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Taxation > Value-added Tax > Flashcards

Value-added Tax Flashcards

1
Q

What is vat?

A

Is an indirect tax, meaning that the tax is not directly assessed but indirectly through the taxation of consumption of goods and services

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2
Q

What is vat?

A

Is an indirect tax, meaning that the tax is not directly assessed but indirectly through the taxation of consumption of goods and services

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3
Q

Tax involves what?

A

The output tax and input tax mechanism aimed at taxing the value added in the production and distribution or delivery chain of goods and services

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4
Q

Define output tax

A

Levied on the goods and services sold by vendor

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5
Q

Define input tax

A

Payable on the goods and services a purchaser buys from a vendor. Purchaser may claim the input as credit against the output levied himself, if vendor

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6
Q

How does vat work?

A

A subtractive or credit input method which allows the vendor to deduct the tax incurred (input) from the tax collected (output) on the supplies made by the enterprise

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7
Q

True or false

Input tax is the VAT that a vendor has incurred in respect of goods or services supplied to him (raised)

A

False

The VAT that a vendor has incurred in respect of goods or services supplied to him (CLAIM)

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8
Q

True or false

The VAT that a vendor charges on goods and services supplied by him (RAISE)

A

True

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9
Q

State the equation of vat payable to/ refundable by SARS

A

Output tax - Input tax

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10
Q

True or false

If the purchaser is a registered vendor, VAT does NOT form part of cost of expense/ asset, because it is claimed back (input).

A

True

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11
Q

True or false

If the purchaser is not registered as a vendor, VAT will not form part of cost of expense/asset, because it is claimed back

A

False

If the purchaser is not registered as a vendor, VAT will form part of cost of expense/asset, because it is not claimed back

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12
Q

State the taxable supplies and their sections

A

Standard rate supplies - s7
Zero rated supplies - s11
Deemed supplies - s8

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13
Q

Where can exempt supplies section be found?

A

In section 12

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14
Q

How many types of supplies are there?

A

2

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15
Q

State the types of supplies

A

Taxable supplies and exempted supplies

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16
Q

Who carries the burden of VAT? The consumer

A

The consumer

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17
Q

How does SARS collect it?

A

The vendor is used as an agent to collect the tax The vendor submits a VAT 201 to SARS at the end of each tax period

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18
Q

In context of tax period. Does vat relate to the normal income tax period or year of assessment?

A

No

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19
Q

State s7

A

Imposition of value-added tax
- shall be levied and paid to SARS
- (a) supply of goods and services for furtherance of any enterprise
- (b) importation of goods into Republic
- (c) importation of services

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20
Q

Define vendor

A

Section 1 definition
- any person registered under s23 of value-added is a vendor

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21
Q

When is a person required to register as a vat vendor?

A

When enterprise taxable supplies excluding vat exceeds R1 000 000 during the prior 12 months or there is contractual obligation anticipated in the next 12 months

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22
Q

Which section states the compulsory registration of enterprise to register as a vat vendor>

A

Section 23 of VAT Act - Registration of persons making supplies in the course of enterprise

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23
Q

When a enterprise register as a vat vendor voluntarily?

A

When taxable supplies exceed R50 000 in the prior 12 months or anticipate in the next 12 months

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24
Q

True or false

Value of taxable supplies –excludes VAT

A

True

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25
Q

True or false

A person carries on separate businesses; to avoid registration, if joint taxable supplies >R1 mil –MUST register (anti-avoidance)

A

True

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26
Q

What is onus on person?

A

Onus is on PERSON to register within 21 days on VAT 101 form

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27
Q

Discuss section 50

A

Section 50 - Separate enterprises, branches and divisions

A Vendor may register their separate enterprises if their separate enterprises have an independent system of accounting and is separately identified from the activities of nature and location.

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28
Q

State the exception of Section 50

A

Section 50A - Separate persons carrying on the same enterprise under certain circumstances to be single person

  • person will be deemed to be a single person carrying on the same activities if activities form part of the enterprise.
  • if combined taxable supplies exceed R1 000 000
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29
Q

Purpose of section 50A

A

To prevent enterprises from avoiding to register

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30
Q

State category A of tax period

A

Vendors tax period of two months ending on the last day of the months of Jan, Mar May,…

Taxable supplies within the 12 month frame is less than R30 million and farmers taxable supplies is greater than R1.5 million

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31
Q

Disclose category B tax period

A

Vendors tax period of two months ending on the last day of the months of Feb, Apr, Jun,…

Taxable supplies within the 12 month frame is less than R30 million and farmers taxable supplies is greater than R1.5 million

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32
Q

State category C tax period

A

Vendors tax periods are one month on the last day of each month of the 12 months of the calender year.

