Tax: South Africa
Contributor: Neerasha Singh
1. Will the relevant law require any sales, value added or other taxes to be payable on a domestic sale/purchase or transfer of title/interest of an aircraft?
South Africa (“SA“) imposes an interest withholding tax on cross border finance provided by non-resident lenders to South African borrowers. The obligation to withhold is subject to limited exceptions and applicable treaty relief. Where there is an obligation to withhold the rate will be 15% subject to any applicable treaty relief.
Where a gain is realized on the disposal of an asset of a capital nature, capital gains tax at an effective rate of 22.4% will be payable by an SA resident company.
Value-added tax (“VAT“) may be levied by the seller on the sale of an aircraft. This is dependent on:
Whether the aircraft is being sold as a going concern;
Whether the aircraft is to be exported from South Africa after the sale; and
The VAT status of the seller and the buyer.
2. Will the relevant law require any sales, value added or other taxes to be payable on an intra EU sale/purchase or transfer of title/interest of an aircraft?
Where a gain is realized on the disposal of an asset of a capital nature, capital gains tax will be payable by the seller. Capital gains for non-residents are only taxable in SA when they are either:
attributable to a permanent establishment of the non-resident in SA; or
in respect of immovable property situated in SA held by the non-resident or an interest or right to or in immovable property situated in SA.
VAT may be levied by the seller on the sale of an aircraft. This is dependent on:
Whether the aircraft is being sold as a going concern;
Whether the aircraft is to be exported from SA after the sale; and
The VAT status of the seller and the buyer.
3. Will the relevant law require any sales, value added or other taxes to be payable on a sale/purchase or transfer of title/interest of an aircraft in that jurisdiction if the purchaser is a foreign entity and will export the aircraft to another country?
South Africa imposes an interest withholding tax on cross border finance provided by non-resident lenders to South African borrowers. The obligation to withhold is subject to limited exceptions and applicable treaty relief. Where there is an obligation to withhold the rate will be 15% subject to any applicable treaty relief.
Where a gain is realized on the disposal of an asset of a capital nature, capital gains tax at an effective rate of 22.4% will be payable by an SA resident company.
Non-residents are only subject to income tax in South Africa on income from a source or deemed source in South Africa. Further, if the non-resident is a resident of a country with which South Africa has a DTA, any such income will only be taxable in South Africa if it is attributable to a permanent establishment through which the non-resident operates in South Africa.
VAT may be levied by the seller on the sale of an aircraft. This is dependent on:
Whether the aircraft is being sold as a going concern;
Whether the aircraft is to be exported from SA after the sale; and
If the seller (SA resident) is registered for VAT, the export of the aircraft will be subject to VAT at 0%.
If the seller is not registered for VAT, provided that the seller obtains a VAT exemption ruling from SARS, there will be no VAT consequences on the exportation of the aircraft.
The VAT status of the seller and the buyer.
4. Will the relevant law require any export tax and/or customs duties to be payable on the export of an aircraft in the relevant jurisdiction?
From a VAT perspective, to the extent that the seller is registered for VAT in South Africa and subject to complying with certain prescribed documentary requirements, the export of the aircraft will be subject to VAT at 0% (zero rated), except if delivery takes place in SA then VAT must be charged at 15%.
5. Will the relevant law require any import (value added) tax and/or customs duties to be payable on the import of an aircraft in the relevant jurisdiction?
VAT is payable on the importation of goods (including aircraft) into SA by the importer of record. The import VAT paid may be claimed as an input tax deduction to the extent that it is used for taxable supplies and the importer is a registered VAT vendor.
Import VAT is payable at a rate of 15% on the customs value of the goods being imported.
6. Will the relevant law require any stamp duties or fees and/or documentary taxes to be payable upon the execution of any aircraft transaction documents in the relevant jurisdiction?
South Africa does not currently impose stamp duties
Fee payable in respect of the de-registration of the aircraft in SA is R740.00, this fee is revised on an annual basis.
No fee is payable for the recordation, registration or filing of a bill of sale.
The following fees are payable on the registration of an aircraft:
Registration fee: R790;
Amendment of a certificate of registration: R570;
Issuing of a replacement certificate of registration: R570;
Uplifting of a grounding: R790;
Cancellation of a certificate registration: R790;
Allocation of special registration marks: R2 830; and
Re-allocation of aircraft registration marks: R2 830.
7. Will the relevant law require any taxes or duties on registering the aircraft?
A prescribed fee of R790.00 is payable upon the registration of an aircraft with the Civil Aviation Authority (“CAA“). Apart from the registration fee, there are no specific taxes and or duties payable for the purposes of registering the aircraft.
8. Are there any luxury taxes payable in your jurisdiction in relation to aircraft?
No
9. Will the relevant law require any income, withholding or other taxes to be payable in respect of payments made by an aircraft lessee to a lessor?
No withholding tax is payable on lease payments of operating leases. However, any default interest will be subject to a withholding tax of 15% (payable by Lessee), subject to any applicable treaty relief.
Non-residents are only subject to income tax in SA on income from a source or deemed source in SA. Whether or not income is from a source or deemed source in SA will depend on the facts of each case.
VAT at a rate of 15% may be payable on lease payments if Lessor is a registered VAT vendor. To avoid the obligation to register as an SA VAT vendor and charge VAT on lease payments one would need to apply for a VAT exemption directive in terms of the Value-Added Tax Act, 1991 from SARS.
10. What are the tax implications for operation and use of commercial aircraft?
For VAT purposes, only persons who are carrying on an enterprise (as defined), and in terms of which taxable supplies exceeding R1 000 000 per annum are made, are obliged to register as VAT vendors in South Africa and levy VAT at 15% on supplies.
Non-residents are only subject to income tax in SA on income from a source or deemed source in SA. Whether or not income is from a source or deemed source in SA will depend on the facts of each case, therefore if the operator or user of the aircraft is earning an income on the operation and use of the aircraft from a source in SA they may be liable for income tax.
11. What are the tax implications for operation and use of corporate and/or private aircraft?
Refer to question 10 above.
12. Will the relevant law require any taxes to be payable on aircraft loan repayments (income tax and interest)?
The South African Income Tax Act imposes an interest withholding tax on regular cross border finance provided to South African borrowers by non–resident lenders, subject to limited exceptions and any applicable treaty relief which may be available. Such withholdings tax if applicable is levied at a rate of 15% on the interest portion of such cross border financing.
13. Does the relevant law have any environmental or carbon emission taxes or schemes?
Carbon tax may be imposed, which is a tax imposed on any company that burns fossil fuels. Most common fuels include coal, oil, gasoline and natural gas. The tax rate is currently at R120 per tonne of carbon dioxide equivalent.
14. Will the relevant law require any cargo, airport (departure) or passenger taxes?
This is dealt with by the terms of the “Conditions of Use” imposed on operators by the Airports Company of South Africa and other aerodrome operators, airport taxes, air navigation charges and landing charges and hangarage accrue and arise automatically and attach to the relevant aircraft
15. Will the relevant law require any aviation fuel taxes?
No
16. Are there any other taxes specific to aircraft (not already mentioned above) in the relevant jurisdiction?
No