VAT

Question 1

How does one calculate input VAT, output VAT and notional input VAT

Answer 1

section 16 of VAT ACT
- input VAT = 15/115 * VAT inclusive cost price
- output VAT = 15/115 * VAT inclusive selling price/market value
- notional VAT = 15/115 * cost price (wont have VAT in it)

Question 2

What is the definition of entertainment in the VAT ACT?

Answer 2

Section 1 of the VAT ACT
- Entertainment means the provision of any food, beverages, accommodation, entertainment, amusement, recreation or hospitality of any kind by a vendor to any one in connection with an enterprise carried on by the vendor
- not how giving away clothes, does not form part of entertainment

Question 3

When can we claim input VAT on entertainment expenses? or anything related to the supply of that entertainment

Answer 3

section 17(2)
- when it is supplied at a charge that covers all the direct and indirect costs AND for the purpose of making taxable or zero rated supplies
- at other times too, i just can’t remember

Question 4

Must we charge output VAT on the supply of entertainment?

Answer 4

section 10(21) of VAT ACT
- yes because it is a taxable supply or supply of zero rated items, UNLESS the input vat was denied

Section 18(3)
- if it is being supplied as a fringe benefit, then it is deemed that no output tax will arise on it

7th schedule of ITA
- also in agreement with section 18(3) it says that the value of a subsidized meal as a fringe benefit is zero

Question 5

What happens when you change your intention from making supplies for consumption where input VAT was allowed to be claimed and now it cant be anymore?

Answer 5

Section 18(1) and section 10(7)
- you need to charge output VAT on the market value of all the input VAT that you did claim

Question 6

Can we claim input VAT on capital items?

Answer 6

Section idk
- Yes we can because it was purchased for enterprise activities or zero rated activities

Question 7

What happens when we dispose of capital items to a connected person in terms of VAT?

Answer 7

Section idk
- If input VAT was claimed on that asset, it is a deemed supply and output vat will need to be levied on the market value

Question 8

can you claim input vat on imported items?

Answer 8

section 7(1)(b) of VAT ACT
- VAT must be charged on those imported items and it will be calculated as 15% of the sum of the following
* customs duty value (cost?)
* 10% of the customs duty value
* non-rebated customs DUTY and any charges
- it must be paid together with the customs duty
- thereafter this value can be claimed as an input VAT deduction if used for enterprise activities

Question 9

What is input VAT and output VAT?

Answer 9

section idk
- input VAT is the vat that you paid on items you bought in order to carry on enterprise activities, this VAT cost you can claim back from SARS and they will reimburse you
- output VAT is the vat you will need to charge on your goods and services as a registered VAT vendor, this VAT is payable to SARS

Question 10

Must we charge output VAT on goods and services supplied to foreign countries?

Answer 10

section 11(2)(l)
- export sales are zero rated items when they are supplied to a non-resident while they are outside the country at the TIME of the supply

Question 11

What are some items that we can’t claim input VAT on?

Answer 11

section idk
- salaries and wages (it is not an enterprise activity) (section idk of VAT ACT)

section idk
- anything used to make exempt supplies

section 17 of the VAT ACT
- entertainment that is supplied under the following conditions
- fees or subscriptions in relation to a membership of any club, association or society of a sporting, social or recreational nature
- a motor vehicle as defined(purchasing or hiring) unless they
* deal in motor vehicles
* bought one as a prize
* many other reasons

Question 12

What happens when we supply a fringe benefit to our employees?

Answer 12

para 5(2) of the 7th schedule and section 18(3) of the VAT ACT
- fringe benefits are a deemed supply and output VAT must be charged and paid to SARS on the cash equivalent
- 15/115 * cash equivalent

Question 13

what is notional input VAT?

Answer 13

This is like input VAT that can be claimed on an item that meets the following
- second hand
- bought from a non-vendor
- is bought for the purpose of making taxable or zero rated supplies

Question 14

What happens when you change your intention of use for an item in terms of VAT, from CONSUMPTION(where input tax was allowed) or making taxable supplies to anything else

Answer 14

Section 18 and section 10(7)
- you need to charge output VAT on the market value

Question 15

What are exempt services?

