VAT & SARS

[GaryF]

Hi guys,
I have been to SARS (yawn) to try to ascertain exactly what can & cannot be claimed as far as VAT is concerned. Their response was claim it and if we reject it then you know. I would rather be sure than face penalties and interest for 5 years for claiming something that I should not be claiming and they only realise in 2017!!
Anybody know where I can get such a guideline booklet / list / whatever?

cheers
Garty

[Dave A]

Here is a list of info documents drawn up by SARS on VAT. The most generic is the VAT 404 Guide for vendors, but as you will see there are some others relating to particular areas of interest.

If you've got any specific questions, by all means ask here - there's a fair chance someone will know the answer.

[wynn]

Yes please ask it as there may be some others who would also be interested in the answer!

[BusNavig8]

The Vat Guide is a very Good Start. If you have a specific claim and you wish to know if it is claimable then Ask! Accomodation has special concessions. 4x4 and commercial vehicles are a big hobby horse for SARS. So I would be really careful there. I would also be careful to deregister a VAT number if you are in the service industry (which is a good idea in most cases) as any assets you claimed Vat on you would have to pay the VAT back to SARS. Another one is where you but a business as a going concern, it must have assets, if it does not then go and buy a computer etc so that is a vat neutral sale.

[IMHO]

Regarding de-registering. Surely there is a time limit on the items you have to pay VAT back on? Exactly which VAT claimed must you pay back?

[BusNavig8]

They use a period of use formula - remember capital assets have a generally accepted period of useage. You can argue and motivate this of course! The vat that you claimed on the original item (only capital items are considered in this clause). In other words - We deregistered one of our companies for VAT because we were service based and most of our expenses were not vatable (petrol, salaries etc )to give us a short breather until our TO reaches the R1m again - hopefully they will increase the ceiling. We made sure that the capital items had depreciated first i.e computers.

[bammer]

Regarding de-registering. Surely there is a time limit on the items you have to pay VAT back on? Exactly which VAT claimed must you pay back?

Some light reading...

Section 8(2)

For the purposes of this Act, where a person ceases to be a vendor, any goods (other than any goods in respect of the acquisition of which by the vendor a deduction of input tax under section 16(3) was denied in terms of section 17(2) or would have been denied if those sections had been applicable prior to the commencement date) or right capable of assignment, cession or surrender which in either case then forms part of the assets of his enterprise, shall be deemed to be supplied by him in the course of his enterprise immediately before he ceased to be a vendor, unless the enterprise is carried on by another person who in terms of section 53 is deemed to be a vendor: Provided that-

i) where such right is so deemed to be supplied that supply shall be deemed to be a supply of a service;

ii) this subsection shall not apply to any such goods or right to the extent that a deduction in terms of section 16(3) has not been allowed or will not be allowed, in respect of the acquisition or use by such vendor, where such vendor on or before 30 June 2000-

aa) ceases to be a vendor for the sole reason that the total value of taxable supplies made by that vendor in the preceding period of 12 months has not exceeded R20 000; or

bb) ceases to be a vendor in respect of a commercial rental establishment or a residential rental establishment for the sole reason that the total receipts and accruals derived from that commercial rental establishment or residential rental establishment in the preceding period of 12 months have not exceeded R48 000;

iii) this subsection shall not apply to fixed property to the extent that a deduction in terms of section 16(3) has not been allowed or will not be allowed in respect of that fixed property or any improvements thereto, where such vendor, on or before 30 June 2000, requests the Commissioner in writing, in the circumstances contemplated in section 24(2), to cancel his registration.

iv) this subsection shall not apply to a vendor that is a constitutional institution listed in Schedule 1 to the Public Finance Management Act, 1999 (Act No. 1 of 1999) or a public authority, respectively, where that vendor (other than a vendor who applied and was registered as a vendor during the period 22 December 2003 to 31 March 2005) ceases to be a vendor as a result of—

aa) the substitution of the definition of ‘public authority’ in the Revenue Laws Amendment Act, 2004 or the insertion of paragraph (viii) to the proviso to the definition of ‘enterprise’ in the Revenue Laws Amendment Act, (Act No. 45 of 2003); or

bb) the re-classification of that vendor or part of that vendor’s activities within the Schedules to the Public Finance Management Act, 1999 (Act No. 1 of 1999) subsequent to the introduction of the Revenue Laws Amendment Act, 2004;

v) this subsection shall not apply to any such goods or right to the extent that output tax has been paid in terms of section 16(4) read with section 22(3) in respect of such goods or right; and

vi) this proviso shall not apply to the extent that input tax in respect of such goods or right has been deducted in terms of section 16(3) read with section 22(4).

