Uncertainty around the value-added tax treatment on services offered to foreign tour operators or foreign travellers continues to plague the local tourism industry.
The Vat Act provides for a zero rating of services when a local entity renders services or goods to a foreign entity or individual abroad. However, the lack of uniformity in the act’s applications creates uncertainty.The Ken case has raised hopes for more clarity and certainty. Ken, a destination management company in the tourism industry, successfully appealed against additional Vat assessments raised by Sars in the tax court.
Hence, there is continued uncertainty for the local tourism industry offering agency services to foreign travellers and operators.A lot turns on the relationship between the principal and the agent. Cliff Watson, tax director at BDO, says the two terms are being used quite loosely in the industry. Practical consequences ADVERTISEMENT CONTINUE READING BELOW He gives an example of a small local business that acts as an agent for an Italian tour operator.
Cullinan Holdings group financial director David Standage says the current reality for local tourism businesses is one of continued uncertainty. Their group navigates the Vat complexities by broadly following the Australian general sales tax guidelines.
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