day period. The deferment holder may select a suitable 30-day deferment period, which can be from the first to the twenty-eighth day of each month. If, in any deferment period, the deferment limit is exceeded, the deferment holder will not be able to defer any additional customs duty and/or Vat for the remainder of that period. The deferment holder is also required to provide a security amount in respect of the approved deferment limit. The security amount can be equal to the deferment limit or can be less, depending on the risk profile of the deferment holder.

South Africa’s Vat system uses the subtractive method to calculate the Vat liability. This calculation takes into account all output tax and input tax that occurred in a particular tax period and usually takes into account the ‘time of supply’ rules, read together with the method (invoice basis or payment basis) that is adopted by a business to account for Vat. Generally, the issue date of an invoice or payment will determine the tax period in which the output tax or input tax must be allocated.

In the case of an input tax deduction arising from Vat levied on importation, such deduction must be allocated to a tax period corresponding to the date the Vat is paid to Sars. In addition, the deduction of input tax must be supported by documentation that must be held at the time a return in respect of that tax period is submitted to the tax administration.

As a result of Sars’ consultations and industry comments, sections 16(3)(a)(iii) and 16(3)(b)(ii) of the Vat Act were amended to allow the input tax deduction to be made in respect of the tax period when the customs release notification was issued. According to Sars, the documentary requirements under Section 16(2)(d) of the Vat Act remain unchanged. These amendments will take effect on April 1. As a consequence, and in order to achieve comparable fiscal neutrality, it is necessary to amend the deferment period so that it aligns with the Vat period.

Sars has proposed that a fixed deferment period of one calendar month apply to all deferment account holders. The payment of the deferment account to Sars will be due on or before the seventh day of the following month. Vendors that have imported goods may deduct the input tax attributable to the tax period during which the goods were released in terms of the Act. As an example, where a clearing agent clears the goods on behalf of a vendor (importer) or a vendor has a deferment account, goods are released in Month 1, payment of the output tax to Sars takes place on or before the seventh day of Month 2, and the vendor deducts the input tax through its VAT201 (vendor declaration) submitted at the end on Month 2. The current position that, when the deferment limit in any deferment period is exceeded, the deferment holder will not be able to defer any additional customs duty and/or Vat for the remainder of that period, is retained. Sars has indicated that a communication with respect to an arrangement for March 2015 will be circulated separately, and this solution is to be provided for in the rules of the Act.
The proposed implementation date is July 1.

Scrap Metal Export Control Guidelines
On February 13, the International Trade Administration Commission of South Africa (Itac) published the amendment to the price preference calculations contained in Paragraph 4.2 of the Control Guidelines on the Exportation of Ferrous and Non-Ferrous Waste and Scrap. The amendment provides for a distinction between the types of metals. An amount of 30% will be deducted to reflect the price at which ferrous scrap metal must be offered for sale to the domestic consuming industry, and an amount of 25% will be deducted to reflect the price at which aluminium scrap metal must be offered for sale to the domestic consuming industry, and an amount of 20% will be deducted to reflect the price at which all other scrap metal must be offered for sale to the domestic consuming industry.

Spirituous Beverages Tariff
Sars released draft spirituous beverages tariff amendments in terms of Schedule No 6 to the Act – Rebates and Refunds of Excise Duties, Fuel Levy, Road Accident Fund Levy and Environmental Levy – dated February 5, on which comment is due by February 20.

Customs Control Act Workshop
On February 12, Sars extended an invitation to two representatives from each company to attend its workshop on the draft rules for chapters 32 to 41 of the Customs Control Act. The workshop is scheduled for March 27, from 10:00 to 12:00, in the auditorium the revenue service’s Linton House offices, in Brooklyn. Confirm your attendance by March 20.

Bonded Goods Court Ruling
On February 11, Sars released a High Court judgement relating to the retention and release of bonded goods on which customs duties and Vat have not been paid, and the preference or ranking order of claims.

Cheese Imports from the EU
On February 16, Sars, in accordance with a decision taken in April 2010 under the Trade, Development and Cooperation Agreement, published the January 2015 tariff rate quota merchandise trade statistics for imported cheese from the European Union.