Zero rate VAT supplies and Input VAT claims

[cdt@financeworx.co.za]

We have a chicken farm whose main business is the selling of eggs that is charged at zero rate VAT. Occasionally we sell live chickens that are vatable. Are we allowed to claim VAT on our expenses. If we claim VAT on our expenses it will mean that SARS will have to repay us the VAT for all the periods submitted?

[Andromeda]

Hi. You have to apportion it. Get hold of a VAT 404 brochure and look at section 8.

In a nutshell, apply the percentage turnover to the input VAT. In other words the chicken turnover as a % of total turnover x the total input VAT.

[Christel]

Hi. Yes you are definitely able to claim ALL expenses relating to the farm back. You do not have to proportion anything as chickens are used to produce eggs! Eggs are zero rated, so you will have a claim basically every month. Just make sure all your invoices are correct as per the SARS rules as they will certainly do a review basically every month.
Hope you are registered for Diesel rebate too? If not, register, then at least you can get the diesel used on the farm back as well.

[dellatjie]

I agree with Christel. Had you other income been exempt, it would be a different story, but as zero rated supplies are seen as taxable supplies, you are allowed to claim input tax on expenses incurred to produce the eggs too.

[Andromeda]

Christel is totally correct. I was confusing exempt with zero rated.