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[2021] ZAGPPHC 70
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Wenco International Mining Systems Ltd and Another v Commissioner for the South African Revenue Service (59922/2019) [2021] ZAGPPHC 70; 83 SATC 463 (19 January 2021)
IN
THE HIGH COURT OF SOUTH AFRICA
(GAUTENG
DIVISION, PRETORIA)
CASE
NO: 59922/2019
REPORTABLE:NO
OF
INTEREST TO OTHEE JUDGES:NO
DATE:19/1/21
In
the matter between:
WENCO
INTERNATIONAL MINING SYSTEMS LTD
(Registration
No:
BC0854695)
First Applicant
WENCO
INTERNATIONAL MINING SYSTEMS LTD
(lncorporated
in British Columbia , Canada)
(Registration
No:
2014/082425/10)
Second Applicant
and
THE
COMMISSIONER FOR THE SOUTH AFRICAN
REVENUE
SERVICE
Respondent
JUDGMENT
D
S FOURIE, J:
[1]
This is a review application in terms
whereof the applicants apply for the following relief
:
“
1.
Reviewing,
declaring unlawful and setting aside the VAT Ruling dated 21 February
2019 issued by the Commissioner for the South African
Revenue Service
to the first applicant;
2.
Directing
the respondent to issue a VAT Ruling
in
terms of which the second
applicant shall register for Value-Added Tax as envisaged in the
definition of
‘
Enterprise’
in section 1(1) of the
Value-Added Tax Act No 89 of
1991;
3.
Directing
the second applicant upon registration as ordered in paragraph 2 to
account for VAT at the zero rate on the services supplied
to the
first applicant in terms of section 11(2)(o) and section 11(2)(k) of
the VAT
Act;
4.
That the respondent be ordered to pay
the costs of the application.”
[2]
During argument the applicants applied for leave to amend
paragraph 3
of their notice of motion as follows:
“
3.
Directing
the second applicant upon registration as ordered in paragraph 2 to
recount for VAT at the zero rate on the services supplied
to the
first applicant as set out in the request for a VAT Ruling dated
5
September
2018 in terms of section 11(2)(o) and section 11(2)(k) of the VAT
Act.”
The respondent did not
object to the proposed amendment and the amendment is therefore
granted
.
BACKGROUND
[3]
The first applicant is incorporated and also has its
principal place
of business
in
British
Columbia, Canada. The second applicant, also incorporated in British
Columbia, Canada has its principal place of business
and registered
address in Centurion, South Africa. The second applicant has been
registered as a branch of the first applicant
in South Africa.
[4]
The first applicant specialises in the development of
software for
the mining industry. It supplies its clients with management systems
software, maintenance, safety and machine guidance
to manage mining
operations.
[5]
The second applicant is responsible for rendering services
such as
training, system support, site visits and installation to South
African and other African clients of the first applicant.
These
services are rendered by the second applicant for and on behalf of
the first applicant. All contracts between the first applicant
and
its clients are concluded and signed in Canada. The second applicant
is paid a management fee by the first applicant for the
services
supplied to
the
first
applicant.
[6]
In order to obtain certainty on their VAT registration
obligations,
the first applicant submitted an application to the respondent for a
VAT Ruling in terms of section 41B of the VAT
Act. On the basis of
the submissions made in the application, the first applicant
requested a ruling confirming that:
(a)
The second applicant (the South African
branch) should register for VAT as opposed to the first applicant, as
envisaged in the definition
of
"enterprise"
in section 1(1) of the VAT Act;
(b)
The second applicant should account for VAT at the zero
rate on the
services supplied to the first applicant in terms of section 11(2)(o)
and section 11(2)(k) of the VAT Act.
[7]
On 21 February 2019 the VAT Ruling was issued. The substance
thereof
can be summarised as follows:
(a)
Based on the information provided, the first applicant, being a
non-resident of the
Republic, does carry on an activity partly in the
Republic that is continuous or regular;
(b) The
training services rendered by the first applicant while being
situated outside
the Republic constitutes a supply as the first
applicant's clients are in South Africa;
(c) The
services are required to be supplied to any other person for a
consideration
in the course or furtherance of that
“
enterprise
”
or activity. Accordingly
,
the
second proviso to the definition of
“
enterprise”
in
section 1(1) of the VAT Act must be satisfied in order to regard the
“
branch
enterprise
”
in
the Republic as a separate person from its main business situated
permanently outside the Republic;
(d)
The
provisions of section 8(9) of the VAT Act are only applicable when
there is an
"
enterprise
"
and therefore supplies resulting
from section 8(9) of the VAT Act cannot create an
“
enterprise
”
;
(e) The
second proviso to the definition of “
enterprise”
in section 1(1) of the VAT Act,
never intended to create a situation where a branch is registered or
required to register in the
Republic purely for supplies that it
makes to its business permanently situated outside the Republic.
