Thursday, May 03, 2007

VAT in South Africa

When we started Route 49 back in 1998 the idea was to get passengers (backpackers) to and from Zimbabwe and Cape Town in as faster period as possible (24 hours). This entailed getting a ROUTE PERMIT, which was critical to any bus service in SA including Taxi’s. When an ordinary bus or taxi applied they had to state the exact roads they would use and more importantly where they would pick up and drop of their passengers. Because of inherent corruption and fiddling VAT had been abolished for all Buses and Taxi’s. Our Route Permit was very different. We had applied for a permit to transport passengers from one country to another without any stops within SA. I decided that this was no longer to be classed as a bus service with the VAT and that our passengers were in fact packages that had to be exported to and from each country, therefore becoming a courier business that was eligible for Zero rated VAT. Our accountant disagreed as did my partner, so I went to the top and contacted a Mr Valentine who was at the time head of VAT in Cape Town. He listened very carefully and said that he would contact me in the near future.

Only one week later he phoned to tell me that I was indeed right and that our business was to be Zero Rated. This meant that we could buy a brand new bus and claim all the VAT back immediately plus all our expenses without having to charge VAT on ticket sales. This gave our business a massive windfall that no other Bus service had ever enjoyed in South Africa. In my mind that was a major win in our fight to survive the crippling costs of running such a service and to this day I count that as one of my finest hours in the set up of a new business. Over the years we claimed Millions of Rand back from the VAT.

I need to get a scanner to explain the next extraordinary turn of events that lead to us being sponsored by Zambezi Lager, so watch this space.

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