UNIVERSITY OF JOHANNESBURG

TAXATION 300 – 2024

VALUE ADDED TAX (VAT)

OUTLINE:
REFERENCES
ACT HAUPT
DO NOT STUDY CHAPTER 1, 30,31
FROM THE ACT
FOR VAT unless
specifically
referred to VAT
Act
INTRODUCTION, BACKGROUND and ADMIN Self study – 1.1, 1.1.5, 1.1.6,
Tax200/3AB 1.5.1, 1.5.2
assumed 30.1, 30.2,
knowledge 30.11, 30.20

 Tax Calculation 30.1.2, 30.11

 Registration S23-25 30.3
30.16.2
 Tax periods S27 30.1.1
 Accounting basis 30.10
 Payment of VAT & Penalties 30.17, 30.20
 Returns, Recordkeeping & Invoices S20(1), (4), (5), (8) 3.1.1, 30.14 – 16
Tax invoices 30.19
S28, S55
 Avoidance and Evasion 30.22

OUTPUT TAX Self study – 30.1.1; 30.1.2

Tax200/3AB 30.2.2
assumed
knowledge
 Definitions – Tax, Output, Input, person, 30.2
Enterprise, Connected person, Invoice, 30.3.10
Consideration, Donation, Supply, Goods,
Second-hand goods, Services, Vendor, Republic,
Electronic services
 Taxable supplies
o Zero Rated (underline in ACT) Schedule 2 (read 30.6
through it)
 EXPORTS (just take note it is
 zero rated – no detail!)
 Going concern 30.4.4, 30.6.4

o Standard rated All other!

 Exempt Supplies (underline in ACT) 30.7
o Financial services (understand difference High level no detail 30.7.2, 30.8
between fee and service)
o Residential Accommodation 30.7.4
o Other 30.7.5 – 7
 Deemed supplies – SARS v British Airways 30.4
o Ceasing to be vendor 30.4.3
o Indemnity payments/Insurance claims 30.4.5
o Fringe Benefits Second semester 30.4.2
only
o Excess payments 30.4.10, 30.5.13
 Non supplies 30.4.7, 30.4.8
 Apportionment of specific output tax See recording 30.4.9

TIME and VALUE of SUPPLY Self study – 30.1.1; 30.1.2; 30.5,

Tax200/3AB
assumed 30.5.8
knowledge
 Connected persons – DEFINITION NB! S1 Def 30.2.8, 30.5.9
 Rental agreements S1 Def 30.5.3
 Instalment credit agreement S1 Def 30.5.4
 Fixed property 30.5.5
 Supply by machine 30.5.6
 Commercial accommodation S1 Def 30.5.11
o Domestic goods and services S1 Def
o Dwelling S1 Def
 Other 30.5.7
30.5.12 – 14
 Market value NB! 30.5.10
INPUT Tax 30.1.1; 30.1.2.
30.2.3, 30.12
 Apportionment of input 30.12.1
 Denied inputs Self study – 30.1.1
Tax200/3AB 30.12.2
assumed
o Entertainment & Motor car knowledge 30.5.12
S1 Def
 Notional input 30.12
o Second-hand goods definition S1 Def 30.2.15

SPECIAL RULES
Fixed property & Transfer Duty CH 31 30.25, 31.1
31.2

VAT LINK Link with VAT 30.26

LINK LECTURE
 LEAVE OUT
Adjusted cost 30.2.7
Associations not for gain 30.2.12, 30.3.6,
30.7.3
Separate enterprises/branches 30.3.2 – 30.3.5
30.4.6, 30.4.9
Leasehold improvements 30.4.11
Xero rated services to non residents 30.6.5
Imports 30.9
Adjustments 30.13
Micro business 30.24
Agents 30.18
Other 30.21, 30.23

