As a result of the financial impact of the coronavirus (COVID-19) pandemic, there have been fluctuations in global currencies including the South African rand. These currency fluctuations may have value added tax (VAT) implications.
In South Africa, a tax invoice for a supply subject to VAT (at the standard rate of VAT) must be issued in the rand. The South African Revenue Service provides approved exchange rates in Binding General Ruling 11 (BGR 11) for determining the rand equivalent of a supply when a standard-rated invoice is issued in a foreign currency.
BGR 11 provides that a supplier may use one of the following exchange rates (published on the website of the South African Reserve Bank and other resources):
1. The daily exchange rate on the date the time of supply occurs
2. The daily exchange rate on the last day of the month preceding the time of supply, or
3. The monthly average rate for the month preceding the month during which the time of supply occurs
The options listed in (2) and (3) above may not be used in “exceptional circumstances” that result in the rand value being distorted. Examples of exceptional circumstances include the collapse of a foreign currency or a fluctuation in a foreign currency of 10% or more within the month referred to in options (2) and (3). In these instances, the daily exchange rate on the date the time of supply occurs is to be used (that is, option (1) is to be used).
Given the fluctuation of the exchange rate over the past month may result in “exceptional circumstances” envisaged in BGR11, VAT-registered vendors need to be aware of the risk associated with the application of exchange rates stipulated in points (2) and (3) above, as opposed to the daily exchange rate on the date the time of supply occurs (point (1)).
Read an April 2020 report [PDF 384 KB] prepared by the KPMG member firm in South Africa
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