Input VAT claim

[kavesh]

Hi all

I know that you cannot claim input vat on entertainment costs like office teas and similar.

What about when the company buys a coffee machine? My feeling is that you may be permitted to claim the input. My client has decided not to claim the input citing you cannot claim vat on office teas and coffees.

But its an asset used in the office, like a fridge.

Is my logic incorrect?

Please advise.

Thanks
Kavesh

[Andromeda]

Hi Kavesh

Please refer Chapter 8.5 LAPD-VAT-G02-VAT-404-Guide-for-Vendors.pdf

[kavesh]

Hi Kavesh

Please refer Chapter 8.5 [ATTACH]8396[/ATTACH]

Thank you kindly.

[Mpholo and Associates]

Hi Kavesh,

I would claim the input VAT. Reason being VAT is an indirect tax levied on the supply of goods and services.
Office expenses are section11(a) expenses (they are expenses incurred in the normal day-to-day running of the business and are related to the operations of the business)

The invoice for the purchase of Office Teas and Coffees does not have to meet the full requirements of a valid VAT invoice.
I don't think Pick n Pay, or Woolworths will have the time to issue me out with an invoice that meets the requirements of a full VAT invoice, so I will be happy with an abridged VAT invoice, provided that the amount on the invoice does not exceed R5,000.00, and the transaction went through the business account.

I also advise my clients not to use physical petty-cash for the purchase of these expenses. It just makes the accounting process long.
Rather give them a bank card that is linked to the business account. Put a fixed amount in that account and ask them to make office consumables from that account, then they must do reconciliations on that card weekly.

Regards,

[Krono9]

Hi Kavesh,

I would claim the input VAT. Reason being VAT is an indirect tax levied on the supply of goods and services.
Office expenses are section11(a) expenses (they are expenses incurred in the normal day-to-day running of the business and are related to the operations of the business)

The invoice for the purchase of Office Teas and Coffees does not have to meet the full requirements of a valid VAT invoice.
I don't think Pick n Pay, or Woolworths will have the time to issue me out with an invoice that meets the requirements of a full VAT invoice, so I will be happy with an abridged VAT invoice, provided that the amount on the invoice does not exceed R5,000.00, and the transaction went through the business account.

I also advise my clients not to use physical petty-cash for the purchase of these expenses. It just makes the accounting process long.
Rather give them a bank card that is linked to the business account. Put a fixed amount in that account and ask them to make office consumables from that account, then they must do reconciliations on that card weekly.

Regards,

I tend to disagree with this view and the problem not directly because of the invoice requirements. If you refer to 8.5.1 in the VAT404 guide and bullet 3 specifically, it refers to coffees/tea's, but also the kitchen equipment as it falls under the very broad definition of "entertainment". We do not claim VAT on kitchen equipment and utensils. We have just completed a SARS VAT audit on site, they specifically checked kitchen equipment purchases and are of the view you cannot claim input tax as its denied under the definition of entertainment. Hope that helps. Maybe Andromeda can give his view?

[Mpholo and Associates]

Hi Krono9,

The very same document you referred to reads as follows;

8.5 Denial of input tax
The VAT Act provides that input tax is denied on certain expenses even if the expenses are
incurred in the course of conducting an enterprise. These include –
• goods or services acquired for purposes of entertainment (subject to certain exceptions
mentioned in 8.5.1);

Focus on the wording in brackets. Now go read 8.5.1 considering those items to be exceptions.

There is a reason why the VAT Act changes from year to year and new cases are added on the VAT Act.
(Firstly) - I don't think you did enough justice to substantiate why you claimed coffee and tea on the VAT audit.
(Secondly) - I don't think the SARS auditor went and focused on input VAT of around R12.00 (A bottle on Jacobs costs about R80.00)
(Thirdly) - I am asking myself how is your Entertainment GL looking like if we are sitting in November 2021 and you already got an Audit on that Account.

In my own opinion, I don't consider coffee and tea as entertainment. Entertainment is associated with Fun. Do you think employees are having fun when drinking coffee at the office?

I think the employees are getting a break from production and going to check on their WhatsApp status'. Some employees even bring they own coffee to work because some employers buy "swak" coffee.

Kitchen equipment is a whole different story. There are some items you have at home that are kitchen equipment, in all logical sense, I would not expect to see some of the things you have in your kitchen at home, at the kitchen of the office. (E.g. why would I want to have a deep fryer at the office kitchen?).

In my humble opinion, The VAT Act has some logic in it. I think we have one of the best VAT Acts in the world.

Claim the VAT.

[Andromeda]

I tend to disagree with this view and the problem not directly because of the invoice requirements. If you refer to 8.5.1 in the VAT404 guide and bullet 3 specifically, it refers to coffees/tea's, but also the kitchen equipment as it falls under the very broad definition of "entertainment". We do not claim VAT on kitchen equipment and utensils. We have just completed a SARS VAT audit on site, they specifically checked kitchen equipment purchases and are of the view you cannot claim input tax as its denied under the definition of entertainment. Hope that helps. Maybe Andromeda can give his view?

I would not claim the VAT.

https://www.saica.co.za/integritax/2015/2383._Entertainment_expenses.htm

If you get a VAT audit I guarantee you that you will get an assessment. I agree with Mpholo and Associates that it is hardly entertainment, but the Vat Act is brutally clear.

[kavesh]

Thanks for all the feedback guys.