1 - VAT Basics

Question 1

which section contains the tax periods for vendors?

Answer 1

section 27

Question 2

which section contains rules for branches, individuals and independence?

Answer 2

section 50

Question 3

what is the anti-avoidance provision?

Answer 3

s50A
- this provision prevents an individual from splitting up one business that qualifies to be a vendor into multiple, as the commissioner will deem this individual to be carrying out a single enterprise and require them to register

Question 4

what are the requirements for output tax to be charged?

Answer 4

1) supply
2) goods or services
3) vendor who supplies
4) in course of their enterprise
5) taxable supply

Question 5

what is the definition of an enterprise?

Answer 5

an activity carried out continuously/regularly where g/s are supplied to any other person for a consideration

Question 6

which activities are specifically included into the enterprise definition?

Answer 6

• supply of electronic services by a non-res
• activities of intermediary

Question 7

which items are excluded from enterprise definition?

Answer 7

• employment
• hobbies/private activities not conducted as business
• commercial accommodation
• making exempt supplies

Question 8

general time of supply for output tax items?

Answer 8

s9(1) - at the earlier of
- invoice is issued
- that payment (or part thereof) of consideration is received

Question 9

general value of supply for output tax items?

Answer 9

s10(2) - consideration

Question 10

what is included in the consideration?

Answer 10

• deposits are not included in the consideration amount unless it is applied (to reduce purchase price) or if it is forfeited
• if in money = money amount
• if not in money = OMV

Question 11

what are the requirements for an input tax deduction?

Answer 11

1) vendor buys goods
2) output vat was charged ito s7 and must have been incurred by vendor
3) acquired for wholly/partly taxable supplies

Question 12

what does a vendor need to claim input tax?

Answer 12

documentary proof such as a tax invoice or debit/credit note

Question 13

who can input tax be claimed from?

Answer 13

• vendor = all supplies
• non-vendor = only secondhand goods

Question 14

what are the time and value of input tax deductions for secondhand goods?

Answer 14

• lower of consideration and OMV
• to the extent of payment

Question 15

what are the rules for apportionment of input tax?

Answer 15

s17(1) - may only claim to the extent that g/s are acquired for taxable supplies:
- if wholly = full
- if >95%, full deduction as per the De-minimus rule
- <95%, partial deduction based on turnover apportionment method

Question 16

what is the apportionment ratio?

Answer 16

u = a / a+b+c
a = value of taxable supplies (excl.VAT)
b = value of exempt supplies
c = any other amounts

Question 17

which section relates to input tax denied items?

Answer 17

s17(2)

Question 18

which items are input tax denied?

Answer 18

• entertainment
• motor cars
• membership fees and subscriptions

Question 19

what are the exceptions to the input tax denial of entertainment?

Answer 19

• if acquired in ordinary course of enterprise and supplied at a charge of at least cost/OMV
• if acquired and supplied to an employee/connected person who covers the cost
• if related to a meal/accommodation enjoyed by a vendor/employee if they spend at least one night away from their usual place of work for business purposes

Question 20

how does the input tax denial work for membership fees?

Answer 20

• any fees paid in respect of clubs, associations (soccer/country club). does not include amts paid to professional bodies.

Question 21

which items meet the definition of a motor vehicle?

Answer 21

• station wagon
• minibus
• motor vehicle with 3+ wheels, made to mainly carry passengers
• motor car
• double cab delivery vehicle

Question 22

which items do NOT meet the definition of a motor vehicle?

Answer 22

vehicles which:
- accommodate 1 or more than 16 persons
- weigh >3500kg
- caravans, ambulances
- purpose other than carrying persons
- hearses

Question 23

what exceptions are there for items which meet the motor car definition?

Answer 23

• acquired as taxable supply for sale/rental
• demonstration/temporary use
• prize

Question 24

what are the two accounting bases for VAT?

Answer 24

• payment basis = VAT is accounted for to the extent that payment is received or made; vendor must apply in writing
• invoice basis = default; VAT is accounted for transaction is deemed to occur

Question 25

which amounts are inclusive of VAT?

Answer 25

consideration
open market value

Question 26

which amounts are exclusive of VAT?

Answer 26

market value
SOCI amounts
CDV

Question 27

what is the tax fraction?

Answer 27

15/115

Question 28

what is the TOS for input tax?

Answer 28

s9(1) - at the earlier of
- time invoice is issued
- time that payment (or part thereof) of consideration is received

Question 29

what is the VOS for input tax?

Answer 29

s10(2) - consideration