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South African Value-Added Tax: Place of supply rules for cross border supplies of services – a comparative analysis with Chapter 3 of the OECD’s International VAT/GST Guidelines

Zulch, Hendriette (2017-12)

Thesis (MAcc)--Stellenbosch University, 2017.

Thesis

ENGLISH SUMMARY : The international norm is that Value-Added Tax (VAT) is a destination-based, consumption-type system that levies VAT on a supply in the destination of consumption. Some jurisdictions have explicit place of supply rules in their VAT legislation to determine the jurisdiction of consumption and consequently, the jurisdiction where the supply should be taxed. The South African VAT Act, does not contain such explicit place of supply rules, but has inferred place of supply rules interwoven into the various provisions. Due to the increase in international trade, the OECD recognised that place of supply rules should be consistent between jurisdictions to ensure that unintentional non-taxation or double taxation does not occur. The OECD developed a set of recommended rules to determine the place of taxation for cross border supplies of services and intangibles which are described in Chapter 3 of the International VAT/GST Guidelines. The purpose of this research study was to determine whether the inferred place of supply rules in the VAT Act and the aforementioned recommended rules in the OECD Guidelines are in harmony, and to make remediation recommendations where it found not to be in harmony. For purposes of this research paper, the outcome of the rules were considered in different scenarios of cross border supplies for the following types of services: - massage services - construction services - consulting services - subscription services to a web application The research methodology followed was non-empirical research to identify and summarise the recommended rules in the OECD Guidelines and the inferred place of supply rules in the VAT Act. Furthermore, a comparative analysis was conducted by applying these rules to different scenarios of cross border supplies and comparing the results. It was found that the outcome of the recommended rules in the OECD Guidelines and the inferred place of supply rules in the VAT Act are in harmony in respect of cross border supplies of massage services and construction services. The outcome were not in harmony in the following scenarios for consulting services and subscription services to web applications: - Where a vendor (resident or non-resident supplier of consulting services or resident supplier of subscription services to a web application) supplies services to a non-resident customer who is in South Africa at the time that the services are rendered. - Where a vendor (resident or non-resident supplier of consulting services or resident supplier of subscription services to a web application) supplies services to a resident customer, but the services are physically rendered outside South Africa. - Where a non-resident non-vendor supplier supplies services to a resident customer and the services are utilised or consumed outside South Africa (in a foreign jurisdiction). In order to ensure that unintentional non-taxation or double taxation does not occur where services are rendered between South Africa and foreign jurisdictions, the inferred place of supply rules in the VAT Act should be amended to render an outcome which is in harmony with the recommended rules in the OECD Guidelines. Recommendations were made on how the VAT Act can be amended to achieve such harmony.

AFRIKAANSE OPSOMMING : Die internasionale norm is dat belasting op toegevoegde waarde (BTW) ‘n bestemmings-gebaseerde verbruiks-tipe stelsel is wat BTW hef op ‘n lewering in die jurisdiksie waar verebruik plaasvind. Sommige jurisdiksies het uitdruklike plek-van-lewering reëls in hul BTW wetgewing wat die jurisdiksie van verbruik, en gevolglik ook die jurisdiksie waar die lewering belas moet word identifiseer. Die Suid Afrikaanse BTW Wet bevat geen uitdruklike plek-van-lewering reëls nie, maar het wel geïmpliseerde plek-van-lewering reëls wat in verskeie bepalings vervat is. Weens die toename in internasionale handel, het die OECD gemerk dat plek-van-lewering reëls tussen jurisdiksies konsekwent moet wees om te verseker dat onbedoelde geen-belasting of dubbel-belasting nie plaasvind nie. Die OECD het gevolglik ‘n stel voorgestelde reëls ontwikkel wat jurisdiksies in hul wetgewing kan implementeer om die plek te bepaal waar die lewering van oorgrens dienste of ontasbare goedere belas moet word en is vervat in Hoofstuk 3 van die OECD se riglyne-dokument. Die doel van hierdie navorsingswerkstuk was om te bepaal of die geïmpliseerde plek-van-lewering reëls in die BTW Wet en die OECD se voorgestelde reëls in harmonie is, en om aanbevelings te maak in gevalle wat die uitkomste nie in harmonie is nie. Vir doeleindes van die navorsingswerkstuk is die uitkoms van die bogenoemde reëls in verskeie scenarios van oorgrens transaksies vir die volgende tipes dienste oorweeg: - masserings dienste - konstruksie dienste - konsultasie dienste - subskripsie dienste tot ‘n webtoepassing Nie-empiriese navorsingsmetodologie was gevolg om die OECD se voorgestelde reëls, asook die geïmpliseerde plek-van-lewering reëls in die BTW Wet te identifiseer, op te som en te bespreek. ‘n Vergelykende analise is verder gedoen deur die reëls op ‘n verskeidenheid van oorgrens transaksies toe te pas en die resultate te vergelyk. Daar is bevind dat die uitkoms van die OECD se voorgestelde reëls en die geïmpliseerde plek-van-lewering reëls in die BTW Wet ten opsigte van oorgrens masserings- en konstruksie dienste in harmonie is. Die uitkoms van die verskeie stelle reëls is egter in konflik in die volgende oorgrens transaksies van konsultasie dienste asook subskripsie dienste tot ‘n webtoepassing: - Waar ‘n BTW ondernemer (inwoner of nie-inwoner verskaffer van konsultasie dienste of inwoner verskaffer van subskripsie dienste tot ‘n webtoepassing) ‘n lewering maak aan ‘n nie-inwoner kliënt wat in Suid-Afrika is wanneer die dienste gelewer word. - Waar ‘n BTW ondernemer (inwoner of nie-inwoner verskaffer van konsultasie dienste of inwoner verskaffer van subskripsie dienste tot ‘n webtoepassing) ‘n lewering maak aan ‘n inwoner kliënt, maar die dienste word fisies buite Suid-Afrika gelewer. - Waar ‘n nie-inwoner nie-ondernemer verskaffer dienste aan ‘n inwoner kliënt lewer en die dienste word buite Suid-Afrika verbruik. Om te versker dat dienste wat gelewer is tussen Suid-Afrika en ander jurisdiksies nie onbedoeld glad nie belas word, of dubbeld belas word nie, moet die geïmpliseerde plek-van-lewering reëls in die BTW Wet gewysig word om ‘n uitkoms te lewer wat in harmonie is met die OECD se voorgestelde reëls. Aanbevelings word gemaak hoe die BTW Wet gewysig kan word om sodanige harmonie te bereik.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/102750
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