South African Revenue Services (“SARS”) announced on 27 March 2020 that imported goods defined as “Essential Goods” as detailed in the Regulations published in Government Gazette No 43148 specific to the COVID-19 pandemic will be exempt from Value-added Tax (“VAT”).

The Regulation as published in the Government Gazette sets out a definition of “Essential Goods” in Chapter 2 paragraph 11A and paragraph A of Annexure B.

“Essential Goods “are listed as being:

1. Food

  1. Any food product, including non -alcoholic beverages;
  2. Animal food; and
  3. Chemicals, packaging and ancillary products used in the production of any food product.

2. Cleaning and Hygiene Products

  1. Toilet Paper, sanitary pads, sanitary tampons, condoms;
  2. Hand sanitiser, disinfectants, soap, alcohol for industrial use, household cleaning products, and personal protective equipment; and
  3. Chemicals, packaging and ancillary products used in the production of any of the above.

3. Medical

  1. Medical and Hospital Supplies, equipment and personal protective equipment; and
  2. Chemicals, packaging and ancillary products used in the production of any of the above.

4. Fuel, including coal and gas

5. Basic goods, including airtime and electricity.

SARS have indicated that items falling within this definition will fall under Item 412.11/00.00/01.00 of Schedule 1 to the VAT Act.

This Item of Schedule 1 refers to:

Goods imported-

  • For the relief of distress of persons in cases of famine or other national disaster;
  • Under any technical assistance agreement; or
  • In terms of an obligation under any multilateral international agreement to which the Republic is a party:

Provided that-

  • The importation of any goods under this item shall be subject to a certificate issued by the International Trade Administration Commission and to such other conditions as may be agreed upon by the Governments of the Republic, Botswana, Lesotho and Swaziland; and
  • Goods imported under this item shall not be sold or disposed of to any party who is not entitled to any privileges under the item, or be removed to the area of Botswana, Lesotho, Namibia or Swaziland without the permission of the International Trade Administration Commission.

Schedule 1 must be read together with Section 13(3) of the VAT Act which states that “The importation of goods set forth in Schedule 1 to this Act is exempt from the tax imposed in terms of section 7(1)(b)”

So in summary any goods that fall within the definition of essential goods as set out in paragraph A of Annexure B to the Regulation will be exempt from VAT on importation into South Africa in terms of Schedule 1 to the VAT Act.

The objective of this change is to alleviate cash flow pressures on businesses importing “Essential Goods” into South Africa as the business importing will not be required to pay the VAT component normally payable on import.

There will also be a full rebate of customs duty in terms of item 412.11 of Schedule 4 of the Customs and Excise Act.

John Jones

Director Corporate and International Tax Johannesburg

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