[8]
In the end the respondent holds the view, as appears
from the VAT
Ruling, that the first applicant must register as a VAT vendor in the
Republic to the extent of the second applicant's
activities, the
first applicant should charge VAT at the standard rate in respect of
the services rendered to clients in the Republic
and the services
physically rendered by the first applicant in other African countries
should be zero rated, provided that section
11(3) of the VAT Act is
complied with.
GROUNDS
OF REVIEW
[9]
According to the founding affidavit the relief is sought
under
section 8(1)(c)(ii)(aa)
of the
Promotion of Administrative Justice
Act No 3 of 2000
. It is also stated that the dispute centres mainly
on the interpretation of
the
definition of “
enterprise”
in
section
1(1) of the VAT Act, read with section 8(9) of the VAT Act.
[10]
Various grounds of review have been pleaded in the founding
affidavit. Taking into account that the dispute centres mainly on the
interpretation of the definition of
"enterprise",
it is not necessary to deal with
each of the grounds of review. The substance of these grounds can be
summarised as follows:
(a)
The content of and conclusions reached in the VAT Ruling are
materially influenced
by an error of interpretation and application
of the law to the information that was provided in the application;
(b) The
VAT Ruling is not rationally connected to the purpose as envisaged in
the aforesaid provisions of the VAT Act, the information before the
respondent and the reasons given for it by the respondent;
(c) If
the VAT Ruling is to be implemented, it would render the registration
of the second applicant nugatory and the second applicant will not be
in a position to deduct any input VAT incurred by it which
will
impact negatively on the profitability of the second applicant.
LEGAL
FRAMEWORK
[11]
In section 1(1) of the VAT Act, an
“
enterprise”
is defined (in relevant part) as
follows:
“
(a)
in
the case of any vendor other than
a
local
authority,
any
enterprise or activity which is carried on continuously or regularly
by any person in the Republic or partly in the Republic
and in the
course or furtherance of which goods or services are supplied to any
other person for a consideration, whether or not
for profit,
including any enterprise or activity carried on in the form of a
commercial, financial, industrial, mining, farming,
fishing or
professional concern or any other concern of
a
continuing
nature or in the form of an association or
club;
(b)
…
(c) …
Provided
that:
(i)
anything
done in connection with the commencement or termination of any such
enterprise or activity shall be enterprise or activity;
(ii)
any
branch or main business of an enterprise permanently situated at
premises outside the Republic shall be deemed to be carried
on by a
person separate from the vendor
,
if
-
(aa)
the branch or main business can be separately identified; and
(bb)
an independent system of accounting is maintained by the concern in
respect of the branch or main business
”
.
[12]
Section 7 of the VAT Act makes provision for the imposition of VAT.
Subsection
(1)(a) provides as follows:
“
Subject
to the exemptions, exceptions
,
deductions
and adjustments provided for in this Act, there shall be levied and
paid for the benefit of the National Revenue Fund
a tax, to be known
as the Value-Added Tax-
(a)
on
the supply by any vendor of goods or services supplied by him on or
after the commencement date in the course or furtherance
of any
enterprise carried on by him.
”
[13]
Section 8 of the VAT Act contains certain deeming provisions.
Subsection
(9) provides as follows:
“
For
the purposes of this Act, where any vendor in carrying on an
enterprise in the Republic consigns or delivers goods to an address
outside the Republic or provides any service to or for the purposes
of his branch or main business outside the Republic in respect
of
which the provisions of paragraph (ii) of the proviso to the
definition of
‘
enterprise
’
in
section 1 are applicable
,
the
vendor shall be deemed to supply such goods or services in the course
or furtherance of his
enterprise.
”
[14]
In terms of section 23(1) of the VAT Act, every person who, on or
after
the commencement date, carries on any enterprise and is not
registered, becomes liable to be registered either at the end of any
month where the total value of taxable supplies made by that person
in the period of twelve months ending at the end of that month
in the
course of carrying on any enterprise has acceded R1 million
(subparagraph (a)), or at the commencement of any month where
the
total value of the taxable supplies in terms of a contractual
obligation to be made in the period of twelve months reckoned
from
that date exceeds R1 million (subparagraph (b)).