Their taxable supplies within the 12 months is greater than R30 million applied in writing or default

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33
Q

Disclose category D tax period

A

Vendors tax period are of 6 month ending on the last day of February and August of the calender year.

Farmers taxable supplies during the 12 months are less than R1,5 million.

Micro business from applying in writing

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34
Q

Disclose category E of tax period

A

Vendors tax periods are of 12 months ending on the last day of their year of assessment.

Written application.
Companies or trust letting of fixed property, rental of movable property, administration of companies which are CP to vendors.

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35
Q

Are all businesses charging VAT?

A

Only those that make taxable supplies and carry on an enterprise and are registered

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36
Q

When are you allowed to claim input?

A
  • Input VAT may only be claimed if the vendor has a valid tax invoice
  • If input not specifically denied
  • In order to make taxable supplies
  • Exception to rule: Acquisition of second-hand goods from a non-vendor (notional input)
  • Importation of goods
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37
Q

Valid Tax invoice treatment is stated in which section(s)?

A

Section 20(4) - shorter invoice
Section 20(5) - extended

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38
Q

How is a valid tax invoice treated if the supply amount is more than R50 including?

A

-Tax invoice optional
- Supplier must issue within 21 days if purchaser requires

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39
Q

How is a valid tax invoice treated if the supply amount is more than R50 but less than R5000 including vat?

A

*‘Invoice’
*Name, address, VAT reg. number of supplier
*Date
*Serialised number
*Description of goods (indicate if 2nd hand) or services supplied
*Value of supply + amount of tax (VAT) charged + consideration for supply
OR
*Consideration and statement that VAT is included at 15% (or amount of VAT)

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40
Q

How is a valid tax invoice treated if the supply amount is more than R5000 including vat?

A

*all the information for a supply between R50 and R5 000 AND
*name, address + VAT REGISTRATION number of RECIPIENT
*quantity or volume of goods/services

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41
Q

State the two types of accounting basis

A

Invoice basis
Payment

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42
Q

The accounting basis is stated in which section?

A

Section 15

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43
Q

Discuss invoice basis

A
  • Account for VAT on earlier of invoice or payment
  • Any supply of R100 000 (including VAT) or more (excluding fixed property) must be accounted for on the invoice basis
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44
Q

Discuss payment basis

A

Account for VAT on payment if
* Association not for gain Account for VAT on payment Payments basis if: Natural person
* Public authority / municipality
* Electronic service provider
* Person voluntarily registered (reasonable expectation) and value of taxable supplies < R50 000
OR
- Natural person and taxable supplies more than R2.5 million excluding vat within 12 months

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45
Q

Where is time of supply stated?

A

Section 9

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46
Q

Section 10 states what?

A

Value of supply

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47
Q

What is the general rule of time of supply?

A

Earlier of:
- Time that invoice is issued
- Time that payment of consideration is received by supplier

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48
Q

What does section 10 general discuss?

A
  • If consideration is in the form off money = the money less the vat
  • If consideration is not in the form of money = the open market value at time of supply less the vat
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49
Q

VAT levied is discussed in which section?

A

Section 7

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50
Q

Importation of goods is stated where?

A

Section 7(1)(b)

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51
Q

Declare the section importation of services

A

Section 7(1)(c)

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52
Q

Declare s7(1)(a)

A

Supply of goods or services by a vendor in the course or furtherance of an enterprise

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53
Q

What is supply in relation to s7(1)(a)?

A
  • includes a sale, rental agreement, instalment credit agreement
    *and all other forms of supply
    *whether voluntary, compulsory or by operation of law,
  • irrespective of where the supply is effected
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54
Q

What is goods in context of s7(1)(a)?

A

*Corporeal movable things
*Fixed property
*Any real right in such thing / property *Electricity(goods and not services)
*Excludes *Money (which also includes bills of exchange, postal orders, promissory notes) *Revenue stamps (except where acquired by stamp collectors)
*Right under mortgage bond / pledge

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55
Q

What is services in context of s7(1)(a)?

