Au­thor­i­ties will make you pay, pal

Ex­perts warn South Africans to con­sider le­gal­i­ties be­fore launch­ing sales through PayPal

Finweek English Edition - - Money Clinic - RUAN JOOSTE ru­anj@fin­week.co.za

PAYPAL HAS BE­COME one of the most fre­quently used In­ter­net pay­ment mech­a­nisms world­wide, and the re­cent an­nounce­ment of First Na­tional Bank and PayPal’s part­ner­ship opened the chan­nel for South Africans to with­draw pay­ments made in US dol­lars to pay for goods and ser­vices, in rand.

PayPal acts as a pay­ment proxy for your credit card and/or bank ac­count for cash top-ups via a PayPal ac­count to buy goods over the In­ter­net. With the suc­cesses of in­ter­na­tional sell­ing plat­forms such as eBay or Bid or Buy, PayPal has be­come a con­ve­nient and rel­a­tively safe way for in­di­vid­u­als and busi­nesses to trade via the In­ter­net with­out tak­ing on the risk and cost of us­ing mul­ti­ple pay­ment fa­cil­i­ties.

But ex­perts warn South African res­i­dents should con­sider all the ex­change con­trol and tax im­pli­ca­tions be­fore launch­ing sales through PayPal.

The SA Re­serve Bank will im­pose trans­ac­tional lim­its when buy­ing for­eign cur­rency through PayPal, while the SA Rev­enue Ser­vice (Sars) will en­force val­ueadded tax reg­u­la­tions, which is the case with all stan­dard ex­port trans­ac­tions.

Deloitte Tax as­so­ci­ate Keith Veitch says there are ex­change con­trol re­quire­ments re­lat­ing to the ex­port of tan­gi­ble goods and it’s rec­om­mended in­di­vid­u­als and busi­nesses li­aise with their bankers in that re­gard. “If the prod­ucts or ser­vices are re­quired to be paid in in­ter­na­tional cur­ren­cies, it’s sug­gested to ask the ad­vice of FNB about the use of a for­eign cur­rency ac­count (where the re­stric­tions have re­cently been re­laxed),” says Veitch.

Deloitte Tax di­rec­tor Geral­dine Con­nell says it’s im­por­tant to ad­here to VAT doc­u­men­tary re­quire­ments for the move­ment of goods from SA. Those de­pend on whether the seller has ex­ported the goods him­self or whether the buyer has col­lected the goods from SA.

If the seller is re­spon­si­ble for ex­port­ing the goods from SA, he needs to re­tain the or­der or con­tract with the buyer, prove the seller has paid the trans­port costs, a copy of the freight trans­port doc­u­ment, a stamped SAD500 form, plus proof of pay­ment.

“Those doc­u­ments must be ob­tained within three months and the goods must be ex­ported within two months of the date of the in­voice or the re­ceipt of any pay­ment. With the cor­rect doc­u­men­ta­tion and pro­ce­dures in place, zero-rated VAT would ap­ply to those ex­port trans­ac­tions,” says Con­nell.

SA’s VAT leg­is­la­tion also gov­erns the time and value of goods be­ing supplied but doesn’t de­scribe the place where a ser­vice or goods are supplied. For ex­am­ple, a South African sup­plier has an on­line shop sell­ing Soc­cer World Cup mem­o­ra­bilia, which is stored in a ware­house in China and dis­patched world­wide. SA doesn’t have rules about where the sale takes place from a VAT point of view.

Says Con­nell: “In fu­ture, e-com­merce VAT cal­cu­la­tions may fol­low the reg­u­la­tions that ap­ply in Europe, where the busi­nessto-con­sumer con­cept ap­plies and VAT is ac­counted for in the lo­ca­tion of the sup­plier.” For ex­am­ple, if a South African sold a wid­get to some­one in Bri­tain, the trans­ac­tion would be sub­ject to VAT in SA. The reg­u­la­tion dif­fers for busi­ness-to-busi­ness trans­ac­tions, where the sup­ply of the ser­vice or goods is deemed to take place in the ju­ris­dic­tion of the cus­tomer. Here, the sale of the wid­get would be sub­ject to VAT in Bri­tain at 17%.

“For ser­vices ren­dered through PayPal to in­ter­na­tional re­gions, the VAT im­pli­ca­tions are more de­pen­dent on where the ser­vices are ren­dered and the lo­ca­tion of re­sources used. An­other con­sid­er­a­tion for in­ter­na­tional ser­vices is that, if the client is in SA – res­i­dent or not – while the ser­vice is be­ing de­liv­ered, the sup­plier may be li­able for SA’s 14% VAT.”

“We gen­er­ally get spe­cific rul­ings from Sars about this for large clients who ap­proach us. From a cus­toms duty per­spec­tive, ex­porters need to make sure they’re reg­is­tered as such with Sars and that they take into ac­count any ex­port per­mit re­quire­ments re­lat­ing to their prod­ucts,” says Con­nell.

GERAL­DINE CON­NELL

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