Commissioner for South African Revenue Service v British Airways Plc

British Airways Plc, an international air carrier and VAT vendor, operates flights to and from South Africa. Its international carriage services are zero-rated for VAT under s 11 of the Value-Added Tax Act 89 of 1991. The Airports Company Limited levies various airport charges on airlines, including a passenger service charge calculated per departing passenger, to cover airport facilities and services. British Airways recovered this passenger service charge directly from passengers by separately itemising it on tickets as part of the composite fare. SARS assessed British Airways for VAT at the standard rate (14%) on the portion of the fare representing recovery of the passenger service charge for the period September 1993 to December 1998. British Airways successfully appealed to the tax court, and SARS appealed to the Supreme Court of Appeal.

The appeal by the Commissioner for the South African Revenue Service was dismissed with costs, including the costs of two counsel.

The case clarifies the VAT treatment of composite charges in the airline industry and limits the application of s 8(15) of the VAT Act. It confirms that VAT liability depends on who supplies the service, not on how charges are recovered or itemised, and prevents SARS from taxing amounts that merely reimburse a vendor for costs incurred for services supplied by a third party.