VAT 3

Question 1

“input tax”, in relation to a vendor, means
Part A
-supplier
-vendor

Answer 1

“input tax”, in relation to a vendor, means –
(a) tax charged under section 7 and payable in terms of
that section by-
(i) a supplier on the supply of goods or services
made by that supplier to the vendor; or
(ii) the vendor on the importation of goods by
that vendor;

Question 2

“input tax”, in relation to a vendor, means
Part B
-second hand goods

Answer 2

(b) An amount equal to the tax fraction of the lesser of any
consideration
-in money given by the vendor for or
-the open market value of the supply
(not being a taxable supply) to
him by way of sale by a resident of the Republic of any second-hand goods situated in the republic.

Question 3

Typical example
• A bank makes both taxable supplies (cheque books, bank charges) and nontaxable
supplies (issue of loans).
Purchase a printer that will be used by the home loan advisor.
• Purchase a printer that will be used by the
cheque department
• Purchase a printer that will be used in the
general information counter

Answer 3

• Purchase a printer that will be used by the home loan advisor.= Exempt
• Purchase a printer that will be used by the cheque department= Claim full input tax
• Purchase a printer that will be used in the general information counter= Apportion input tax

Question 4

Allocation of input tax -

s17(1)

Answer 4

• There are various methods to allocate.
• In terms of Binding General Rulings 4 & 16 the
standard method of apportionment is the
Turnover-based method.
• % is calculated once a year and used on all
input for that year.

Question 5

Turnover-based method formula

Answer 5

Total val of taxable supplies (excl VAT)/ Total val of all supplies x total input vat

Question 6

Allocation of input tax -
s17(1)
• Special apportionment methods are allowed if:

Answer 6

– The Turnover-based method does not yield a fair approximation
of the extent of taxable supplies, AND
– Prior approval is obtained from SARS.

Question 7

Allocation of input tax -

s17(1) Excluded from the formula:

Answer 7

– Capital goods and services (other than goods obtained in terms
of a lease agreement)
– Goods / services for which an input VAT deduction was denied

Question 8

De minimis Rule

Answer 8

If taxable use is more than or equal to 95% then claim 100%

input

Question 9

Allocation of output VAT

Non-Supply s8(14)

Answer 9

Where input tax was denied, the goods that
are being supplied are deemed to be made
otherwise than in the furtherance of an
enterprise

Question 10

Allocation of output VAT
Non-Supply s8(14)
excludes

Answer 10

• Fringe benefits where the employee is granted right of
  use of an asset.
• A hearse for which input tax was allowed.
• A game viewing vehicle for which input tax was allowed.

Question 11

Mr Know-nothing asks you to tell him the input tax consequences as well as how
much output tax he needs to levy on the following supply of goods:
- Telephones bought as stock
- Computer bought to use for financial services
- Brown Bread bought as stock
- Brown Bread bought to provide to employees
Assume the company makes 50% taxable supplies

Answer 11

Telephones (Stock)
input 100% 
output 100% 
why:Solely used for making taxable supplies
Computer (Use) 
input 0% 
output 100% 
Solely used for making exempt
supplies
Brown Bread (Stock)
input 100% (although it would be R0)
output 0% Zero Rated
Brown Bread (Use)
input 0% 
output 0% 
Input Tax was denied
(Entertainment)

Question 12

Special rules for timing and

value

Answer 12

3. 1 Commercial Accommodation
4. 2 Connected Persons
5. 3 Instalment Credit Agreements
6. 4 Rental Agreements
7. 5 Second hand goods
8. 6 Fixed Property
9. 7 Transport

Question 13

Definition of Commercial Accommodation

Answer 13

Definition of Commercial Accommodation
• Lodging OR board AND lodging, together with domestic goods and
services that is regularly or systematically supplied, excluding a
dwelling supplied in terms of an agreement for letting and
hiring thereof; OR
• Lodging OR board AND lodging in a home for the aged, children,
physically or mentally handicapped persons; OR
• Lodging OR board AND lodging in a hospice

Question 14

Previously the definition said that
something would only be commercial
accommodation if it made taxable
supplies of more than R60,000. 
now says?

Answer 14

This has been deleted from the
definition, but it is still in the definition
of an enterprise and will increase to
R120 000 from 1 Apr 2016.

Question 15

exception for invoice basis

Answer 15

fixed property -account for output tax when payment pf purchase price is recieved

Question 16

on payment basis:
-stock is delivered with invoice of R180 000 on 19 July
-payment is on 31 aug
what is the timing of the supply?

Answer 16

exceeds R100 000
therefore use Invoice basis
therefore it is 19 july