Questions have been raised following the publication of the first set of rules for the Customs Duty Act related to the term “deferment benefit”. Industry stakeholders are questioning why the word benefit is used in conjunction with deferment – especially in light of a published proposal by the South African Revenue Service earlier this year to introduce a fixed deferment period of one calendar month to apply to all deferment account holders. Currently deferment account holders make payments at different times of the month on agreed dates with SARS allowing companies to stagger their payments and control cash flow.
SARS has however proposed that each company should only have one national deferment account which will run from the first to the last day of each month and which will then be payable by the 7th day of the following month. This is also how the matter is laid out in the draft rules now out for public comment. Whilst the proposal has been put on hold and has been postponed following a wide industry outcry as it would severely affect cash flow, the use of the word “benefit” in the rules implies that SARS sees the deferment accounts as exactly that – some kind of a privilege or benefit in the name of the deferment account holder.
“So one has to ask if this is something that they feel they can take away as one can do with a benefit?” said an industry source FTW spoke to. “We are of the opinion that the world benefit” should not be used in this context at all. What essentially amounts to a similar deferment scheme is not described as a “benefit” in the VAT Act, and the Revised Kyoto Convention does not refer to “deferment of duty” in these terms. It is a strange “benefit” indeed that requires every deferment account holder to have a bank guarantee in place guaranteeing payment not only of the duty, but a 25% portion of the import VAT. “VAT vendors are not required in terms of the VAT Act to have any guarantees in place for the deferment of VAT in terms of the VAT Act. SARS has habitually discriminated against importers and customs brokers by treating imports, and the corresponding deferment of taxes, differently.” Another issue that has cropped up in the Duty Act is that the document only refer to the deferment of duties and not VAT.
“It should read “import taxes” which includes both, but they have given industry a set of rules that only applies to duties and not VAT. There is major room for confusion and clarity will have to be obtained around this.”