[Question] Back claiming Vat on development costs

[ASF]

Hi
We are a newly registered company and are in the process of developing a tourism facility with high development costs. We are not yet generating a turnover as that will only happen once the development is complete and can consequently not yet register for Vat. We would obviously like to be able to reclaim the Vat on the development costs and would like to know whether it would be possible to back-claim Vat and for how far back?
Thanks!

[CLIVE-TRIANGLE]

5 years back, I believe.

[Houses4Rent]

Probably best to ask SARS to be sure. Ask them three times. If you get three times the same answer you are lucky and can believe the answer.

[CLIVE-TRIANGLE]

It's embedded in the efiling process too. When you request a correction, and attempt to increase an input vat amount, the popup informs you that you cant and rather to add it it next cycle because you have five years in which to claim it.

What I am not certain about is whether you would have had to be registered with a "liable for vat" date prior to incurring the expense.

[Justloadit]

Even if you can not claim the VAT, the VAT portion will still affect your earning of profit. So either way it will probably be accounted for if not claimed as a reduction in your profit margin, or in your case, and increase in the carry over loss. just remember that there must always be a mention of financial support to the company, in the case that it is trading at a loss, or else you may be deemed to be trading recklessly.

[Beancounter]

What I am not certain about is whether you would have had to be registered with a "liable for vat" date prior to incurring the expense.

You have to have been registered for VAT at the time to be able to claim Input VAT incurred at that date during the past 5 years. To solve niggling problems like that, you could purchase in your own name until the business is large enough to register for VAT. Lease the equipment to the business for an amount more or less equal to the annual depreciation so you don't show a profit in your personal capacity. When the business registers for VAT, sell it to the business as second-hand goods issuing a VAT264 as the source document. You will sell it at market value and not at the original cost price but that way you get the equipment etc. in the business' name and you get to claim some VAT back in terms of Section 20(8) of the VAT Act. If you're going to pay from the business' account, be sure to have a loan agreement in place to prove that the business purchased on your behalf. Journal entries alone won't suffice to prove the underlying intention. SARS may cotton on to this and bring in new legislation to close this loophole but hey, the law is there to be followed as it is at the time.