Tour operators have started consulting tax experts to ready themselves for a possible audit as the SA Revenue Service turns its attention to the tourism sector.

The updated VAT interpretation note, news of SARS auditing inbound tour operators, and a recent court case involving a tour operator who incorrectly charged zero-rated VAT on tour packages for overseas tourists, have caused South African-based tour operators to urgently ensure their house is in order.

Fearing hounding by SARS, the tour operators who spoke to Tourism Update preferred to remain anonymous.

A number of tour operators, not yet audited by SARS, have consulted private auditors and accountants to make sure they are compliant with the VAT application requirements for the tourism industry. Operator X said their business has gone 21 years without charging and claiming VAT and received a tax clearance certificate each year. “We’ve spoken to our auditor and he has told us that as long as we are not claiming VAT incorrectly, there shouldn’t be a problem,” said the operator.

Operator Y said all operators needed to operate within the parameters of the law and was confident that ensuring VAT application was done by the book had been made a top priority by their internal auditors.

Satsa CEO, David Frost has spoken about the need to resolve the problem without imposing historical penalties on inbound tour companies.

SARS also released an updated interpretation note no. 42 in December 2016. According to the note, the purpose of the document is to provide guidance to local entrepreneurs for applying the correct VAT rate in respect of the supply of tour packages and related goods or services to non-resident tourists and foreign tour operators. When asked how SARS planned to navigate historical punitive measures given the fact that an updated document providing clarification was only made available on December 12, 2016, SARS failed to provide comment. At the time of publication, a response has not been received.

Despite the clarification, operators still believe that the VAT application makes locally based tour operators uncompetitive. Operator Z said it was unfair to charge VAT on a package in its entirety when some elements within the package, such as fuel and salaries, were not subject to VAT. Charging VAT on the whole package pushed the price up and had the potential to price operators out of the market, where they were competing with internationally based operators. Operator Z suggested that packages should instead be split into VAT components and non-VAT components. “I don’t think anyone is 100% sure how to do this,” said the operator.