CTAA 031

Ch. 32 (SILKE)
Ch. 30 (NOTES)
Road Map for VAT
Definition
Imported
Registration
goods

Input VAT Tax period

Deemed Accounting
Supply basis

Time value of
Exempt Supply
supply

Zero Rated
Output VAT
Supply
Charging or non charging of
VAT “The big picture
Vendor Non-vendor

Deemed Supply of
Non-supplies All Supplies
supplies Goods/Services

Standard rate Zero rate Exempt No VAT

15% VAT
VAT @ 0% No VAT
(Output tax)
The charging section - decision tree
Exempt supplies
(Section 12)
Deemed supplies
(Section 8)
(a) Zero rated
Supply of (Section 11)
goods/services
Time of supply
(Section 9)
(b)
Impositioning
goods imported and Standard rate
(Section 7(1))
section 13
Value of supply Documentation
(Section 10) (Sections 20 & 21)
(c)
Imported services and
section 14
“Input tax” Denied input tax
(Sections 1, and 17(1)) (Section 17(2))

Other deductions
(Section 16)
 Input VAT
Input tax is defined in section I of the vat act as:
VAT charged to a vendor by another vendor, on the supply of goods or
services to him

The goods or services acquired by the vendor wholly or partly for the
purpose of consumption, use or supply in the course of making taxable

If the goods or services are acquired only partly for making supplies
then the input vat shall be apportioned
 Determination of Input VAT
Input VAT =
VAT payable in 15/115 of the
terms of lesser of:
section 7
consideration
On supply of goods
and services by a open market value
supplier to vendor
On acquisition of 2nd
on importation of hand goods situated
goods by vendor in SA by a resident
REMEMBER!
Must have a valid tax invoice
to claim an input 15/115
 Determination of Input VAT
Vendor will be allowed to claim an input VAT deduction if:
Vendor paid VAT on acquisition OR
Notional input VAT on acquisition of 2nd hand goods

On supply of goods and services by a supplier to

vendor

Determine the purpose for which the goods/services

will be used
100% taxable >=95% taxable supplies < 95% taxable supplies
supplies – claim – claim 100% input VAT – de – apportion input VAT
100% input VAT minimus rule (CTAA031)
Prohibited input deductions – 17(2)

Vendor will be not be allowed to claim an input VAT deduction on

goods or services that are acquired for the purpose

• Entertainment expense
• Fees or subscription
• Motor cars

Note the exception to this rule!!!

 Denial of input tax
Entertainment

defined (section 1) as

• Provision of any food, beverages,

Entertainment
accommodation, entertainment,
amusement, recreation/hospitality
• Of any kind
• By a vendor
• Whether directly or indirectly
• To anyone
• In connection with an enterprise carried on
by him
 Denial of input tax Input CAN be
claimed if:
Entertainment: EXCEPTIONS
• Vendors in the business of supplying entertainment
• Charge is made that covers direct & indirect cost or
equal to open MV of such supply OR
• Entertainment for bona fide promotional purposes
Entertainment to current client & excess food not consumed is
given to employees or welfare organization
• Supply entertainment to any employee or connected
person and a charge is made that covers all direct and
indirect cost
• Personal subsistence of vendor or employees obliged to
be away from usual place of residence for at least one
night (also if self-employed)
• Vendors operating taxable passenger transport services
• Vendors organizing seminars/similar events for reward
 Denial of input tax

Club Subscriptions
Club
subscription • For e.g: membership fee of sporting, social
or recreational clubs
• Membership fees of professional bodies not
within the ambit of club subscriptions
(therefore input is NOT denied)
 Denial of input tax

Motor Car
defined (section 1), includes

• Motor vehicle, station wagon, minibus,

double cab light delivery vehicle
• and any other motor vehicle of any kind
Motor car • normally used on public roads
• which has three or more wheels
• Constructed or converted wholly or mainly
for the carriage of passengers
 Denial of input tax
Motor Car: EXCEPTIONS
• Vehicles capable of carrying only 1 person,
vehicles suitable for carrying > 16 persons
• Vehicles with unladen mass of 3,500kg/more
• Vehicles constructed for a special purpose
Motor car other than carrying passengers
• Game viewing vehicles –
constructed/converted for carriage of 7 or >
passengers. Used exclusively for that
purpose (not merely incidental and
subordinate to that use)
• Hearse – used exclusively for the purpose of
transporting deceased persons.
 Denial of input tax

