VAT Implications of Exporter of Record Designation on the SAD500 for Indirect Exports

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VAT Implications of Exporter of Record Designation on the SAD500 for Indirect Exports

• 14 April 2025
• Customs and Excise
• The Tax Faculty Tax Specialist

This article is based on tax law for the year ending 29 February 2026.

 The Problem / Facts
A supply of movable goods is made to a non-resident customer under "Free Alongside Ship" (FAS) Incoterms. The goods are delivered to a designated port within South Africa, and the transaction is treated as an indirect export with VAT levied at the zero rate. The central issue is whether the party arranging the export should be listed as the Exporter of Record (i.e. reflected in field 2 of the SAD500 form).

Analysis of the Tax Issues Identified
The main consideration is identifying the correct party to be listed as the Exporter of Record (EOR) on the SAD500 form when a transaction is treated as an indirect export. This has direct implications for the zero-rated VAT treatment. Where a party facilitates the export process and applies the zero tax rate, compliance with VAT legislation, export procedures, and documentation requirements is essential.

A key concern is whether the responsibility of delivering goods to a non-resident’s designated port under FAS terms requires the facilitating party to act as the EOR on the SAD500 form. This must align with VAT and customs requirements, particularly those of the VAT Act and SARS guidelines.

 Tax Issues and Applicable Legislation
 Exporter of Record Determination under FAS Incoterms
Clarifying the responsible party for completing the SAD500 form under export arrangements.
Applicable legislation: SARS Customs and Excise Act; VAT Act 89 of 1991, Section 11(1)(a).

Application of the Zero VAT Rate for Indirect Exports
Ensuring correct categorisation and compliance for VAT zero-rating.
Applicable legislation: VAT Act, Section 11(1)(a).

 Documentary Proof Supporting Zero-Rating
Meeting SARS documentary requirements, including proper SAD500 completion.
Applicable guidance: SARS Interpretation Note 31.

Export Obligations under FAS Incoterms
Understanding the delivery obligations under FAS and the impact on EOR status.
Guided by: International trade conventions and SARS customs guidance.

Applicable Law

VAT Act 89 of 1991:

• Section 11(1)(a): Zero-rating of exported goods.

• Section 11(3): Requirement for documentary proof to support zero-rating.

SARS Notes and Guidelines:

• Interpretation Note 31: Documentation for indirect exports.

• VAT Practice Note 30: VAT treatment of indirect exports.

Customs and Excise Act (1964):

• Requirements for SAD500 completion and roles of exporter/declarant.

Incoterms (International Commercial Terms):

• FAS: Seller’s responsibility ends when goods are delivered alongside the vessel at the port.

Application of the Law to the Facts
Under FAS terms, the seller’s obligations end at delivery alongside the vessel. However, where a party treats the transaction as an indirect export and applies the zero VAT rate, they must also ensure full compliance with documentation requirements under the VAT Act.

In such cases:

• The party initiating the export process and completing the customs declaration must be identified as the EOR on the SAD500.
• SARS Interpretation Note 31 states that when the exporting party facilitates the process, they must be listed as the EOR.
• Field 2 of the SAD500 should reflect the party physically exporting the goods. If the transaction is not conducted directly by the non-resident purchaser, the facilitating party would typically need to be listed.
• Incorrect categorisation could result in SARS disallowing the zero VAT rate, leading to VAT liabilities.

Conclusion
The party facilitating the indirect export should be listed as the Exporter of Record in field 2 of the SAD500. This aligns with their responsibilities under the VAT Act and ensures the documentary compliance required to support the zero-rating of VAT.

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