UPDATE (20h16): The South African Revenue Service (SARS) reverted to say they could not comment  as the matters raised are sub-judice as communicated to SATSA via its representative.

A spokesperson added: "SARS is committed to the growth and development of the SMME sector as a vital contributor to overall economic prosperity. In fact, SARS has put in place concrete steps to enhance the tax compliance of this very broad but important sector. Such tax compliance must take place under existing provisions of the tax law for which SARS is responsible."

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Small, medium and micro enterprises (SMMEs) face yet another hurdle in their battle for survival as the South African Revenue Service (SARS) seeks to charge them value-added tax on fees made for international travel arrangements – something that is currently VAT-exempt by law.

Tourism Update understands that 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 they 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,” said David Frost, CEO of SATSA.

African Moments Travel – which has gone to great lengths to ascertain from SARS what the business would need to do to fulfil the role of an agent in its eyes (and has yet to hear from the revenue service) – is one of those affected.

Company Director, Dennis Spaeth, explained: “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 away, with no end in sight to find a meaningful consensus,” said Spaeth.

According to SATSA, 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,” commented Frost.

SATSA has asked 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,” said Frost.

“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,” he said.