CASE
FOR THE APPLICANTS
[15]
According to the founding affidavit the first and second applicants
can
be separately identified and they maintain an independent system
of accounting. They are therefore to be viewed as separate persons
in
terms of the VAT Act. The second applicant renders the services
referred to above and not the first applicant. The applicants
also
point out (in the replying affidavit) that the second applicant has a
distinct company registration number and income tax
registration
number in South Africa. In addition to that the applicants also rely
on a balance sheet and income statement of the
second applicant to
submit that an independent system of accounting is maintained.
[16]
According to the applicants the respondent failed to consider the
activities of the second applicant with reference to the relevant
provisions contained in the VAT Act. Taking into account the
provisions of section 1(1) of the VAT Act, supplies made by a branch
or main business situated outside the Republic are not subject
to
VAT. Such branch or main business is deemed to be a separate person
for VAT purposes. Any supplier of goods or services by a
South
African branch to such an independent main business situated outside
the Republic would attract VAT
,
unless
the supply is exempt or zero-rated.
[17]
In the context of the second proviso to the definition of
“
enterprise
”
in section 1(1) of the VAT Act, “
the
branch
”
is
the business of the second applicant and the
“
main
business
”
is
the business of the first applicant situated outside the Republic of
Canada. In terms of the aforesaid second proviso, the main
business
of the first applicant is excluded from the definition of
“
enterprise
”
in section 1(1) of the VAT Act.
According to the applicants the VAT Ruling of the respondent attempts
to rely on the activities
of the second applicant. This it cannot do
as the first and second applicants are functioning as separate
persons.
[18] It
is contended that the definition of
“
enterprise
”
in section 1(1) of the VAT Act, read
together with section 8(9), means that where any vendor carrying on
an “
enterprise”
in
the Republic
,
provides
any service to or for the purpose of his branch or main business
situated outside the Republic and the branch or main business
can be
separately identified and maintains an independent system of
accounting, the vendor is deemed to have supplied the goods
and
services in the course of carrying on that
“
enterprise”
.
[19]
Therefore, so it
i
s
submitted, the approach followed by the respondent in the VAT Ruling
runs counter to the definition of
“
enterprise”
in section 1(1) of the VAT Act read
with section 8(9) of the VAT Act.
CASE
FOR THE RESPONDENT
[20]
According to the respondent the legal person constituting the
applicants
(the company incorporated in Canada) conducts an
“
enterprise
”
in South Africa for VAT purposes
,
in the sense that, using locally
situated resources, it continuously and regularly carries on
activities in the course or furtherance
of which it provides software
support and training services to clients both in South Africa and
elsewhere in Africa in exchange
for consideration.
[21]
The primary question is whether the second applicant (i.e. the
alleged
South African
"
branch
"
of the lega
l
person) can be said to be conducting
such an enterprise separately from the first applicant in the sense
envisaged in proviso (ii)
to the definition of
“
enterprise
”
in the VAT Act. The respondent believes
not. It has concluded that the first applicant (the foreign entity)
conducts an enterprise
in South Africa, and that the enterprise
cannot be separately attributed to the second applicant for VAT
purposes.
[22]
It is also pointed out that a second question involves the VAT
treatment
(i.e. zero-rating) of supplies alleged to be made by the
second applicant to the first applicant in terms of sections 11(2)(0)
and 11(2)(k) of the VAT Act. These issues only arise if the
applicants in fact fall to be treated as separate persons for VAT
purposes.
The applicants did not seek a ruling as to the VAT
treatment of supplies made by the first applicant to its clients
,
if it transpires that the first
applicant conducts the VAT enterprise.
[23]
Attached to the answering affidavit is a copy of a service level
agreement purportedly concluded between the first and second
applicants (annexure “A3”). It is not denied by the
applicants
that the service level agreement was concluded between
them
.
It is
contended by the respondent that in terms of this agreement the
second applicant cannot be separately identified from the
first
applicant as it only
“
serves
”
the first applicant in South Africa,
being no more than an extension of the first applicant.
[24]
In the circumstances the respondent contends that the second
applicant
cannot be separately registered as conducting an
"
enterprise
"
separate from or different to that
of the fi
r
st
applicant. According to the respondent it is the first applicant that
conducts the enterprise
,
and
that it should accordingly be registered as a VAT vendor to the
extent that it does indeed carry on an enterprise in South Africa.
