There is continued uncertainty for the local tourism industry offering agency services to foreign travellers and operators.
Inconsistencies in the approach adopted by the South African Revenue Service and an onerous administrative burden on particularly smaller companies are making South Africa uncompetitive compared to the rest of the world.The South African Tourism Services Association unpacked the practical consequences of the Vat complexities for inbound operators and the implications of a tax court decision in the so-called Ken case during a recent webinar.
However, the tax court decision is only binding on the two parties, namely Sars and Ken, warns Jo Roman, senior associate at ENSafrica. The case is quite fact-specific and cannot be relied on in general terms.The relationship No contractual rights and obligations are established between the agent and the third parties. The agent merely acts as the conduit to bring about the legal relationships between the principal and the suppliers.The principal must grant the agent the necessary authority to act on their behalf. If a dispute arises, the agent relies on that authority to show that the authority existed at the time when the legal act was concluded.
Suddenly, these services are now consumed within the country, and the agency mechanism changes from an arranging fee to effectively becoming a principal that should charge the standard Vat rate on the services.“If you do not have a proper system in place and there is no control over your finances, it becomes difficult and expensive to manage,” Van Rooyen adds.
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