SARS red tape jeopardises recovery of COVID-19 beleaguered Tourism SMMEs

South Africa’s beleaguered tourism SMMEs face yet another hurdle in their battle for survival as SARS seeks to charge them VAT on fees made for international travel arrangements – something which is VAT-exempt by law.

Many tourism businesses are being audited by SARS and required to pay VAT on the fee that is charged to international clients for arranging their inbound travel to South Africa. SARS claims these businesses are acting in the principal role, when these are in fact agents and therefore are not required to on-charge VAT on their fee to international travellers.

“SARS has publicly stated that it intends to minimise the burden of compliance for SMMEs and to clarify any uncertainties so that SMMEs understand their tax obligations better. This new requirement for agents to pay VAT on fees levied to international travellers flies in the face of this,” explains David Frost, CEO SATSA.

One such business grappling with this requirement is African Moments Travel, which has gone to great lengths ascertain from SARS what the business would need to do to fulfil the role of an agent in its eyes, which has yet to be forthcoming,

Says Director, Dennis Spaeth: “We have spent over two years going through various procedural steps to highlight that, as an agent, we have acted correctly by not charging VAT on the fee we charge international clients for booking their travel in South Africa.”

“Our attempts to clarify our position and our role as an agent to SARS have been ignored or not answered directly. Despite not reaching an agreement with SARS as to what role we play, we are now attempting to reach a settlement agreement with SARS to try and put the matter to rest. This is despite the goalposts being continuously shifted further way, with no end in sight to find a meaningful consensus,” says Spaeth.

This is yet another example of unnecessary red tape and inconsistent application of policies, among many others, that hamper the growth of the Tourism sector and its potential to contribute to South Africa’s economy.

“Tourism is a key driver of SMMEs and employment, particularly in peri-urban and rural areas where other industries do not operate. To burden tourism SMMEs with confusing and complex VAT policies that lead to accidental non-compliance hampers their ability to contribute to economic growth,” says Frost.

“We would ask SARS to simplify the way VAT is levied within Tourism, so that it supports instead of hinders the growth of the industry, particularly SMMEs. This is especially as the Tourism sector was amongst the first and hardest hit by the COVID-19 lockdown.

Further, SARS should clarify how VAT should be correctly levied for the various services and roles (agent/principal) found within the industry by working with the industry associations that represent tourism and travel businesses so that we can do our part in helping to reignite South Africa’s economy in a fair and sustainable way,” concludes Frost.