[Question] Diesel Rebate (Farming Activities)

[Christel]

Hello all,
I would like to know if someone could give their opinion:

We have a dairy farmer who owns two farms. On the farm in the Tsitsikamma area he runs the dairy. Then he has another farm near the Modderriver - here he raises the heffers. He has his own truck and driver (who earns a monthly salary, with subsistence etc for nights away). He transports the calves from Tsitsikamma to Modderriver Farm once a week. Would he be able to claim the diesel back on this transport? He trades in a PTY and both farms fall under the trading of this Pty: Dairy and related farming activities.

I would appreciate any assistance.
thanks,
Christel

[Mark Atkinson]

Hi Christel,

Firstly, is the farmer a VAT vendor? I'm not sure whether you are referring to a deduction of VAT or a deduction of income tax.

My proposed answer is this:

For VAT Purposes: Fuel is a zero-rated supply and thus he would not be able to claim any input VAT on the diesel, because he was not charged any VAT.

For Income Tax purposes: I don't see why he wouldn't be able to claim the diesel as a deduction of income in the PTY. It seems to me that the expense is in the production of income. As long as he claims it in the year that he incurs the expense, it shouldn't be an issue.

[Christel]

Hello Mark,
Thanks for your input. Yes, this client is registered for VAT.
Farmers get a diesel rebate on the actual VAT return. You put in the total litres used for farming activities, then multiply it by 80% and then they refund x R1.42 of that amount to the vendor.
So my question would be if he can claim the full litres of the diesel used for transport purposes.

Thanks.
Christel

[Christel]

Heee Haa... .I think I have (with the help of Dave A... in the post about SARS & VAT...) answered my own question: Dave posted a link to "documents from SARS re VAT".. and if you open the link... you will find a document (REFERENCE GUIDE – DIESEL / BIODIESEL REFUND AS-VAT-DR-03) This clearly sets out what in Agriculture is claimable as a diesel rebate. Look at page 7, section 7.3.1 (a) (i) (F).
VIOLA!
thanks!

[Mark Atkinson]

Glad you found your answer Christel.

My apologies, I read your question from the wrong perspective at first.

[Nickolai Naydenov]

As Mark said, the diesel is used for production of income therefore it must be fully tax deductible.

[Christel]

As Mark said, the diesel is used for production of income therefore it must be fully tax deductible.

Yes...but my initial question was regarding Diesel Rebate on VAT return. Thanks for all the input - I appreciate the assistance.

[Nickolai Naydenov]

Apologies for misunderstanding the question.

[Laurence Lombard]

I am a farmer and no tax expert and have not read the link, but my first thought would be claim the rebate on the diesel and then claim the rest of the diesel as a tax expense. The transport of the heifers (sp?) is clearly part of the input costs so no grey area there. If required one could have an arrangement with the driver "you drive the truck, I buy the fuel" or "you drive the truck, I supply truck and fuel". Just my thoughts.

Regarding post #4 - it would be useful if you give a summary of the answer you found there - it would save us ploughing through legalese to arrive at a conclusion.

[Christel]

Hi Laurence, I have the document and will email it to you as an attachment.... Heifers.. ja, nee... dis nou as jy 'n boertjie is wat gewoonlik net uit selfverdediging Ingels praat nou die taal moet skryf ook. Soos jy kan sien is Engels nie my "mother tail" nie. Groete.

[Dave A]

Soos jy kan sien is Engels nie my "mother tail" nie. Groete.

I'd have never guessed
up until now