DISCUSSION
[25]
It was contended on behalf of the applicants that supplies made by a
branch or main business situated outside the Republic are not subject
to VAT. Such branch or main business is deemed to be a separate
person for VAT purposes. Any supply of goods or services by a South
African branch to such an independent main business situated
outside
the Republic would attract VAT at the standard rate
,
unless the supply is zero-rated or
exempt. Therefore
,
so
it was submitted, in the context of the second proviso to the
definition of
“
enterprise
”
in section 1(1) of the VAT Act, the main
business of the first applicant (in Canada) is deemed to be carried
on by a person (the
first applicant) separate from the second
applicant. In this context the branch is the business of the second
applicant.
[26]
Counsel for the respondent submitted
that for purposes of the VAT Act
,
the first and second appl
i
cants
are a single legal entity. The first applicant supplies goods
(computer software) and services (system support services
,
training, site visits and installation) to its customers situated
inter alia
in
South Africa. The first applicant contracts with clients for the
provisions of these supplies and all such contracts are concluded
and
signed in Canada. The first applicant has set up the second applicant
as a branch in South Africa to serve the first applicant
and to
enable it to provide a service to its clients. The first applicant is
therefore the party that invoices the clients for
its supply of goods
and services to them. It is then concluded that the second applicant
can therefore not be said to provide goods
or services to other
persons as is required by the definition of
“
enterprise
”
.
The provisions of proviso (ii) to
that definition
accordingly do not apply
to render the second applicant separately identifiable from the first
applicant for VAT purposes.
[27]
have already pointed out above that the dispute
between the parties
centres mainly on the interpretation of the definition of
"
enterprise
"
in section 1(1) of the VAT Act, read
with section 8(9) thereof. However
,
before I consider the definition of
“
enterprise
”
,
it is necessary to understand the
applicants’ structure.
THE
APPLICANTS
’
BUSINESS
STRUCTURE
[28]
In
CSARS v Res Publica (Ptv) Ltd
[2018] ZASCA 109
par [12] reference is made to the general principle
(as recognised in other VAT jurisdictions)
“
that
the VAT consequences of
a
supply
must be assessed by reference
,
first and foremost
,
to the contractual arrangements
under which the supply is made
”
.
[29]
The first applicant’s business as explained in the founding
affidavit
is to supply goods and services to its customers situated
inter alia
in
South Africa. To enable it to do this kind of business the second
applicant has been registered as a branch of the first applicant
in
South Africa. These services are rendered by the second applicant for
and on behalf of the first applicant to clients of the
first
applican
t.
All
contracts between the first applicant and its clients are concluded
and signed in Canada. The second applicant is paid a management
fee
by the first applicant for the services supplied to the first
applicant.
[30]
The contractual arrangement between the
applicants is contained in a service level agreement that was entered
into on 17 Sep
t
ember
2018. In terms of this agreement the first applicant appointed the
second applicant as the “
service
provider
”
to
“
solely
and exclusively
...
provide
the services
”
.
The services are defined in clause
1.1.9 as “
services provided by
the Service Provider to Wenco for the operation of Wenco
’
s
business as detailed in clause
3
...
"
.
In clause 3 the services, duties and powers of the service provider
are set out in more detail.
[31]
Taking into account the aforesaid contractual arrangements under
which
the supply is made
,
it
does not appear that the second applicant (as the service provider)
is providing services
“
to
South African and other African clients of the first applicant
”
as maintained by the applicants.
According to the service level agreement (clause 2 thereof) it should
be accepted that the second
applicant was appointed by the first
applicant to provide the services
“
solely
and exclusively
”
to
the first applicant. This appears in the definition of
"
services
"
(clause 1.1
.
9)
where it is stated that these
“
services
”
are to be provided by the second
applicant (service provider) to the first applicant (Wenco) for the
operation of the first applicant's
business (and not that of the
second applicant).
[32]
Apart from the contractual arrangement
between the applicants, I think one should also look at the
geographical arrangement between
them. Taking into account the
contractual arrangement between the applicants, one should be careful
not to conclude that the services
rendered by
t
he
second applicant to clients of the first applicant in South Africa
,
that those services are therefore not
rendered by the first applicant. It is clearly stated in the founding
affidavit that the services
are rendered by the second applicant for
and on behalf of the first applicant. Put differently, the rendering
of services by the
second applicant may constitute the physical act
of doing so in South Africa, but viewed from a legal
viewpoint
it seems that the position of the second applicant as a branch of the
first applicant
in
South
Africa, is merely that of an agent acting on behalf of the first
applicant
“
for
the operation of Wenco’s
(first applicant) business”
in
South Africa. Usually, no rights or obligations ensue between an
agent and third parties. This may also explain why all contracts
are
concluded and signed between the first applicant and its clients in
Canada.
