Claiming vat on gift cards

[prineesha]

My client who is an optometrist, recently registered for vat. He purchases gift cards and gives it to his patients per consult. Can he claim back the vat on the purchase of the gift cards. The gift cards are grocery gift cards.

[dellatjie]

Great idea!!

The general test for a deduction is: Was the expense incurred in the production of taxable goods for VAT purposes. That is the best that I can give you. Hope someone else will assist here?

[CLIVE-TRIANGLE]

It can be claimed (advertising & promotions), but if I remember right, only when issued. In other words, not on your stock of gift cards held.

[prineesha]

Hi Clive
In terms of s17(2) of the vat act it is considered as "entertainment" as the gift voucher can be used to purchase food and beverages. It is a gift card from checkers. So I don't think I can claim it back as input tax. what are your thoughts?

[CLIVE-TRIANGLE]

Hi Prineesha, that would be why it can only be claimed on issue (don't quote me on this!) because it is open to abuse by the vendor.

If the Act denies the input credit, then so be it.

In the instance that I have seen, an input credit was not claimed on acquisition. An input credit, via change in use, was claimed when issued / sold. But I have no idea how legit it is.

If you actually sell these, and you are denied an input credit, then it is puzzling that you need to pay vat on the output?

There was another thread on this a while ago:

http://www.theforumsa.co.za/forums/showthread.php/15161-Gift-vouchers-and-VAT