What happens if an entity is registered for VAT on say 1 February 2012, but has a instalment sale agreement in place that commenced before that date (say January 2012).
For illustration purposes, let me use some figures:
On 1 January 2012, instalment sale agreement for stock purchase of R1,000,000 (excl VAT), R1,140,000 (incl VAT) commenced. The agreement is signed on that date and a tax invoice for this purchase is issued by the supplier. The date of the invoice is 1 January 2012. The supplier is registered for VAT, but the purchaser is only registered for VAT on 1 February 2012.
Per the instalment sale agreement, the outstanding amount is payable over 6 months. The first instalment of R190k (R167k excl VAT) was paid on 1 January 2012. The purchaser allocated the full amount of R190k to stock, as VAT input can not be claimed. The seller accounts for R23k Output VAT and R167k is allocated to turnover.
The entries on 1 January 2012 are as follows (purchaser):
Dr Stock R1,140,000 (full value incl VAT as not yet registered for VAT)
Cr Supplier R1,140,000
Dr Supplier R190,000
Cr Bank R190,000
The second instalment of R190k (R167k excl VAT) was paid on 1 February 2012. Can the purchaser allocate R167k to stock and claim back R23k Input VAT on this transaction? He is registered for VAT from 1 February 2012, but the invoice date is before that date?