Answer 15

Section 12
- the services where no VAT can be levied on, therefore the following goods and services will never have VAT attached to them, making it not possible claim input VAT or charge output VAT
* financial services such as interest BUT NOT bank charges
residential property LETTING BUT NOT commercial property letting

Question 16

what documentation is required in order to account for VAT?

Answer 16

Section 16 and idk
- you need an appropriate tax invoice in order to claim an input tax deduction
- I dont know what you need in order to charge output VAT

Question 17

what are the implications of VAT on insurance premiums and the payout if an asset is destroyed?

Question 18

change in use input Tax?

Answer 18

section idk
- some stuff gets re apportioned

Question 19

How does Section 18D work?

Question 21

What are the VAT and income Tax implications of a rental agreement in comparison to a credit installment agreement type b?

Answer 21

• rental agreement
• the lessor is going to charge VAT on the full value of the asset to the lessee
• the lessor is also able to claim capital allowances on the asset (excluding input vat if he previously claimed that
• the lessee must claim the input VAT every time he makes a payment
• time of supply = earlier of payment and due date for payment
• credit installment agreement type b
• the seller will charge VAT on the full value of the asset to the buyer
• the seller will account for VAT only to the extent that it has been paid?
• the buyer will claim the full VAT as input at once on the purchase price
• the buyer will then be able to claim capital allowances on the asset (less the claimed input VAT amount)
• finance charges are not going to be carrying any VAT because are they are an exempt service
• time of supply is the earlier of date of delivery or first payment

Question 22

how does the Section 16(3)(h) and s18A thing work?

Answer 22

look on your slides china!

Question 23

What are the VAT implications if you make improvements on your lease holding?

Answer 23

• Lessor
  section 18C and 8(29) of the VAT act
• if the building is then used for non-taxable supplies, then an output adjustment must be made if the lessee claimed an input VAT deduction
• if it is being used by them to make taxable supplies and so is the lessee, then no output tax adjustment will need to be made
• lessee
  section 8(29) of the VAT act
• if the improvements have been made for no consideration, it is a DEEMED supply

section 10(28)
- the value of the supply will be nil since no consideration was received

section 9(12)
- the time of the supply is when the improvements have been completed

section idk
- since the improvements were made to make taxable supplies, and is an enterprise activity

Question 24

What are the VAT implications of a bartering transaction?

Answer 24

• if both parties are registered VAT vendors
  > input VAT points
  section idk of the VAT act
• the input VAT claimable will simply be the output VAT that they would have charged on their supply, which would be done according to the same rules I have set out below

> output VAT points
Section 7(1) of the VAT act
- the thing you are giving is most likely a supply in the furtherence of enterrpise and which means that VAT will be levied on it
- this is however not dependent on the other party being a VAT vendor

section 9(1) of the VAT act
- the time of supply is the earlier of when payment was made or invoice issued
- therefore this is when the supply that WE GIVE, is made

section 10(3) of the VAT act
- the value of the supply when the consideration is not in money but “otherwise” is the open market value of the considersation

Question 25

What are the implications of not issuing the tax invoice? and when should it be?

Answer 25

section idk
- they will be liable to penalties and interest when they fail to account for the output VAT on supplies made

section 20(1) of the VAT act
- it should be issued within 21 days of the supply

Question 26

what is a category A,B and C and E VAT vendor?

Answer 26

Category A: submit a VAT return every 2 months ending from Jan onwards
Category B: submit a VAT return every 2 months ending from Feb onwards
Category C: submit a VAT return every 1 month
Category E: required to submit a VAT return for every 12 months

Question 27

What is section 10(4) of the VAT act mean?

Answer 27

It’s basically saying that you have to charge output tax on your supply but the value of the supply is deemed to be the open market value, if the following requirements have been met
- the supply was made for no or less consideration than the open market value
- the seller and buyer are connected persons
- the buyer wouldn’t have been able to claim full input VAT even if the full open market value was charged (this one makes sense because if they could claim if, the net effect would be zero and so this subsection would be pointless)