OUTCOMES:
At the end of this unit you should be able to :
1. Calculate VAT payable or refundable to/from SARS
2. Identify a Taxable, Zero rated and Exempt supplies and know how to treat them in discussion and
calculation questions
3. Discuss VAT principles surrounding Taxable, Zero rated and Exempt supplies
4. Deal with VAT principles on Deemed supplies, Connected persons, Fixed property and Transfer duty
5. Discuss and apply Time and Value of supply rules for VAT
6. Know when and how to apportion Input VAT
7. Discuss and apply Denied and Notional Input VAT rules
8. Advise someone on how VAT works i.e. registration, periods, accounting basis, payment and
penalties surrounding VAT and how to fill in a VAT return
9. Criticise VAT documentation

CASE LAW

 CSARS v BRITISH AIRWAYS

HOW CAN VAT BE TESTED

 Calculations, Discussion questions and/or Combinations of calcs and discuss, Intergration with all
topics to come for the rest of the year.

BACKGROUND
Value-Added Tax (hereafter VAT) is levied in terms of the Value-Added Tax Act 89 of 1991,
and is a type of indirect tax, and a direct cost to the final consumer. VAT is levied at 15%.
VAT is the tax on the consumption of goods and services in SA. It is an inclusive tax (meaning
any price charged by a VENDOR includes VAT).
Calculation of VAT:
OUTPUT VAT XX
X
Minus
INPUT VAT (xxx)
VAT payable /
(refundable)
From the above calculation it is determined that VAT is divided into OUTPUT & INPUT VAT

OUTPUT VAT
Tax charged/levied under section 7(1) (a) by a VENDOR for the SUPPLY by him of goods and
services
Levied on
1. SUPPLY of
 Goods/services
 In Republic
 By VENDOR
 In course of enterprise
2. Imports into Republic of goods (outside 300 scope)
3. Supply of Imported services (outside 300 scope)

NB  vendor SELLS goods/services the goods/services go OUT of business thus OUTPUT

VAT
VENDOR:
Registration:
Compulsory Voluntary
End of month when Value of taxable supplies for 12 months
> R50 000 (list of trades)
VALUE of taxable supplies for 12 months Acquiring going concern and value of taxable
supplies > R50 000
 > R1 million
 Types of Supplies

TAXABLE SUPPLIES EXEMPT SUPPLIES

STANDARD RATE – 15% ZERO RATED

0%

all other supplies Tax levied at 0% NO tax levied

Can claim INPUT deduction Can NOT claim INPUT deduction

DEEMED SUPPLIES

Cessation Indemnity Fringe

of business payments benefits

Deemed supply on day just - Relating to activities of given to employees

Before vendor ceased enterprise REFER TO 2nd sem

Business - supply on date of receipt/

Payment

- N/A if previously denied

Or not taxable supply

AND

If goods are totally reinstated

- ZERO rated previously

 Deemed still zero rated

Connected persons & VAT

NB - Connected persons definition section 1

INPUT TAX
This is the VAT component of payment for goods and services SUPPLIED by the vendor for
purposes of making taxable supplies.
NB – Vendor BUYS goods/services, therefore goods/services comes INTO business thus
account for INPUT tax
NB  A vendor can ONLY claim input VAT if he is in possession of a valid TAX INVOICE!
When a vendor uses goods/services PARTLY for making taxable supplies  APPORTION
INPUT tax to % taxable supplies, HOWEVER when taxable supplies is greater or equal to
95% of total supplies claim a FULL input tax deduction.

APPORTIONMENT of VAT input (only calculated ONCE a year and applied to ALL input
during year)
NB - It is compulsory to apportion input where goods/services are acquired for both taxable
and exempt supplies
Turnover method

A = B x C/D

B = Total INPUT tax

C = VALUE of all TAXABLE supplies
D = value of ALL supplies
NB – VALUE excludes VAT
Excluded from the above values:
 Instalment credit agreements
 Supply of capital goods (unless supply under rental agreement)
 Goods & services where input tax deductions is denied

