5 - Specific Transactions (3)

Question 1

who are the connected persons to a natural person?

Answer 1

• any relative

- any trust of which such natural person or such relative is a beneficiary

Question 2

what is a relative?

Answer 2

the spouse of a natural person or any person related to their spouse within the third degree or the spouse of anyone related to the natural person within third degree

Question 3

who falls within the first degree of relation to the taxpayer?

Answer 3

spouse, child (adopted or not), parent

Question 4

who falls within the second degree of relation to the taxpayer?

Answer 4

grandparent, grandchild, brother, sister

Question 5

who are the connected persons to a company?

Answer 5

• a natural person who holds 10% or more shares in the company (worked out using the aggregate shares of the person and all persons related to them)
• any company who has the same SH / is controlled by the same SH as the initial company
• any person connected to a person connected to a company (holds 10%+ shares)

Question 6

what is the specific TOS rule for a supply to a connected person?

Answer 6

s9(2)(a)

• if goods are supplied = time of removal of goods
• if goods not removed = time when goods are made available
• if services are supplied = time that service is performed

Question 7

when do we use general TOS for connected persons?

Answer 7

we calculate the date for both the general and specific rule and then choose the earlier date of the two

Question 8

when will the specific TOS rule never apply for connected persons?

Answer 8

if we cannot determine the consideration and the buyer cannot claim a full input tax deduction

Question 9

which VOS do we use for a supply to a connected person?

Answer 9

• general rule = s10(2)

- specific rule, if requirements are met and it is for output tax purposes

Question 10

what are the requirements for the specific VOS rule to be used for a supply to a connected person?

Answer 10

• supplier supplies for no consideration / consideration less than OMV / consideration cannot be determined
• supplier and recipient are connected persons
• recipient will not be entitled to claim full input tax deduction if they were charged OMV

Question 11

what is the specific VOS rule for a supply to a connected person?

Answer 11

open market value

Question 12

what is a lodging?

Answer 12

a temporary place of residence

Question 13

what is a lodger?

Answer 13

a natural person who takes up temporary accommodation

Question 14

what case law principle do we apply to commercial accommodation?

Answer 14

do not look at the ultimate use of the end user of the accommodation, look at the substance of the contract and not who actually uses the building

Question 15

what is the time of supply for commercial accommodation?

Answer 15

earlier of when payment is made and earlier of when invoice is sent/pmt is due

Question 16

what is the value of supply for commercial accommodation?

Answer 16

• longer terms (29 and more days) = 60% x all-inclusive charge or amount for accommodation only if separable
• shorter terms (28 or less) = all-inclusive charge (consideration)

Question 17

what would be defined as fixed property?

Answer 17

land, building, improvements thereto

Question 18

is land considered new?

Answer 18

no, land is always secondhand

Question 19

what are the options for TOS for the sale of fixed property?

Answer 19

• meets 10(4) and sold to a connected person
• sold in course of enterprise
• sold by a non-vendor

Question 20

what is the TOS if fixed property is sold to a connected person?

Answer 20

earlier of payment and registration of the transfer at the deeds’ office

Question 21

what is the TOS if fixed property is sold in the course of enterprise?

Answer 21

to the extent of payment (for both input and output)

Question 22

what is the TOS if fixed property is sold by a non-vendor?

Answer 22

• secondhand good = no output tax

- input tax is claimed at extent of payment

Question 23

what is the VOS for the sale of fixed property?

Answer 23

s10(2)

consideration

Question 24

when is transfer duty charged?

Answer 24

on the sale of fixed property, separate from VAT and normal tax. usually if sold by non-vendor.

Question 25

who pays transfer duty?

Answer 25

the buyer of the fixed property

Question 26

when is transfer duty not charged?

Answer 26

when fixed property is supplied in a taxable supply, then it will be exempt

Question 27

what is the amount for transfer duty?

Answer 27

0-13%

will be paid in addition to input tax claimed from secondhand goods rule.

Question 28

when do we do an input tax adjustment?

Answer 28

when we buy a good that is apportioned for taxable supplies and sell it for an amount including output tax that is not apportioned

Question 29

how do we calculate the input tax adjustment?

Answer 29

A x B x C
A = tax fraction
B = lower of cost at acquisition and OMV on date of supply
C = % of non-taxable use

Question 30

how does an irrecoverable debt adjustment work?

Answer 30

the vendor sells taxable supply goods on credit and it later becomes irrecoverable (bad debts written off). the vendor will become entitled to an input tax deduction to reverse the initial output tax charged. use same rate output tax was charged at. debt x 15/115.

Question 31

what adjustment do we make if the irrecoverable debt is later recovered?

Answer 31

if the amount is later partially or wholly recovered, the amount recovered will be deemed to have an output tax adjustment

Question 32

what adjustment will be made for non-payment to creditors?

Answer 32

when a vendor who uses invoice basis claims input tax deduction on g/s purchased on credit and has not actually paid the debt off within 12 months of the end of the period in which input tax was claimed, the vendor shall be obliged to charge an additional amount of output tax

Question 33

can we adjust back for any adjustment made for non-payment to creditors?

Answer 33

yes. if the debt is then paid after the 12 months, we can claim back the input tax deduction.

Question 34

when would the change in use adjustment apply?

Answer 34

if a g/s previously acquired by the taxpayer for taxable supplies, is now being used for non-taxable purposes or in a way that would have made the goods input tax denied when acquired, we do the change in use adjustment

Question 35

what does it mean when the change in use adjustment applies?

Answer 35

the g/s whose use is changed will be deemed to be supplied by the vendor by way of a taxable supply and output tax will be charged based on s7(1)(a) and s18(1)

Question 36

what is the TOS for the change in use adjustment?

Answer 36

the time that the g/s are applied for non-taxable / input tax denied purposes

Question 37

what is the VOS for the change in use adjustment?

Answer 37

OMV