5 - Specific Transactions (3) Flashcards
who are the connected persons to a natural person?
- any relative
- any trust of which such natural person or such relative is a beneficiary
what is a relative?
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
who falls within the first degree of relation to the taxpayer?
spouse, child (adopted or not), parent
who falls within the second degree of relation to the taxpayer?
grandparent, grandchild, brother, sister
who are the connected persons to a company?
- 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)
what is the specific TOS rule for a supply to a connected person?
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
when do we use general TOS for connected persons?
we calculate the date for both the general and specific rule and then choose the earlier date of the two
when will the specific TOS rule never apply for connected persons?
if we cannot determine the consideration and the buyer cannot claim a full input tax deduction
which VOS do we use for a supply to a connected person?
- general rule = s10(2)
- specific rule, if requirements are met and it is for output tax purposes
what are the requirements for the specific VOS rule to be used for a supply to a connected person?
- 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
what is the specific VOS rule for a supply to a connected person?
open market value
what is a lodging?
a temporary place of residence
what is a lodger?
a natural person who takes up temporary accommodation
what case law principle do we apply to commercial accommodation?
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
what is the time of supply for commercial accommodation?
earlier of when payment is made and earlier of when invoice is sent/pmt is due
what is the value of supply for commercial accommodation?
- 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)
what would be defined as fixed property?
land, building, improvements thereto
is land considered new?
no, land is always secondhand
what are the options for TOS for the sale of fixed property?
- meets 10(4) and sold to a connected person
- sold in course of enterprise
- sold by a non-vendor
what is the TOS if fixed property is sold to a connected person?
earlier of payment and registration of the transfer at the deeds’ office
what is the TOS if fixed property is sold in the course of enterprise?
to the extent of payment (for both input and output)
what is the TOS if fixed property is sold by a non-vendor?
- secondhand good = no output tax
- input tax is claimed at extent of payment
what is the VOS for the sale of fixed property?
s10(2)
consideration
when is transfer duty charged?
on the sale of fixed property, separate from VAT and normal tax. usually if sold by non-vendor.
who pays transfer duty?
the buyer of the fixed property
when is transfer duty not charged?
when fixed property is supplied in a taxable supply, then it will be exempt
what is the amount for transfer duty?
0-13%
will be paid in addition to input tax claimed from secondhand goods rule.
when do we do an input tax adjustment?
when we buy a good that is apportioned for taxable supplies and sell it for an amount including output tax that is not apportioned
how do we calculate the input tax adjustment?
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
how does an irrecoverable debt adjustment work?
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.
what adjustment do we make if the irrecoverable debt is later recovered?
if the amount is later partially or wholly recovered, the amount recovered will be deemed to have an output tax adjustment
what adjustment will be made for non-payment to creditors?
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
can we adjust back for any adjustment made for non-payment to creditors?
yes. if the debt is then paid after the 12 months, we can claim back the input tax deduction.
when would the change in use adjustment apply?
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
what does it mean when the change in use adjustment applies?
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)
what is the TOS for the change in use adjustment?
the time that the g/s are applied for non-taxable / input tax denied purposes
what is the VOS for the change in use adjustment?
OMV