Motor Car: Denial does NOT apply to

• car dealer
• runs a car hire business
Motor car • acquired the motor car for the purpose of
awarding the car as a prize
• regularly or continuously supplies motor
cars as prizes to clients or customers
Notional input VAT on second-hand goods
• Acquire 2nd hand goods from non-vendor (resident of RSA)
• Goods situated in the Republic
• Goods are being used wholly or partly for making of taxable supplies
• Second hand goods = goods previously owned (excludes animals +
gold coins)
• Input tax = 15/115 x lesser of:
• Cost
• Open MV
• Only claim notional input tax to extent that payment has been
made
Notional input VAT on second-hand goods
• Documentary requirements – vendor maintain
• Name, ID, legal registration number
• Photocopy of supplier’s ID / letterhead (registration number)
• Acquisition date
• Description of goods
• Quantity or volume
• Consideration for the supply
• Proof & date of payment
• No documentary proof required for purchases NOT exceeding R50
 Importation of goods – s7(1)(a)
VAT Output will be raised on
importation (whether vendor or not)

Non-customs union Customs union

member countries member countries

Customs duty value + 10% of

customs duty value + customs X 15% Customs duty
X 15%
duty value

Remember: VAT is collected by customs

officer along with customs duty at a Botswana / Lesotho /
designated port of entry. If importer is a Namibia / Swaziland
vendor then can claim an input tax
deduction
 Importation of goods – s7(1)(a)
“In bond” supply of goods??

• Goods imported but stored at customs warehouse (not yet declared

for use in SA)
 Importation of goods – s7(1)(a)

“In bond” supply

Value = Greatest of

Customs duty value + 10% of Consideration

customs duty value + customs X 15% for “in bond” X 15%
duty supply
General rule: of Time and Value of supply

Time of Supply Value of supply

The earlier of
• Time that invoice is issued
• Payment
• Time that payment of
consideration is received by
supplier
• If consideration is in the form of
money = the money
• If consideration is not in the form
of money = the open market value
at time of supply
• Therefore the value of supply is
consideration less VAT
Special rule: Connected Person
Time of Supply
• Goods to be removed – time of
removal
• Goods not yet removed - time
made available
• Services – when services are
performed
Value of Supply
• Value of supply is open market
value if:
• Supply is made for no
consideration / consideration
less than open MV,
• AND recipient not entitled to full
input tax deduction in respect of
supply
Special Rule :Rental Agreements

Time of Supply Value of Supply

• Date on which payment is due • General rule
• Date on which payment is
received
 Special Rule :Fixed Property

Time of Supply Value of Supply

Earlier of
• Date of registration
• Date on which any payment of
consideration is made
• General rule Either VAT or transfer
duties levied on transaction
• Where amount due is in instalment
– only claim input to the extent of
payment is made
 Fixed property transactions
• If seller is a registered vendor – account for output VAT.
(if VAT is levied, transaction exempt from transfer duties in terms of
transfer Duty Act).
• If seller is a non-vendor – transfer duties are levied on the sale.

Therefore
NEVER transfer duties & VAT
on a fixed property transaction –
VAT has preference!
 How is transfer duty calculated?
On a SLIDING SCALE

On the first R600 000 of value 0%

On the value exceeding R600 000 but not exceeding R1 million 3%
On the value exceeding R1 million but not exceeding R1.5 million 5%
On the value exceeding R1.5 million 8%
 Time and value of supply
Fixed property

Buyer will
claim either

NOTIONAL input ACTUAL input

Valid Tax Invoice

Supply between R50

& R5,000 (incl. VAT)
Required
2 through 6, plus 8
and 9

Supply > R5,000

(incl. VAT)
Required
1 through 10
Administrative Procedures
• Completed VAT 201 + PMT to SARS on or before
• 25th of the month (manually submitted) or
• END of month (e-filing – submission & payment)
following end of tax period
• If not on a business day – business day before the 25th/last day
• Late payment of VAT:
• Penalty of 10% of the tax due
• Interest at prescribed rate calculated from 1st day of the month following the month
in which payment was due
• Commissioner can prescribe the time at which PMT must be made – if not
in time it will be deemed that the PMT was made on the next business day
QUESTIONS