A

*anything done or to be done
*including granting, cession or surrender of a right *making available of a facility or advantage

  • If something is not a supply of goods (and not specifically excluded in definition) it will be a supply of services
  • Includes supply of trade marks, patents, goodwill, know-how PMTS
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56
Q

A vendor is what in context of section 7(1)(a)?

A

Person registered or required to register for VAT purposes

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57
Q

Enterprise is defined as what in section 1?

A

*Any activity or enterprise
*carried on in SA, or partly in SA
*on a regular or continuous basis
*by any person *in the course or furtherance of which goods or services are supplied
*for a consideration
*whether or not for profit

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58
Q

What are specific inclusions in enterprise?

A

*anything in connection with commencement or termination of an enterprise
*activities of a welfare organisation
*supply of electronic services by person from an export country

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59
Q

Post the specific exclusions to enterprise

A

*Activity to the extent it involves the making of exempt supplies
*Hobbies of natural persons *Services by an employee for ‘remuneration’(4thschedule ITA) *Supplies made outside SA by any branch or main businessprovided that:
*branch / main business is permanently located at premises outside SA
*Separately identified
*Independent accounting system
*Supply of commercial accommodation where taxable supplies in period of 12 months will NOT exceed R120 000 (from 1 April 2017)

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60
Q

Time of supply section 13(1) discuss what?

A
  • Non-customs union member countries
  • Customs union member countries
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61
Q

Explain non-customs union members countries

A

Date on which goods are entered for home consumption (date on Customs Bill of Entry)

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62
Q

Explain customs union member countries

A

Declared and tax paid on entry into the Republic

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63
Q

State the custom union countries

A
  • Botswana
  • Lesotho
  • Namibia
  • eSwatini
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64
Q

Should vat be raised on importation of goods irrespective if the person is a vendor or not?

A

Yes

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65
Q

How should the importation of goods be calculated if the goods are imported from a non-customs union member countries?

A

(Customs duty value +10% of customs duty value + custom duty)*15%

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66
Q

How should the importation of goods be calculated if their are imported from a custom union countries?

A

Custom duty value*15%

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67
Q

Who collects the vat of imported goods?

A

VAT is collected by customs officer along with customs duty at a designated port of entry. If importer is a vendor then can claim an input tax deduction

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68
Q

Define imported services

A

Supply of services:
* by supplier who is non-resident / carries on business outside SA
* to a recipient who is a resident of SA
* to the extent that services are used in SA for purposes of making NON-TAXABLE supplies

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69
Q

Vat is payable by which recipient of imported services?

A
  • A non-vendor
  • A vendor for a purpose other than making taxable supplies
    (To the extent that used in South Africa)
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70
Q

How should a non-vendor disclose the importation of service to SARS?

A

Recipient declares importation (VAT 215) within 30 days of earlier of payment or invoice date

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71
Q

How should a vendor disclose the importation of services to SARS?

A

Include in next VAT 201 return

72
Q

Which importation services does not attract VAT?

A
  • Supply which was already subject to VAT
  • Would be exempt or zero rated services if they had been supplied from here
  • Educational services provided by foreign institutions to South African students
  • Rendering of services by an employee to his employer(e.g. a foreign director)
  • Supply where invoice <R100
73
Q

Zero-rated supplies is discussed in which section?

A

Section 11

74
Q

Discuss supplier in relation to zero-rated supplies s11

A

*Makes taxable supplies
*Levies VAT at 0% on supplies made
*May claim input tax on any other goods or services acquired to make zero rated supplies

75
Q

How should a recipient of zero-rated supply be treated in context of section 11?

A

*VAT at 0% was paid (levied at 0%)
*Therefore no input tax can be claimed

76
Q

State which items are considered as zero-rated supplies in section 11

A
  • Fuel levy goods
  • Basic foodstuffs
  • Gold coins issued by the Reserve bank
  • Illuminating Kerosene
  • Sanitary towels and panty liners
  • To a foreign branch or main business
  • Sale of enterprise or part of enterprise as a going concern
77
Q

Provide the requirements for a sale of enterprise or part of enterprise as going concern to be zero-rated

A

Agree in writing that:
1. Income earning activity at time of transfer
2. All assets necessary for carrying on the enterprise are disposed of
3. At time of contract agree that consideration is inclusive of VAT at a zero-rate
4. Both parties are registered vendors for VAT

78
Q

If a seller of enterprise sales/produces 100% taxable and sells the enterprise or part of how much output tax should be levied?

A

Seller levies output tax of 0% on full transaction and Purchaser pay input tax of Rnil– no input tax credit

79
Q

Discuss direct export in context of section 11

A

*Moveable goods
*consigned / delivered in export country *documentary proof
*Through a designated port and within a prescribed time period *Own baggage / own transport / cartage contractor (conditions)

BUT

*2nd hand goods where notional input tax was claimed → NOT zero rated

80
Q

How is direct export VAT levied in s11?

A

VAT levied =cost price to exporter x 15/115 (usually equal to notional input previously claimed)

81
Q

Interpretation note number 30 discuss what?

A

*90 days to get all export documentation together, else taxed at 15%
*90 days calculated from:
*The earlier of payment of any consideration
*or invoicing
*5 Years to claim back once have all docs

82
Q

Interpretation note number 30 relates to which taxable supply rate?

A

zero-rated

83
Q

Discuss indirect export in terms of section 11

A

*Export incentive scheme / delivery in SA to a “qualifying purchaser”
*standard rate (15%)
*VAT refund to non-resident recipient
*If 2ndhand goods (notional input previously claimed) -levy15%
*ONLY difference between 15% output levied on SP vs CP and input VAT claimed (by SA vendor) claimed as refund by recipient

84
Q

State the exception of indirect export in terms of section 11

A

*Ensures delivery for exports by sea / air or by road / rail (i.e. to Africa) supplier may at own discretion & risk zero rate
*but cannot elect 0%on 2nd hand goods where notional input tax was claimed

85
Q

How is VAT levied in indirect export in context of section 11?

A

VAT levied = cost to supplier x 15% (usually equal to notional input previously claimed)

86
Q

Provide exempted exported services

A
  • Transport and ancillary transport services
  • Service linked to land or improvement outside RSA - Services rendered in RSA to a non-resident who is not in RSA at the time
  • Services to branch or H/O outside RSA
  • Zero-rated supplies
  • Other Vocational training for non-resident & nonvendor employer
  • “municipal rate”
87
Q

Discuss section 11(2) (zero-rated supplies)

A

a) Transportation of passengers or goods From and to a place outside South Africa SA to export country Place in export country to SA
b) Transport of passengers by air only from one place in SA to another place in SA also qualifies for the zero rating if part of international carriage
c) Transport of goods and “ancillary transport services” by any means (air/rail/road) from a place within SA to another place within SA by the same supplier of the international transport service (inclusive of all other services)

88
Q

Discuss zero-rated supplies section11 (2) even further

A

f) Services directly in connection with land in any export country
k) Services physically rendered outside SA
*This excludes electronic services…
o) Services to branch or head-office outside RSA (deemed supply ito s8(9))
*Permanently situated outside RSA
*Can be separately identified
*Has a separate accounting system Many exceptions and exceptions to exceptions

89
Q

Section 11(3) mentions

A

Documentary proof substantiating the vendor’s entitlement to apply the zero rating should be retained.

90
Q

Interpret supplier in context of exempt supplies (s12)

A

*Makes non-taxable supplies
*Not an enterprise
*Levies NO VAT on supplies made
*May NOT claim input tax on any other goods or services acquired to make exempt supplies

91
Q

How is the recipient treated in section 12 of exempted supplies?

A

*No VAT was levied / paid
*Therefore no input tax can be claimed

92
Q

Section 2 describes financial services as?

A
  • exchange of currency
  • issue of debt security or provision of credit
  • transfer of ownership of a share / member’s interest
  • providing an interest bearing loan and interest
  • The provision of long-term insurance polices (i.e. premiums and proceeds of long term insurance policies=exempt)
  • provision or transfer of ownership in superannuation scheme (pension, provident, retirement annuity, medical aid)
  • Issue, acquisition, buying, selling, transfer of Cryptocurrency
93
Q

Exemptions of financial services

A

*All fees related to financial service
*Commissions related to financial service *Merchant’s discount

94
Q

True or False

The zero-rating of financial services (when performed outside SA or to a non-resident not physically in SA) takes precedence over the exemption

A

True

95
Q

State the items considered as exempted supplies

A
  • Financial Services
  • Residential accommodation
  • Transport of fare-paying passengers and their personal effects by road or rail
  • Educational services by a school, public higher education institution etc. which is a PBO
  • Supply by a school, university etc. solely / mainly for benefit of its learners (e.g. lodging)
  • Crèche or after-school care centre
  • Membership to employee organisations
96
Q

Define residential accommodation in context of section 12

A

Supply of a dwelling under an agreement for the letting or hiring there of NOT SALE OF dwelling= place used predominantly as residence or abode of natural person, including fixtures and fittings belonging thereto

97
Q

True or False

Commercial accommodation is an exempted supply

A

False

Commercial accommodation is not an exempted supply

98
Q

Exempt supplies extend to which other scenarios

A

Exempt supply also applies to employers who supply accommodation to employees :
- as benefit of his employment; or
- employer operates hostel or boarding establishment mainly for employees (not for a profit)

99
Q

Residential accommodation excludes which items in terms of section 12?

A
  • Lodging together with domestic goods and services
    OR
  • Board & lodging in home for aged, children or physical/mentally handicapped persons
    OR
  • Board & lodging in hospice
    ( Supplied at an all inclusive charge 15%)
100
Q

Further expound in commercial accommodation in terms of section 12

A
  • For an unbroken period > 28 days
  • Attract VAT on 60% of the value of the supply
  • Value of supply 60%15%
101
Q

Irrecoverable debts in interpreted in which section?

A

Section 22(1)

102
Q

Which accounting payment method does irrecoverable debts use?

A

Invoice basis

103
Q

Analyze irrecoverable debts section 22

A

If a VENDOR accounted for OUTPUT tax in respect of a debtor and Taxable Supply debt becomes bad the vendor is entitled to INPUTtax deduction s22(1) VAT rate on date of ORIGINAL supply should be used.

104
Q

If the vendor recovers the irrecoverable debts how is it redeemed in section 22(2)

A

Debt is partly or wholly recovered:
- Must raise deemed OUTPUT on portion recovered as far as it relates to a taxable supply previously made
- OUTPUT adjustment based on ORIGINAL supply should be used

105
Q

If the vendor did not pay a creditor.

Expound how will it be treated in section 22(3). (Irrecoverable debts)

A

*Deducted input tax on taxable supplies made to him
* Cannot pay the full consideration
*Within 12 months from the tax period in which the deduction was claimed
*15/115 x unpaid consideration raised as output tax

106
Q

If the vendor pays the irrecoverable debt to the creditor .

How will it be redeemed?

A

Input tax may again be deducted by the vendor on payment, if paid after s22(3) adjustment s22(4)

107
Q

Clarify the transfer of outstanding debt with or without recourse. (Irrecoverable debts)

A

Section 22(1) proviso (iv)(aa)

“face value” s22(7)
- The amount of the account receivable at the time of transfer less the amount written off by the seller, after adjustments for debit and credit notes already written off as irrecoverable

108
Q

Analyze cease being a vendor in terms of section 8(2)

A
  • Any goods(except if input was denied) or right owned by a vendor which forms part of the assets of his/her enterprise, deemed to be supplied immediately before ceasing to be a vendor (Time s9(5)
109
Q

Interpret cease being a vendor in context of section 22(3)

A

Balance owing to a supplier / creditor Output tax levied on unpaid balance ONLY creditors younger (not older) than 12 months (> 12 months dealt with under s22(3)) ONLY to extent that output tax has NOT yet been raised

110
Q

Expound the value of supply of cease being a vendor in terms of section 10(5)

A

Value of deemed supply (of goods & rights) lessor of:
- cost:
- Of acquisition, manufacture etc. (including VAT)
- If goods or services were acquired from connected person and s10(4) applied… then open market value on date of acquisition (later lecture)
- Open market value on date of cessation

111
Q

Further expound on the value of deemed supply of cease of being a vendor (outstanding balances to suppliers -creditors)

A

On balances NOT older than 12 month the consideration amount is not yet paid.
- On balances older than 12 months the output already is accounted for s22(3) unless s22(4) was applieed

112
Q

Analyze indemnity payments in terms of section 8(8)

A

Vendor receives indemnity PAYMENT under contract of insurance (short term) or is indemnified under contract of insurance by the PAYMENT of an amount of money to another person.
Payment deemed to be consideration received for a supply of a service to the extent that it relates to a loss incurred in the course of carrying on an enterprise.
Time of supply: when payment is received

113
Q

Deemed supply rule of indemnity payments is not applicable to?

A
  • Payment/ indemnification are not related to taxable supplies
  • Insurer replaces item (not PMT)
  • Payment received by the vendor relates to: *the total reinstatement of goods AND *Goods stolen or damaged beyond economic repair AND *input tax was denied

(Output tax apportioned -only to extent of taxable supplies)

114
Q

Clarify supplies to a branch or main business outside SA in context of deemed supplies [section 8(9)]

A

Vendor consign or delivers goods or provides services to branch / main business outside SA and foreign branch / main business is deemed separate from vendor (Proviso “Enterprise”).
Vendor -deemed to make a supply of goods and services in the course of his enterprise

115
Q

Provide the requirements of supplies to a branch/main business outside SA stated in enterprise provision par (ii) in relation to deemed supplies [section 8(9)]

A

Branch / main business, is permanently outside SA is separately identified and has independent accounting system the supply will be zero-rated

116
Q

Where is fringe benefit listed?

A

Fringe benefits listed in the 7th Schedule of the Income Tax Act

117
Q

True or False

Travel and subsistence allowances are not taxed under the 7th schedule -[Certain fringe benefits]

A

True

118
Q

True or False

Exempt supplies, zero-rated supplies, the supply of something other than goods and services (e.g. housing subsidy) and supply of entertainment are also included in certain fringe benefits

A

False

Exempt supplies, zero-rated supplies, the supply of something other than goods and services (e.g. housing subsidy) and supply of entertainment are also excluded

119
Q

Who pays for the vat for fringe benefits?

A

Deemed supply for the employer

120
Q

How is fringe benefit output tax calculated?

A

Output tax apportioned -only to extent of taxable supplies made by ER

121
Q

Discuss fringe benefits subject to VAT?

A
  • Assets sold at less than MV
  • Services made available for personal purposes
  • Right to use an asset Company car
  • Release of debt owed to employer
122
Q

How is the employer car value of the supply determined?

A

Employer car [monthly] regulation:

  • 0,3% / 0,6%xdetermined value (ex VAT)
  • LESS costs paid by employee
  • x15/115
  • x Taxable use

[End of the month in which subject to employees tax s9(7) - time of the supply)

123
Q

When is the 0.3% used on the determined value of the motor vehicle in fringe benefits?

A

Input VAT not claimed

124
Q

When is the 0.6% used on the determined value of the motor vehicle in fringe benefits?

A

Input VAT claimed

125
Q

True or false

Determined value’ always excludes VAT & finance charges

A

True

126
Q

When is the determined value of motor car reduced?

A

*The determined value is sometimes reduced by 15% on the reducing balance method
*This is done for every completed period of 12 months that the vendor (the employer in this case) acquired the asset until use was granted to the specific employee

127
Q

How is the value of supply of motor car determined if the employee incurred cost on usage?

A

[Company car value of supply (MONTHLY calc) less costs paid by employee]
- If employee pays entirely for maintenance and repairs of the car, reduced by the lower of R85 or consideration so paid for maintenance

  • *If employee contributes toward private use, the contribution is split into categories and analyzed separately
    *The capital portion-whether or not VAT was levied by the ER would generally depend on whether this is a motor car as defined or not
    *Fuel-zero rated
    *Maintenance-standard supply
    *Insurance-standard supply
    *Interest-exempt
128
Q

Payments exceeding consideration is stated in which section?

A
  • Section 8(27)
  • section 10 (26)
129
Q

Discuss payments exceeding consideration

A
  • Vendor receives payment > consideration (price)
  • MUST levy output tax on excess amount
  • UNLESS repaid within 4 months
  • Time of supply–last day after 4 month period
  • If the excess is refunded later: claim as input tax s16(3)(m)
130
Q

Discuss non-supplies

A
  • Lay-by agreement S8(4)
  • Supply of goods on which input was denied (s8(14)(a))
131
Q

Disclose the two exceptions of output tax

A

Output tax on fringe benefits and indemnity payments apportioned to the extent of taxable supplies

[Section 8(16)(a)]

132
Q

Elaborate on input tax that is apportioned according to section 8(16)(a)

A

Input VAT is apportioned to the extent that the goods or services will be used to make taxable supplies

133
Q

Elaborate output tax that is not apportioned according to section 8(16)(a)

A

Acquired goods or services partly for making taxable supplies and partly for making exempt supplies:

Option 1: On subsequent supply of that item – account for output tax on full consideration

Option 2: Claimed input VAT to the extent that taxable supplies are made

134
Q

When will a vendor be allowed to claim an input tax deduction?

A

If:
1. Vendor paid VAT on goods / service OR goods imported or Notional input tax on acquisition of 2nd hand goods
2. Input is not denied and vendor is in possession of a valid tax invoice or required documentation
3. Determine the purpose for which the goods / services will be used (specific ID else apportionment

[ Section 16(2)/(3) and section 17(1)]

135
Q

Complete the sentence

100% taxable supplies…

A

claim 100% input tax unless input denied

136
Q

Complete the sentence

> =95% taxable supplies…

A

claim 100% input tax de minimis rule S17(1)(i)

137
Q

Complete the sentence

<95% taxable supplies…

A
  • Apportion input tax
  • Use turnover-based method
  • Special apportionment method (Binding general ruling no 16)
138
Q

Which taxable supplies are denied input tax?

A
  • Entertainment
  • club subscriptions
  • Motor car
139
Q

State the exception of entertainment denial of input tax

A
  • Vendors in business of supplying entertainment
    - Charge is made -covers direct & indirect costs or = to open MV of such supply OR
    - Entertainment for bona fide promotional purposes to clients OR
    - Excess food not consumed is given to employees or welfare organisation
  • Supply entertainment to any employee or connected person& charge is made-covers all direct and indirect costs
  • Personal subsistence of vendor or employees obliged to be away from usual place of residence for at least one night (also if self-employed
  • Vendors operating taxable passenger transport services
  • Vendors organising seminars / similar events for reward
140
Q

Where is club subscriptions stated?

A

Section 17(2)(b)

141
Q

Discuss club subscriptions

A

*Membership fee of sporting, social or recreational clubs
*Membership fees of professional bodies not within the ambit of club subscriptions (therefore input is NOT denied)

142
Q

Disclose the exception of denial of input of motor car

A
  • vehicles capable of carrying only 1 person, vehicles suitable for carrying > 16 persons
  • vehicles with an unladen mass of 3500kgor more - - caravans, ambulances
  • vehicles constructed for a special purpose other than carrying passengers
  • Game viewing vehicles [constructed / converted for carriage of 7 or > passengers. Used exclusively for that purpose]
  • Hearse [used exclusively for the purpose of transporting deceased persons]
143
Q

Denial of input tax of motor car does not apply to?

A
  • Car dealer
  • Runs a car hire business
  • Acquired the motor car for the purpose of awarding the car as a prize (betting transaction)
  • Regularly or continuously supplies motor cars as prizes to clients or customers

[ Section 17(2)(c)]

144
Q

Define notional input tax on second-hand goods

A
  • Acquire 2nd hand goods under a non-taxable supply (from vendor/non-vendor) who is a resident of RSA and goods are situated in the Republic
  • Goods are being used wholly or partly for making of taxable supplies and input is NOT denied
  • Second hand goods = goods previously owned and used (excludes animals + gold coins)
  • Input tax = 15/115 x lesserof:
    *Cost
    *Open MV
  • Only claim notional input tax to extent that payment has been made (s16(3)(a)(ii)(aa)
145
Q

Discuss notional input tax on second hand goods in terms of section 20(8)

A
  • Documentary requirements –recipient maintain:
    *Name, ID no, legal registration number of supplier
    *Photocopy of supplier’s ID / letterhead (registration number)
    *Address of supplier
    *Acquisition date
    *Description of goods
    *Quantity or volume
    *Consideration for the supply
    *Proof & date of payment
    *No documentary proof required for purchases NOT exceeding R50
    *NB: Export of Second hand goods (s11(1)provisio) s10(12)
146
Q

Discuss export of second hand goods in terms of section 11(1) proviso, section 10(12)

A

*Movable second-hand goods
*Notional input was previously claimed by supplier/exporter (awareness only: or by supplier’s connected person)
*Then export is not zero rated but standard rated *Based on original purchase price to supplier
*Thus purchase price x 15/115

147
Q

True or False

Value of supply includes VAT

A

False

Value of supply Excludes VAT

148
Q

True or False

Consideration of supply Includes VAT

A

True

149
Q

Define connected person in terms of section1

A

*Natural person (incl. estate)
*Trust fund
*Close corporation
*Company (other than a CC)
*Branches/ Divisions of a vendor

150
Q

Discuss time of supply in terms of connected person

A

Section 9(2)(a)

Time of removal of goods / time made available / service performed or General rule if results in earlier date

151
Q

Discuss value of supply in terms of connected person

A

Section 10(4)

For SUPPLIER open market value if:
1. Supply is made for no consideration / consideration less than open MV/ consideration cannot be determined
2. AND recipient not entitled to full input tax deduction in respect of supply

152
Q

In context of time and value of supply of connected person. Which section has precedent?

A

Section 18(3)&raquo_space;> Section 10(4)

153
Q

Disclose time of supply of rental agreement (operating lease)

A

Section 9(3)(a)

Earlier of:
1. Date on which payment is due
2. Date on which payment is received

154
Q

Disclose value of supply of rental agreement (operating lease)

A

Use general rule

155
Q

Elaborate time of supply of progressive supplies

A

Section 9(3)(b)

Earlier of:
1. Date on which payment is due
2. Date on which payment is received
3. Date invoice is issued

156
Q

Elaborate value of supply of progressive supplies

A

Use general rule

157
Q

Expound on time of supply of undetermined consideration

A

Section 9(4)

Earlier of: when and to extent that
1. Date on which payment is due
2. Date on which payment is received
3. Date invoice is issued

158
Q

Expound on value of supply of undetermined consideration

A

Use normal rule

159
Q

Expound on value of supply of undetermined consideration

A

Use normal rule

160
Q

Expound time of supply of entertainment

A

Normal rule

161
Q

Expound value of supply of entertainment

A

Section 10(21)

1.Input denied: Value = Rnil (including to connected person)
2. But general rule if entertainment business (as input not denied)

162
Q

Disclose time of supply dual supplies

A

Normal rule

163
Q

Disclose value of supply of dual supplies

A

Single consideration for taxable and non-taxable supply: apportion consideration to each component

Section 10(22), Section 8(15)

164
Q

Disclose time of supply of supply for no consideration

A

Use normal rule

165
Q

Disclose value of supply of supply for no consideration

A

Value of the supply deemed to be nil but S10(4) > s10(23)

166
Q

State the time of supply of vouchers

A

General rule

167
Q

State the value of supply of vouchers

A

Section 10(18) and section 10(19)

For monetary value: NO VAT on issue /purchase of voucher When redeemed = VAT

For goods or services: Issue / purchase of Voucher = VAT When redeemed = NO VAT

168
Q

State the time of supply of discount vouchers

A

General rule

169
Q

State the value of supply of discount vouchers

A

Vouchers Issue + redeem: Same supplier
- Issue:No VAT
- Redeem: VAT on reduced amount

Issue + redeem: different suppliers
- Supplier: Account for VAT on cash(paid by customer)plus voucher (paid by other supplier)

Section 10(20)

170
Q

Discuss time of value of instalment credit agreement, cash value

A

Earlier of:
1. Time of PMT of any consideration (deposit?)
2. When goods are delivered

Section 9(3)(c)

171
Q

Discuss value of value of instalment credit agreement, cash value

A
  1. Consideration = cash value (which includes VAT)
  2. No VAT on finance charges

Section 10(6)

172
Q

What are the influence on the income tax?

A
  • Capital allowances
  • CGT
  • Expenses
  • Income
  • Fringe benefits
173
Q

State the time of supply of fixed property

A

Earlier of:
1. Date of registration
2. Date payment of any consideration is made

BUT both parties account for VAT to the extent of payment of consideration

174
Q

State the value of supply of fixed property

A

General rule but Either VAT or transfer duty

175
Q

What is the special rule for fixed property?

A

notional input and if s10(4) applies (awareness)

176
Q

State the fixed property transactions purchase from a vendor under taxable supply

A
  1. The seller of fixed property has to account
    for output tax to the extent that the seller has received payment of the purchase price
  2. The purchaser (vendor) may claim an input tax as follows:
    - Registered on invoice / payments basis: *Input tax may be claimed to the extent that the purchaser has made payment of the purchase price.
177
Q

State the fixed property transactions purchase from a non-vendor under taxable supply

A
  1. The seller does not levy VAT.
  2. The purchaser pays transfer duty and may claim a notional input (on second-hand goods) as follows:
    - Registered on invoice basis:
    *Claim to the extent payment has been made
    *BUT only ONCE property is registered in name of vendor (purchaser)
    - Registered on payments basis: Claimed to the extent that the purchaser has made payment of the purchase price

Taxation (3 decks)

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