Demystifying the value-added tax effects of foreign branches in South Africa: The Wenco case

Abstract

The application of South African value-added tax (VAT) principles to transactions involving foreign branches is challenging. A recent judgment made in Wenco International Mining Systems Ltd & another v CSARS (59922/2019) [2021] ZAGPPHC 70 brought the uncertain applications of the VAT Act to the forefront. An awareness of the uncertainties could guide policymakers to improve the legislation and assist tax professionals who advise their clients. This research adopts a qualitative approach and traditional legal doctrinal methodology. It proposes amendments to the legislation. I question the application of s 8(9) of the VAT Act because proviso (ii) of the definition of ‘enterprise’ separates the activities of foreign branch or foreign main business from those of the vendor. It is unclear if a foreign branch or foreign main business is treated as a separate ‘person’ in the VAT Act, with all the accompanying powers of another ‘person’. The proviso is also unclear about whether it applies only if the foreign branch or foreign main business makes supplies ‘for consideration’. It is unclear whether s 11(1)(i) and 11(2)(o) should apply, as opposed to s 11(1)(a) and 11(2)(l).