4 - Deemed Supplies

Question 1

what is a deemed supply and what section is it in?

Answer 1

section 8 = if this transaction occurs in the company, it will be deemed to be a supply made by the vendor and the vendor will charge output tax on it

Question 2

when would an indemnity payment become a deemed supply?

Answer 2

• vendor receives one under insurance contract, AND

- pmt relates to a loss incurred in the course of enterprise

Question 3

what is the value of supply for indemnity pmt?

Answer 3

s8(8)

- consideration

Question 4

what is the time of supply for indemnity pmt?

Answer 4

s8(8)

- the date/day that the payment is received

Question 5

when will a deemed supply not arise for indemnity payment?

Answer 5

• if it does not relate to taxable supplies (would make them non-vendor if no taxables = no enterprise), OR
• if the pmt relates to the total reinstatement of a good that was input tax denied on acquisition

Question 6

what does total reinstatement mean?

Answer 6

stolen or damaged beyond repair

Question 7

when does a deemed supply occur for pmts exceeding consideration?

Answer 7

when a vendor receives any payment in respect of a standard-rated taxable supply that is in excess of the consideration AND the excess portion is not refunded within 4 months of receipt

Question 8

what is the TOS for pmt exceeding consideration?

Answer 8

the last day of the tax period within which the 4-month period ends

Question 9

what is the VOS for pmt exceeding consideration?

Answer 9

the excess portion received (is a consideration so incl VAT)

Question 10

what happens when ceasing to be a vendor?

Answer 10

when a vendor ceases, any assets that form part of the enterprise will be deemed to be supplied by the vendor to customers

Question 11

what is the time of supply for ceasing to be a vendor?

Answer 11

s8(2) and 9(5)

- immediately before ceasing

Question 12

what is VOS for ceasing to be a vendor?

Answer 12

s10(5) = will be the lesser of:

• cost at acquisition (incl VAT)
• OMV on the date of supply

Question 13

when is a foreign branch deemed to be independent?

Answer 13

• separately identifiable (by nature, location), AND

- maintains its own accounting system

Question 14

how would an independent foreign branch be taxed?

Answer 14

taxed as an entity separate to the vendor

Question 15

what would make the enterprise of an independent foreign branch separately identifiable?

Answer 15

if the local branch which is a vendor can carry on its enterprise independently of its foreign main business and makes supplies to a person other than independent foreign branch

Question 16

how would transfers to an independent foreign branch be treated?

Answer 16

would be treated as a deemed supply by the local vendor to the branch in the course of his enterprise. these goods would not be consumed in SA and would essentially be treated as a zero-rated g/s

Question 17

at what tax rate would the deemed supply to an independent foreign branch occur?

Answer 17

0%

Question 18

what is the TOS for a transfer to an independent foreign branch?

Answer 18

the time/date that the good is delivered or service is performed

Question 19

what is the VOS for a transfer to an independent foreign branch?

Answer 19

the lesser of the:

• cost to the buyer (incl. VAT and transport costs)
• OMV on date of supply

Question 20

what if the foreign branch is not independent?

Answer 20

it will not be deemed a supply for tax purposes

Question 21

what is a part supply and what section does it fall under?

Answer 21

s8(15) = this is when a vendor makes a single supply of g/s and a single pmt is received, but if separate considerations were charged, tax would’ve been charged partly at 15%

Question 22

how does the deemed supply of a part supply work?

Answer 22

if a supply meets the definition of a part supply, each part will be deemed to be separate supplies for VAT

Question 23

what is the TOS and VOS for part supplies?

Answer 23

normal s7(1)(a), s9(1) and s10(2) rules apply

Question 24

when would the definition of an ICA be met?

Answer 24

if it meets the preamble and either para (a) or (b) in s1

Question 25

what is the preamble of the ICA definition?

Answer 25

any agreement entered into whereby corporeal movable goods OR mov/immovable machinery or plant are supplied

Question 26

what is para (a) of the ICA definition?

Answer 26

(must meet all)
supplied in a sales contract:
- sold for determinable/stated sum of money to be paid in full or instalments at future date
- finance charge component
- amount payable to supplier > cash value
- purchaser does not become owner merely by virtue of delivery/use OR seller can receive return of goods if purchaser fails to meet agreement terms

Question 27

what is the definition of cash value?

Answer 27

the arm’s length price including VAT but excluding finance charges

Question 28

what is para (b) of the ICA definition?

Answer 28

supplied in a lease agreement:

• rent consists of determinable/stated sum of money to be paid in full or instalments at future date
• finance charge component
• total amount payable to supplier > cash value
• lessee entitled to use for at least 12 months
• lessee accepts full risk for loss OR lessor assumes full risk and lessee accepts full risk or maintenance and repair

Question 29

what is the definition of a rental agreement?

Answer 29

any agreement entered into for the letting of goods, excluding a lease that meets para (b) or and preamble of ICA definition

Question 30

what are the VAT consequences for a rental agreement?

Answer 30

will be deemed a supply by the vendor and the vendor must charge output tax as per s8(11) and s7(1)(a)

Question 31

what is TOS for rental agreements?

Answer 31

s9(3)(a)

earlier of when payment is made and payment is due

Question 32

what is VOS for rental agreements?

Answer 32

s10(2)

consideration (rental payments accounted for individually)

Question 33

what are the VAT consequences for an ICA?

Answer 33

will be deemed a supply by the vendor and the vendor must charge output tax as per s8(11) and s7(1)(a)

Question 34

what is the TOS for an ICA?

Answer 34

s9(3)(c)

earlier of receipt of pmt or delivery of goods

Question 35

what is the VOS for an ICA?

Answer 35

s10(6)
the cash value
(full value taxed and accounted for upfront)

Question 36

would an office building constitute plant?

Answer 36

no

Question 37

what are the VAT consequences if the vendor enters into an RA/ICA?

Answer 37

will be a deemed supply for the other supplier thus vendor can claim input tax deductions on the rent pmts

Question 38

what are the case law principles for part supplies?

Answer 38

• we can only split things up as part supplies if the same vendor sells multiple g/s
• output tax is charged because g/s are being supplied, not just because the vendor receives money

Question 39

what deemed supply does the input tax adjustment relate to?

Answer 39

s8(16)
when a good is acquired for partly taxable purposes (partial input tax) and is subsequently supplied (sold), it shall be deemed to be supplied wholly for enterprise purposes (taxable supplies), and so we charge full output tax