Deferred VAT – credit to Customs and Excise

Mar 10, 2008

by Hester Hopkins of Customs @ Wylie

The Department of Customs and Excise offers a 30-day account facility (deferment scheme) to registered clients, by which the payment of excise duties and VAT may be postponed for 30 days.

This facility enables clients to postpone the payment of duties and VAT for 30 days from the date of importation.

The duties and VAT should be paid by the end of the 30-day period, failing which the facility will be suspended and penalties become payable, says Hester Hopkins, National Manager of Customs @ Wylie, an initiative of Shepstone & Wylie’s International Trade Department

The Commissioner of Customs and Excise may require importers seeking such deferment to furnish security in the form, nature or amount determined by him to protect the State from any loss that might be incurred.

The amount that may be deferred is secured by means of a bond/ guarantee issued by an approved financial institution. Such bond covers both the customs duties and VAT.

Compliant and existing clients qualifying for small business status may apply for a 40 percent deduction from the normal amount of security that would have been called for.

Each time a dutiable clearance is made to customs, that amount of duty is deducted from the allowed deferment amount. In practice though, customs are only deducting the duties from the allowed deferred amount, and the VAT is not being deducted, although it is being deferred.

Hopkins says that in the face of differing views among importers, Customs @ Wylie have confirmed that customs will be calling for bonds/ guarantees for the deferred VAT amounts in due course. Customs have explained that the VAT bond may not be 100 percent of the deferred VAT but rather about 25- 30 percent of the VAT being deferred. The amount of the bond will be subject to customs scrutiny of the client's previous status and his compliance record.

In effect, this means that customs will be calling for additional security from importers in the amount of an agreed percentage of the VAT that is being deferred, says Hopkins.