THE
APPLICATIONS FOR A VAT RULING
[33]
Taking into account the applicants’ business structure as
well
as the geographical arrangement between them, it is important to
understand the context within which the VAT Ruling was requested.
The
applicants refer in the founding affidavit only to the application
for a VAT Ruling (annexure
“C”)
dated 5 September 2018. In that
application certain background facts were supplied, legal submissions
were made and then the request
was formulated as follows:
“
Based
on
the facts and discussions above, we request the Commissioner to issue
a ruling in terms of section 41B of the VAT Act read with
section
72
of
the VAT Act and Chapter
7
of
the TAA, to confirm that:
•
Wenco
SA
(the
South African branch) should register for VAT as opposed to Wenco
(main business situated in Canada), as envisaged in section
1(1) of
the VAT Act under the definition of
'enterprise
’
and
•
Wenco
SA
should
account for VAT at the zero-rate on the services supplied to Wenco in
terms of section 11(2)(o) and section 11(2)(k).”
[34]
Taking into account the formulation of
the request, the question arises whether it was the idea that only
one of the applicants
should be registered for VAT and, if so, with
regard to which enterprise was a ruling sought? The
application
of 5 September 2018 does not give a direct answer to these questions.
[35]
However, this issue has been addressed in the answering affidavit.
It
is pointed out that on 7 April 2017 the first applicant
,
through another representative, applied
for a VAT Ruling in relation to issues similar to those to which the
present application
relates. In that application (annexure “A1
”
)
the first applicant was referred to as
“
WHC”
and the second applicant as
“
WHA
”
.
In that application for a VAT Ruling
certain background facts were presented
,
similar to those contained in the second
application for a VAT Ruling dated 5 September 2018. The ruling
requested in the first
application for a VAT Ruling dated 7 April
2017 reads as follows:
“
28.
On
behalf of WHC (first applicant) and WHA (second applicant) we request
that the Commissioner issues a ruling in terms of section
41B of the
VAT Act
,
read
together with Chapter
7
of
the TA Act to confirm that
:
28.1
WHC (first applicant) is not
conducting an enterprise in the Republic and therefore is not
required to registered as a VAT vendor
;
28.2
WHA (second applicant) is conducting
an enterprise and required to register for
VAT
;
28.3
WHC
(first applicant) and WHA (second applicant) are in terms of proviso
(i) to the definition of
'
enterprise
'
deemed to be separate persons for VAT
purposes;
and
28.4
WHA (second applicant) will be
required to zero-rate
on
the supply of services by WHA to WHC
,
which is physically rendered by
WHA to the South African customer in South Africa
,
under the provisions of section
11(2)(1)
.”
[36]
The respondent advised the first applicant that it was not prepared
to grant the ruling sought as set out above. The respondent was then
informed that the ruling sought in the application of 7 April
2017
was withdrawn. Taking into account the ruling that was sought in the
application of 7 April 2017, it appears that the applicants
had the
following in mind:
(a)
The first applicant is not required to register as a VAT vendor as it
is not
conducting an enterprise in the Republic;
(b)
The second applicant should be required to register for VAT as it is
conducting
an enterprise in the Republic;
(c)
The second applicant would be required to zero-rate on the supply of
services to the
first applicant which is physically rendered by the
first applicant to South African customers.
[37]
According to the above analysis it is not difficult to understand
what the applicants had in mind with the first request for a VAT
Ruling: remove the first applicant from the VAT arena and register
the second applicant for VAT who will then be required to zero-rate
on the supply of services. The result would be that neither
the first
applicant, nor the second applicant would be liable for the payment
of any VAT on the supply of services to the mining
industry in the
Republic.
[38]
However, this is not the end of the
story. On 5 September 2018 a second application for a VAT Ruling was
served. How does the second
application differ from the first one
dated 7 April 2017? Comparing the two
applications,
it appears that the applicants are the same entities. It also appears
that their business structure as well as the
geographical arrangement
between them
,
are
substantially the same. There also appears to be no material
difference between both the rulings that were sought, first on
7
April 2017 and later on 5 September 2018.
[39]
In the application dated 5 September 2018 the respondent was also
requested
to confirm that the second applicant should register for
VAT
“
as
opposed to Wenco (main business situated in Canada)”
and
that the second applicant should account for VAT
“
at
the zero-rate on the services supplied
”
.
