4 - Deemed Supplies Flashcards
what is a deemed supply and what section is it in?
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
when would an indemnity payment become a deemed supply?
- vendor receives one under insurance contract, AND
- pmt relates to a loss incurred in the course of enterprise
what is the value of supply for indemnity pmt?
s8(8)
- consideration
what is the time of supply for indemnity pmt?
s8(8)
- the date/day that the payment is received
when will a deemed supply not arise for indemnity payment?
- 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
what does total reinstatement mean?
stolen or damaged beyond repair
when does a deemed supply occur for pmts exceeding consideration?
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
what is the TOS for pmt exceeding consideration?
the last day of the tax period within which the 4-month period ends
what is the VOS for pmt exceeding consideration?
the excess portion received (is a consideration so incl VAT)
what happens when ceasing to be a vendor?
when a vendor ceases, any assets that form part of the enterprise will be deemed to be supplied by the vendor to customers
what is the time of supply for ceasing to be a vendor?
s8(2) and 9(5)
- immediately before ceasing
what is VOS for ceasing to be a vendor?
s10(5) = will be the lesser of:
- cost at acquisition (incl VAT)
- OMV on the date of supply
when is a foreign branch deemed to be independent?
- separately identifiable (by nature, location), AND
- maintains its own accounting system
how would an independent foreign branch be taxed?
taxed as an entity separate to the vendor
what would make the enterprise of an independent foreign branch separately identifiable?
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
how would transfers to an independent foreign branch be treated?
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
at what tax rate would the deemed supply to an independent foreign branch occur?
0%
what is the TOS for a transfer to an independent foreign branch?
the time/date that the good is delivered or service is performed
what is the VOS for a transfer to an independent foreign branch?
the lesser of the:
- cost to the buyer (incl. VAT and transport costs)
- OMV on date of supply
what if the foreign branch is not independent?
it will not be deemed a supply for tax purposes
what is a part supply and what section does it fall under?
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%
how does the deemed supply of a part supply work?
if a supply meets the definition of a part supply, each part will be deemed to be separate supplies for VAT
what is the TOS and VOS for part supplies?
normal s7(1)(a), s9(1) and s10(2) rules apply
when would the definition of an ICA be met?
if it meets the preamble and either para (a) or (b) in s1
what is the preamble of the ICA definition?
any agreement entered into whereby corporeal movable goods OR mov/immovable machinery or plant are supplied
what is para (a) of the ICA definition?
(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
what is the definition of cash value?
the arm’s length price including VAT but excluding finance charges
what is para (b) of the ICA definition?
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
what is the definition of a rental agreement?
any agreement entered into for the letting of goods, excluding a lease that meets para (b) or and preamble of ICA definition
what are the VAT consequences for a rental agreement?
will be deemed a supply by the vendor and the vendor must charge output tax as per s8(11) and s7(1)(a)
what is TOS for rental agreements?
s9(3)(a)
earlier of when payment is made and payment is due
what is VOS for rental agreements?
s10(2)
consideration (rental payments accounted for individually)
what are the VAT consequences for an ICA?
will be deemed a supply by the vendor and the vendor must charge output tax as per s8(11) and s7(1)(a)
what is the TOS for an ICA?
s9(3)(c)
earlier of receipt of pmt or delivery of goods
what is the VOS for an ICA?
s10(6)
the cash value
(full value taxed and accounted for upfront)
would an office building constitute plant?
no
what are the VAT consequences if the vendor enters into an RA/ICA?
will be a deemed supply for the other supplier thus vendor can claim input tax deductions on the rent pmts
what are the case law principles for part supplies?
- 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
what deemed supply does the input tax adjustment relate to?
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