IF goods/services are purchased from a NON vendor (not registered for VAT) no input can be
claimed as NO VAT was paid (one exception is purchases of SECOND HAND goods from
non-vendors).
DENIAL OF INPUT VAT DEDUCTION
 Entertainment
Includes provision of food & beverage, accommodation, amusement, recreation or
hospitality.
When the following is incurred INPUT WILL be claimable
o Business to supply entertainment and charge for all indirect and direct costs
o Supply of entertainment when NATURAL PERSON employed by vendor is
REQUIRED to be away from home for at least 1 night
o Vendors operating taxable passenger transport services (airlines, trains etc)
o Vendors organising seminars for reward
 Club memberships and subscriptions
Relating to sport, social or recreational nature
INPUT WILL be claimable
o Professional memberships of employees (ex: CA(SA)), only if sole proprietor
 Motor car
Definition NB
INPUT will be claimable on motor vehicles IF
o Vehicle transporting 1 person OR > 16 persons
o Vehicle unlade mass 3 500 kg or more
o Caravans, ambulances
o Vehicles that can NOT transport passengers(Construction Rule)
o Game viewing vehicles
o Hearses
Exceptions to the general rule of “no input”  thus CAN claim input: (s(17)):
 Vendor acquire exclusively to make taxable supplies (car dealer)
 Vendor acquire to award as betting prize
 Vendor acquire and his enterprise is to continuously supply cars as prizes

NB – denial of input ONLY on ACQUISITION of motor car, therefore CAN claim input on
repairs, maintenance and other costs.

DEEMED INPUT VAT (Notional input)

 Second hand goods (may include fixed property)
If acquired from a non-vendor (resident in RSA) and the goods are situated in RSA –
deemed input VAT is claimable
Criteria:
 Situated in SA
 Purchaser = vendor
 Seller = non vendor
 Used to make taxable supplies
Excluded from definition
  Animals
 Gold coins
Input VAT calculated at < (The lower of) of purchase price or market value, the deemed
input can ONLY be claimed to the extent that PAYMENT has been made.
INSTALMENT CREDIT AGREEMENTS
Agreement where goods, machinery or plant are supplied under a qualifying sale or lease
Includes suspensive sales and finance leases
Requirements
In case of SALE
 Goods sold to purchaser
 By seller
 For stated amount of money
 Payable in whole or instalments
 Over period in the future
 INCLUDES finance cost
 Aggregate of amount payable > cash value of supply
In case of LEASE
 For stated amount of money
 Payable in instalments
 Over period in the future
 INCLUDES finance cost
 Aggregate of amount payable > cash value of supply
 Lessee entitled to possession for at least 12 months
 Lessee accepts full risk for loss, insurance, maintenance, repair etc..
Value of supply
 Cash sale value (EXCLUDING interest  financial service)
Time of supply
 EARLIER of delivery or payment
Implications
LESSOR LESSEE
Output on CASH cost Input on CASH cost
In FULL In FULL
Commencement of Commence of lease
lease

RENTAL AGREEMENTS
Agreement for letting of goods (incl fixed property) that is NOT a lease as per “instalment
credit agreement”
Includes operating lease
Value of supply
 Rental consideration
Time of supply
 EARLIER of payment due or received

Implications
LESSOR LESSEE
Output on each rental Input on each rental
payment payment
Over duration of lease Over duration of lease

FIXED PROPERTY transactions

Goods – INCLUDE fixed property
Letting:
 Commercial accommodation  standard value @ 15%
 Residential accommodation  exempt supply
 Property OUTSIDE SA  exempt supply

Sale:
 Property OUTSIDE SA  exempt supply
 Property INSIDE SA  subject to VAT @ 15% or 0% (going concern sale)  EXEMPT
from transfer duty (thus no transfer duty payable)  know criteria WHEN this will be
applicable

Value of supply
Lesser of consideration paid or market value
Time of supply
 Earlier of registration of transfer date, or date of payment

NB - Input tax on acquisition of fixed property by way of a taxable supply can ONLY be
claimed to the extent of consideration paid.
BAD DEBTS
When vendor made taxable supplies; accounted for output VAT and the amount owing LATER
becomes irrecoverable  vendor may claim INPUT VAT for amount written off