Section 10(5)

Where goods or services are deemed to be supplied by a vendor in terms of section 8(2) or (9), the supply shall be deemed to be made for a consideration in money equal to the lesser of-

a) the cost to the vendor of the acquisition, manufacture, assembly, construction or production of such goods or services, including-

i) any tax charged in respect of the supply to the vendor of such goods or services or of any components, materials or services utilized by him in such manufacture, assembly, construction or production;

ii) where such goods or any right referred to in section 8(2), when held by the vendor, constituted trading stock as defined in section 1 of the Income Tax Act, any further costs (including tax) incurred by him in respect of such goods or right as contemplated in section 22(3)(a) of that Act;

iii) any costs (including tax) incurred by the vendor in respect of the transportation or delivery of such goods or the provision of such services in respect of such goods that are consigned or delivered or the provision of such services as contemplated in section 8(9); and

iv) where such goods or services were acquired under a supply in respect of which the consideration in money was in terms of section 10(4) deemed to be the open market value of the supply or would in terms of that section have been deemed to be the open market value of the supply were it not for the fact that the recipient would have been entitled under section 16(3) to make a deduction of the full amount of tax in respect of that supply, such open market value to the extent that it exceeds the consideration in money for that supply; or

b) the open market value of such supply.

[IMHO]

Some light reading...

Well, to some maybe. Can anyone summarize this into a simpler form, that even I can follow?

[Dave A]

If it's an asset on your books that you claimed Input VAT for - SARS is going to want at least some (and at times all) of the Input VAT you claimed back if you deregister for VAT.*

*Terms and condtions apply

Does that help?

[Cecilia23]

I Think my question might seem strange, and maybe even not so "straight and narrow" but here goes any way.

At the moment we are looking at getting a BBEEE partner, he is working on projects allready and asked us to make out invoices obo him. the problem i have with this, is what is our liabillity regarding his VAT that is on the invoice that we make out in his name? and if it is not our responsibility how do i put it in words to explain that the vat is his responsibility (I r from pretoria - english was not a subject in school )

[Dave A]

At the moment we are looking at getting a BBEEE partner, he is working on projects allready and asked us to make out invoices obo him. the problem i have with this, is what is our liabillity regarding his VAT that is on the invoice that we make out in his name? and if it is not our responsibility how do i put it in words to explain that the vat is his responsibility

About the best way I can think of approaching this is - Who's VAT number is going on the invoice as the supplier of goods and/or services?

[BusNavig8]

It should be handled as follows : you invoice the client, if they are vat vendors then you charge vat. Then the BBBEE partner to be invoices you and you hay him. If he us a vat vendor he issues you a tax invoice if not just an invoice which you would pay in the usual way. Remember that you may incur a tax problem if he is not regarded as an independent trader and thus have to deduct PAYE from the invoice.

[bammer]

Assuming all parties are registered VAT vendors and subequent to entering into an agency agreement, you can, in terms of section 54 of the VAT Act, act on behalf of the partner. Acting as agent, you are entitled to issue and receive tax invoices as if the supplies were made by you (and to you) and not the partner (principal). Certain requirements have to be met (see s. 54(3)), including, notifying the principal (within 21 days) of its VAT liability. Note that you cannot claim input tax on behalf of the principal and should not account for output tax in respect of any tax invoices issued by you on his behalf.

[BusNavig8]

Assuming all parties are registered VAT vendors and subequent to entering into an agency agreement, you can, in terms of section 54 of the VAT Act, act on behalf of the partner. Acting as agent, you are entitled to issue and receive tax invoices as if the supplies were made by you (and to you) and not the partner (principal). Certain requirements have to be met (see s. 54(3)), including, notifying the principal (within 21 days) of its VAT liability. Note that you cannot claim input tax on behalf of the principal and should not account for output tax in respect of any tax invoices issued by you on his behalf.

In these cases an agency agreement is rarely entered into and the definition of an agency agreement in terms if the original post as I read it was not the intention of the parties, the intention of the parties was something entirely different. If he were a BBBEE partner would he be entitled to the VAT on the income he generated? The section of the VAT act is intended for agency agreements where they will be intended to stay as such. It can if course be argued that the partnership fell through but in most cases I guarantee you that there is no agreement in place.