Comparing
t
he
two applications
,
it
is not difficult to see and to conclude that also the second
application dated 5 September 2018 had in mind that neither the
first, nor the second applicant would be liable for the payment of
any VAT on the services supplied in the Republic. Can this approach
be justified in terms of the relevant provisions of the VAT Act?
THE
VAT ACT
[40]
Both parties accept that the
interpretation of statutes is a unitary exercise to be conducted in
accordance with the approach set
out in
Natal
Joint Municipal Pension Fund v Edumeni Municipality
2012 (4) SA 593
(SCA) par [18] where it was explained that the
process entails attributing meaning to the relevant statutory
provis
i
on,
in the light of the language used, the context in which the provision
is set, including the material known to the drafters
,
and the purpose which the provision is
intended to serve. In addition thereto, an interpretation that is
sensible and business-like
is to be preferred over one that
leads
to insensible consequences or those that appear to frustrate the
statutory objective.
[41]
The term
“
enterprise
”
in section 1(1) of the VAT Act is
defined as any enterprise or activity which is carried on
continuously or regularly by any person
in the Republic in the course
of which goods or services are supplied to any other person for a
consideration. The primary question
is
,
in my view, whether the second applicant
can be said to be conducting such an enterprise separately from the
first applicant in
the sense envisaged in proviso (ii) to the
definition of “
enterprise
”
in the VAT Act referred to above.
[42]
The alleged enterprise of the second
applicant consists solely, according to the applicants, of the supply
of services to the first
applicant in exchange for a fee. On this
basis the first applicant has the sole and direct contractual
relationship with clients,
being companies conducting mine operations
in South Africa. In accordance with the service level agreement the
services provided
by the second applicant to the first applicant
shall be for the operation of the first applicant
’
s
business. Put differently, the second applicant cannot be separately
identified from the first applicant as it only serves the
first
applicant as described in the serv
i
ce
level agreement
,
being
no more than an agent of the first applicant, notwithstanding a
different company registration number and a different system
of
accounting
.
This
is confirmed by the explanation of the applicants that the services
rendered by the second applicant are for and on behalf
of the first
applicant.
[43]
It has been pointed out by counsel for the respondent that the
applicants' case is dependent upon a finding that the second
applicant conducts an independently recognisable “
enterprise”
in South Africa in the course of
which it makes taxable supplies. On that basis, it is contended by
the applicants that the business
of the first applicant is deemed to
be carried on separately from it by virtue of proviso (ii) of the
definition of “
enterprise”.
[44]
However, it is important to take into account that the applicants
do
not and cannot contend that the second applicant is engaged in an
enterprise in which it makes supplies to the end-clients.
According
to the service level agreement it appears to be common cause that the
supplies upon which it relies are supplies only
to the first
applicant. It therefore seems that the second applicant only serves
the first applicant. The second applicant supplies
no service “
to
any other person”
as required
by the definition of “
enterprise”
in section 1(1) of the VAT Act. It
can therefore not be said, in my view, that the second applicant is
conducting an “
enterprise”
in South Africa. Furthermore, taking
into account the wording “
in
the Republic or partly in the Republic”
as
they appear in the definition of “
enterprise”,
I do not think that one can
seriously content that the second proviso to the definition
contemplates a situation where a branch
is registered in the Republic
purely for supplies that it makes to its business permanently
situated outside the Republic.
[45]
It was also submitted on behalf of the
respondent that section 8(9) of the VAT Act presupposes the existence
of an “
enterprise”.
I
agree with this submission. Only after it has been determined that
the second applicant indeed conducts an enterprise, will the
provisions of section 8(9) become applicable. I
have
already concluded that the second applicant does not conduct an
“
enterprise
”
in South Af
r
ica
as defined in the VAT Act and therefore, in my view, section 8(9)
does not come into play.
[46]
For these reasons I am of the view that there is no basis to set
aside the VAT Ruling or to direct the making of a different ruling.
The second question which involves the VAT treatment of a zero
rating
is therefore no longer relevant as these issues only arise if the
applicants in fact fall to be treated as separate persons
for VAT
purposes
.
In
my view the second applicant cannot be separately registered as
conducting an “
enterprise”
separate from or different to that
of the first applicant. In the result the application cannot succeed
.
ORDER
The
application is dismissed with costs
,
including the costs of two counsel.
D
S FOURIE
JUDGE
OF THE HIGH COURT
PRETORIA