VAT and the Issue and Redemption of Tokens, Stamps and Vouchers

• Author: Des Kruger Kruger
• Published date: 01 March 2022
• Date: 01 March 2022
• Pages: 16-26
• DOI: 10.10520/ejc-btclq_v13_n1_a4

16 © Siber ink

VAT and the Issue and

Redemption of Tokens,

Stamps and Vouchers

DES KRUGER*

ABSTRACT

Where a token, stamp or voucher (collectively referred to as ‘voucher’) is

issued by a vendor for consideration, the crisp issue is whether the supply of

the voucher falls to be dealt with under section 10(18) or (19) of the Value-

Added Tax Act 89 of 1991 (‘VAT Act’). Should the voucher fall to be dealt with

under section 10(18) the supply of the voucher is disregarded for purposes of

the VAT Act. Practically, this means that no liability to account for value-added

tax (VAT) arises on sale of the vouchers, but only on the sale of the goods or

services acquired in exchange for redemption of the voucher.

By contrast, should the sale of the voucher fall to be dealt with under

section 10(19), the vendor will be required to account for VAT on sale of the

voucher, but the value of the goods or services supplied on surrender of the

vouchers is deemed to be nil.

In a recent case, Mobile Telephone Networks (Pty) Ltd (‘MTN’) had previ-

ously accounted for VAT in respect of the sale of its airtime vouchers on the

basis that the vouchers fell within the ambit of section 10(19), that is, that VAT

needed to be accounted for on sale of the airtime vouchers. MTN approached

SARS for a ruling conf‌irming that section 10(18) was in fact applicable. SARS

declined and MTN sought a declaratory order conf‌irming that section 10(18)

was the appropriate provision that applied in these circumstances.

After a very unsatisfactory analysis, Hughes J held that the airtime vouchers

fell within the ambit of section 10(19) of the VAT Act. Unsatisfactory, as

the learned judge did not identify what services were ‘specif‌ied on such …

voucher’ or ‘which by usage or arrangement entitled the holder to specif‌ied

goods or services.’ This author argues that while the holder will be entitled on

redemption of the voucher to a number of identif‌iable goods or services, this

is not tantamount to specifying the goods and services that may be acquired

by the holder on redemption of the vouchers.

The possibility that MTN is still only required to account for the VAT on

redemption because of the application of the Consumer Protection Act 68 of

2008 (‘CPA’) — even if the ‘airtime’ vouchers do indeed fall within the ambit

of section 10(19) — is explored. A Tax Court case that dealt with the interac-

tion between the CPA and the Income Tax Act in the context of the sale of

gift cards is considered. The learned judge had concluded that the CPA had

application and that the moneys received on sale of the gift cards could not

be said to have been ‘received’ by the taxpayer and as such did not fall within

the taxpayer’s ‘gross income’. The author concludes on the same basis that

* Consultant, Webber Wentzel; Adjunct Professor, University of Cape Town.