When second-hand goods such as vehicles, machinery, or artworks are bought and exported from South Africa, the VAT implications depend on several factors, in particular, whether notional input tax has been claimed, and who is responsible for the export.
Understanding these distinctions is critical for vendors and purchasers to ensure full compliance with the Value-Added Tax Act, 1991 (VAT Act) and related export regulations.
Claiming notional input tax
The term ‘second-hand goods’ refers to goods that have been previously owned and used. The VAT Act provides for a notional input tax mechanism that allows a VAT-registered vendor to claim input tax on the purchase of second-hand goods, even when the seller is not VAT-registered and has not charged VAT.
This mechanism ensures that VAT is ultimately levied only on the value added by registered vendors, maintaining the integrity of the VAT system.
To claim notional input tax, the following key conditions must be met:
- The purchaser must be a VAT-registered vendor.
- The goods must be acquired under a non-taxable transaction in the course of conducting an enterprise.
- Payment must have been made for the goods.
The purchaser must obtain and retain a VAT 264 declaration, completed and signed by both parties. This declaration records the seller’s details, description of the goods, consideration paid, proof of payment, and a statement confirming that the sale was not a taxable supply.
The notional input tax is calculated by applying the tax fraction (15/115) to the lower of the purchase price or the open market value of the goods.
Example:
A motor dealer purchases a second-hand vehicle from a non-vendor for R115,000 (open market value). If all conditions are met, the dealer can claim notional input tax of R15,000 (R115,000 × 15/115).
When the dealer sells the vehicle for R120,000 (plus VAT of R18,000), the VAT payable to SARS is R3,000, effectively taxing only the R20,000 margin at 15%.
Exporting second-hand goods
When second-hand goods are exported, the VAT treatment depends on whether the export is direct (by the vendor) or indirect (by the purchaser), and whether notional input tax was claimed.
A vendor may zero-rate the supply of movable goods exported to a foreign destination if the export is handled in accordance with Section 11(1) of the VAT Act and the Export Regulations. However, this general rule is subject to an important limitation:
- If notional input tax has been claimed on the acquisition of second-hand goods, the subsequent export
of those goods cannot be zero-rated. - Instead, VAT must be charged at the standard rate (15%).
Direct exports
For direct exports (i.e., where the vendor arranges for the goods to be exported), a special valuation rule applies. The vendor must levy VAT equal to the notional input tax that was previously claimed on the goods being exported.
Example:
Vendor ABC (an art gallery) purchases a painting from a non-vendor for R11,500, and claims notional input tax of R1,500. ABC then exports the painting to a buyer in Botswana.
The sale cannot be zero-rated, and ABC must levy VAT of R1,500, equal to the notional input tax originally deducted. The buyer is also not entitled to a refund of this VAT amount.
Indirect exports
In indirect exports, the foreign purchaser arranges for the goods to be exported. The South African supplier normally charges VAT at 15%, and the purchaser may apply for a refund through the VAT Refund Administrator (VRA), provided that all export documentation and timeframes are satisfied.
However, if the seller claimed notional input tax, the VRA will limit the refund.
The refund will thus be calculated as the VAT paid by the purchaser, minus the notional input tax previously claimed by the supplier. This ensures that SARS does not suffer a double VAT recovery – one through the seller’s notional input, and another through the purchaser’s refund claim.
Example:
Using the earlier scenario, assume that ABC sells the painting to Y for R16,500 (including VAT of R2,152.17). Y exports the painting and applies for a refund. The VRA will refund only R652.17 (R2,152.17 VAT charged, less the R1,500 notional input tax previously claimed).
Normal input tax scenario
If the second-hand goods were acquired by the seller from another VAT-registered vendor under a normal taxable supply (not a notional input transaction), the seller would have claimed normal input tax, not notional input tax.
In that case, the subsequent export can be zero-rated, and the purchaser may qualify for a full VAT refund (less the VRA’s commission).
Key takeaways
Exporting second-hand goods such as vehicles, equipment, or artwork from South Africa involves complex VAT considerations. The main principles to remember are:
- Notional input tax may be claimed only on purchases from non-vendors, and only once payment has been made.
- Exports of second-hand goods where notional input tax was claimed cannot be zero-rated.
- In direct exports, the vendor must charge VAT equal to the notional input tax claimed.
- In indirect exports, refunds are limited to prevent double recovery.
- Vendors and purchasers must retain documentation and comply with SARS and VRA requirements to avoid financial and compliance risks.
Conclusion
The VAT treatment of second-hand goods and their export requires careful attention to the source of acquisition, the type of export, and whether notional input tax has been claimed.
Vendors and foreign purchasers should ensure that all documentation, including the VAT 264 form and export evidence, is properly completed and retained.
A sound understanding of these rules helps prevent costly errors, disallowed claims, or penalties, and ensures compliance with the provisions of the VAT Act.
The examples used in this article are sourced from the October 2025 issue of SARS’ VAT Connect.
WRITTEN BY STEVEN JONES
Steven Jones is a retired tax practitioner and member of the South African Institute of Professional Accountants.
While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes.