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Tax > VAT 1 > Flashcards

VAT 1 Flashcards

1
Q

Approach to doing a

question

A

Kill the VAT
Kill the normal tax
Kill the CGT

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2
Q

Types of Supply

A 
Types of Supply
– Taxable Supply
• Standard rated – 14%
• Zero rated – 0% (s11)
– Exempt Supply (s12)
– Non-supply (s8(14))
– Deemed Supply (ss 8, 8A & 18(3))
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3
Q 
Basic Calculations (s16)
• VAT payable or refundable =
A

VAT payable or refundable =
Output VAT xxx
Less: Input VAT (xx)
=Payable or refundable xxx

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4
Q

VAT calculation

A 
VAT calculation
Output VAT
- Input VAT
\+- Adjustments
= Amount owing to/due from SARS*
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5
Q

Using e-filing

A

on/ before the last working day of the following month of

the VAT period

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6
Q

Not e-filing=

A

on/before 25th of the following month of the VAT period

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7
Q

who is taxed on VAT?

A

the final consumer of a good or

service

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8
Q

When to levy output tax 7(1)(a)

A 
Output tax is levied under section 7(1)(a):
- on the supply
- by any vendor
- of goods or services
- in the course or furtherance of an
enterprise
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9
Q

Output tax is also levied under section

7(1)(b) on

A
  • importation
  • of goods
  • by any person
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10
Q

Output tax levied under section 7(1)(c) on:

A
  • supply
  • on imported services
  • by any person
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11
Q

Supply

A 
“supply” includes performance in terms
of 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, and any derivative
of “supply” shall be construed
accordingly;
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12
Q

“goods” means

A

means corporeal movable things, fixed
property and any real right in any such thing or
fixed property, and electricity

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13
Q

Goods exclude

A

but excluding—
(a) money (as defined);
(b) any right under a mortgage bond or pledge
of any such thing or fixed property; and
(c) any stamp, form or card which has a money
value and has been sold or issued by the State
for the payment of any tax or duty levied under
any Act of Parliament, except when subsequent
to its original sale or issue it is disposed of or
imported as a collector’s piece or
investment article

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14
Q

“money” means –

A

(a) coins (other than coins made wholly or mainly
from a precious metal other than silver) which
the South African Reserve Bank has issued in
the Republic which remains in circulation, and
any paper currency which is a legal tender
(b) any coin (other than a coin made wholly or
mainly from a precious metal) or paper
currency of any country other than the Republic
which is used or circulated or is intended for
use or circulation as currency;

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15
Q

“money” means.. except

A

when disposed of or imported as a
collector’s piece, investment article or item of
numismatic interest

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16
Q

“services”

A 
means anything done or to be
done, including the granting, assignment,
cession or surrender of any right or the
making available of any facility or
advantage
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17
Q

“services” excludes

A

excluding a supply of
goods, money or any stamp, form or card
contemplated in paragraph (c) of the
definition of “goods”;

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18
Q

Enterprise

A 
In the case of a vendor
any enterprise or activity
carried on continuously or regularly
in South Africa or partly in South Africa
by any person (as defined in s1)
in the course or furtherance of which
goods or services are supplied
for a consideration (as defined in s1)
whether for profit or not
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19
Q

Enterprise

Specifically includes:

A

• Supplies by a public authority where the minister is satisfied and the
commissioner has notified that it is deemed to be in furtherance of
an enterprise (par b(i)).
• Activities of a share block company if they have registered as
vendor (par b(iii)
• The activities of a welfare organisation (par b(ii)) and foreign donor
funded project (par b(v))
• Supply of electronic services from a place in an export company
where at least two of the following are present (par b(vi):
– Recipient of services is a resident in the Republic
– Payment to that person in export country originates from a South African Bank
– Recipient of services has a business, residential OR postal address in the
Republic
• Anything done in connection with the commencement or
termination of an enterprise (proviso (i))

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20
Q

Enterprise

Specifically excludes:

A

• The supply of services by an employee to his
employer for remuneration (proviso iii)
• A hobby (private or recreational pursuit)
(proviso iv)
• Any activity to the extent that it makes exempt supplies (proviso v)
• Commercial accommodation (as def in s1) (see
later) not exceeding R60 000 for a period of
12months (R120 000 after 1 Apr ‘16) (prov. ix)
• Branches (proviso ii) (see later)

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21
Q

sale of exempt supplies in relation

A

Enterprise Specifically excludes this

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22
Q

Enterprise

Specifically excludes: in terms of accommodation

A

Commercial accommodation (as def in s1) (see later) not exceeding R60 000 for a period of
12months (R120 000 after 1 Apr ‘16) (prov. ix)
(ie Enterprise includes accommodation that exceeds 60 000)

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23
Q

Consideration

A
  • Any payment made or to be made
  • In relation to supply of goods or services
  • Including a deposit
  • In money or otherwise
  • Whether voluntary or not
  • Whether by that person or not
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24
Q

Does a Consideration include a deposit?

A

Yes

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25
Q

Consideration (cont.):

• But does not include:

A

• Donations
• Deposits which have not been applied as
consideration or forfeited

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26
Q

NB! Exam Tip!!!
Consideration = typically includes or excludes VAT?
Value of supply = includes or excludes VAT.?

A

Consideration = typically includes VAT

Value of supply = excludes VAT

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27
Q

Vendor

A

Definition of vendor simply states a person
that is or has to be registered in terms of
the VAT act

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28
Q

Compulsory registration: at END of the month where total taxable supplies for PREVIOUS 12 months

A

exceed R1mill

29
Q

Compulsory registration: at BEGINNING of a month where total taxable supplies for NEXT 12 months

A

exceed R1mill

30
Q

Compulsory registration: at END of the month where supply of imported electronic services

A

exceed R 50 k for PREVIOUS 12 months

31
Q

Voluntary Registration: total taxable supplies for PREVIOUS 12 months

A

exceed R 50 k

32
Q

Voluntary Registration:total taxable supplies for NEXT 12 months after date of registration

A

exceed R 50 k

33
Q

Voluntary Registration: going concern

A

intends to carry on enterprise from supply of going concern of which taxable supplies from going concern exceed R5k in 12 months preceding

34
Q

How are Branches & Divisions (s50) treated as vat vendor

A 
- Own independent accounting
records AND
- Separately identified in terms of
location or activities
= Separate VAT
vendor
-Not compulsory – choice of the Vendor
-All taxable supplies must be added
together for R1m determination
35
Q

Accounting Basis (s15)

A

Invoice basis or Payment basis

36
Q

INVOICE BASIS General rule

A

Earlier of
Invoicing; or
Receipt of payment

37
Q

Deposit deemed to be consideration if:

A

It immediately reduces liability (it’s applied)

OR when the deposit is forfeited

38
Q

Exception to the general rule is you are

registered on the payment basis:

A

Output tax is accounted for, in general,
when payments are received and the input
tax is accounted for when payments are
made.

39
Q

PAYMENT BASIS
The following persons may
apply (s15(2)):

A
  • Public Authority
  • Water board
  • Municipal entity that
    supplies gas, water or
    electricity or services
    consisting of drainage,
    sewage and garbage
    disposal or removal.
  • Municipality
  • Association not for gain
  • Person supplying imported
    electronic services
  • SABC
40
Q

When can a natural person or partnership apply for PAYMENT BASIS

A 
Natural Person or
Partnership where:
- Total value of taxable
supplies for 12 month period
was
41
Q 
A person who has
voluntarily registered
before having made
taxable supplies of
R50,000 must use which basis?
A

PAYMENT BASIS

42
Q

Where a vendor (other than a public authority or
municipality) makes a supply of which
consideration is R100,000 or more

A

such vendor
such account for the transaction on an invoice
basis.

43
Q

A person who has voluntarily registered before
having made taxable supplies of R50,000, but
expects to make such taxable supplies in the next
12 months must use the (a)_____basis, but then
has to revert to the (b)_____basis once taxable
supplies exceeds R50,000, unless they are a
Natural Person who applies in writing to stay on
(C)______ basis.

A

a payment
b invoice
c payment

44
Q

If consideration

= money ; what value ?

A

Rand value

45
Q

If consideration

≠ money; use what value

A

• Open market value

46
Q

A :VAT periods (s27)

A

Taxable supplies ≤ R30 000 000
Farmers > R1 500 000
2 monthly Jan, March, May…(odd number months)

47
Q

B :VAT periods (s27)

A

Taxable supplies ≤ R30 000 000
Farmers > R1 500 000
2 monthly Feb, April, June…(even number months)

48
Q

C :VAT periods (s27)

A

Taxable supplies > R30 000 000
OR specific application
OR repeated default
1 monthly

49
Q

D :VAT periods (s27)

A

Farmers ≤ R1 500 000
Micro businesses (Module 1)
Bi-annually February, August

50
Q

E :VAT periods (s27)

A

Annually (very specific)

51
Q

VAT periods (s27)
Taxable supply:
R30 mill

A

Taxable supply:

R30 mill C

52
Q 
VAT periods (s27)
If farmer?
A

Farmers > R1 500 000 A or B

Farmers ≤ R1 500 000 D

53
Q

If repeated default which time period?

A

C

54
Q

Standard Supply

A

Every supply that is not zero rated or
exempt supply will be at the standard VAT
rate @14%.

55
Q

example :
Timber Merchant (Pty) Ltd (a VAT vendor) sells timber to a furniture
manufacturer for R114 (including R14 VAT).
Timber merchant: The timber merchant makes no purchases
Manufacturer: The manufacturer uses the timber to make a table, which it sells to a furniture retailer for R342 (including R42 VAT)
Retailer: The retailer then sells the table to a consumer for R798 (including R98 VAT)
Retailer sells to client

A 
Timber
merchant :
Output R14
Input R0
Payable R14
Manufacturer:
Output R42
Input (R14)
Payable R28
Retailer
Output R98
Input (R42)
Payable R56
Client
Pays R98
Claimable R0
56
Q

Zero-rated Supplies: Export of movable goods (ss(1)(a)(i)&(ii))

A

a) Consigned or delivered by the vendor to the recipient at an
address in export country, which has documentary proof
b) Delivered by vendor to owner or charterer of a foreign-going
ship or foreign-going aircraft going to a destination in an
export country (includes goods used or consumed on such ship
or aircraft)
c) Removed by the republic by the recipient or agent of the
recipient, however:
a) Where such supplier has supplied the good in the republic they may not
zero-rate the supply, but
b) The tax paid will be refunded when the goods are removed from the
republic.

57
Q

Zero-rated Supplies

Export of services (s11(2))

A
  • Transportation
  • Ancillary services to exported goods
  • E.g. Insurance on transported goods
  • Services rendered outside South Africa:
  • Where a resident physically leaves the country to render the service in the export country.
  • Services to non-residents:
  • Must be directly rendered to non-resident
  • Non-resident must not be in South Africa when services are
    rendered
58
Q

Zero-rated Supplies
Export of services (s11(2))
Services rendered outside SA
-who, where

A

Services rendered outside South Africa:

- Where a resident physically leaves the country to render the service in the export country.

59
Q 
Zero-rated Supplies
Export of services (s11(2))
 Services to non-residents:
-directly/indirectly
- to who, by whom, where
A
  • Services to non-residents:
  • Must be directly rendered to non-resident
  • Non-resident must not be in South Africa when services are rendered
60
Q

Example: Mr. Smith is a non-resident who is in SA on
holiday in the Knysna region. He bought himself
an ornament made entirely out of sea shells
from a local curio shop. He paid R114 for the
ornament. Two weeks later he departs from SA
to his home in New York.
Explain the VAT consequences for
• Mr. Smith;
• The curio shop; and
• SARS

A

Mr. Smith
• Pays VAT of R14 when buying the ornament from the curio
shop
• R14 VAT is paid back to Mr. Smith when he “indirectly
exports” the ornament to the USA
Curio shop
Levies VAT on all sales and therefore receives output VAT of
R14 that is paid over to SARS
SARS
Receives R14 output VAT from the curio shop’s sale to Mr.
Smith
Subsequently pays R14 back to Mr. Smith when he “indirectly
exports” the ornament to the USA

61
Q 
Pentravel (a registered vendor) sells safari
packages to Americans for commercial
accommodation in the Kruger Park.
What are the VAT consequences?
A. VAT at standard rate
B. VAT at zero rate
C. No VAT
A

A
The packages would still be services rendered
and the non-residents would be physically in the
country

62
Q

ABC Accounting Services (Pty) Ltd renders
accounting services to Stars & Stripes, an SA
branch of an American company.
What are the VAT consequences?
A. VAT at standard rate
B. VAT at zero rate
C. No VAT

A

A
Service has to be rendered to Non-Resident
OUTSIDE of SA before it can be zero-rated.

63
Q

Easy Tax CC provides a tax opinion to Problems
LLC, an entity operating only in the UK.
Services are typically delivered via email.
What are the VAT consequences?
A. VAT at standard rate
B. VAT at zero rate
C. No VAT

A

B
Services rendered to non-resident who is
outside of the country.

64
Q

Other zero rated supply

A
  • Property rates and taxes s11(2)(w)

- Water and electricity

65
Q

Exempt supply

A
  • Financial Services (s2)

- Residential Accommodation (s12(c))

66
Q 
Financial Services: which are exempt?
Issue of share
Issue of debt
Issue of cheque
book
Bank charges
A

Issue of share -exempt
Issue of debt -exempt
Issue of cheque book- Standard-rated
Bank charges– Standard-rated

67
Q

A ‘dwelling’ is defined as

A

• any building, premises, structure or other place or part thereof
• that is intended for use predominantly as a place of residence or abode
of any natural person,
• including fixtures and fittings belonging thereto and enjoyed therewith,

68
Q

A dwelling excludes

A

where it is used in the supply of commercial

accommodation.

69
Q

Exempt Supply: Residential Accommodation (s12(c)) excludes

A

Excluding hostels or hotels

Tax (7 decks)

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