On 01 September 2012 South African Revenue Service (SARS) issued Binding General Ruling (VAT): No 11 (BGR).

This BGR prescribes the foreign exchange rate that must be used when issuing tax invoices as well as for determining the output tax due where the consideration for the standard rated supply is in a foreign currency.

The intention of the BGR is to clarify for VAT vendors the appropriate treatment, where they have entered into contracts or are required to issue tax invoices and the value of the taxable supply of goods and or services needs to be reflected in foreign currency. It is important to note that this BGR deals specifically with transactions which would be subject to VAT at standard VAT rates.

The Value-Added Tax Act No. 89 of 1991 (the Act) requires a supplier to issue a tax invoice within twenty one days from the date of making a taxable supply and requires further that such invoice must be issued in the currency of the Republic of South Africa unless the supply is zero rated. (Section 20(4) and 20(5))

The Act does not specifically deal with the relevant exchange rates that SARS would find acceptable for suppliers to apply, when invoices are issued in foreign currency, to establish both the Rand consideration and the output tax liability in such a manner that the requirements of Sections 20(4) and 20(5) are met.

The BGR states that from the perspective of SARS a vendor must issue a tax invoice, in compliance with Sections 20(4) and 20(5), in the currency of the Republic within 21 days of the date of supply.

Where the vendor is required to issue the invoice in a foreign currency both the consideration for the supply in the foreign currency as well as the exchange rate applicable must be reflected on the above-mentioned invoice.

In order to determine the Rand equivalent of the supply, SARS have indicated that the exchange rate acceptable will be the daily exchange rate as published on the website of the South African Reserve Bank.

John Jones

Audit and Corporate Taxation Partner, Johannesburg