Value-added tax: SARS takes away on take-away

Author: Ben Strauss. Recently the Cape Tax Court handed down an important judgment about value-added tax (VAT). The taxpayer (D) was a registered VAT vendor. It operated a foods delivery business. D contracted with food outlets and restaurants to advertise their menus in booklets which D had printed and delivered to households. Customers who wished to place orders for food phoned an operator at D’s premises who took the orders. D’s staff would then pass the details of the order to the relevant food outlet and despatch a driver to collect and pay for the food that had been ordered. The driver then delivered the food to the customer. D’s branding was on the drivers’ uniforms.

The VAT implications of interest-free credit

It is the long-standing practice of traders and service providers to grant customers extended payment terms for the goods or services they supply as a means to enhance turnover. Where the credit provided is interest-free, the question that arises is whether the provision of such credit impacts on the entitlement of the supplier to claim input tax for value added tax (“VAT”) purposes. 

Value Added Tax on private equity transactions

Author: Seelan Moonsamy (Tax Manager at ENSafrica). The judgment of the Supreme Court of Appeal (“SCA”), which established certain guidelines and principles regarding the claiming of input tax for value added tax (“VAT”) purposes in the Commissioner for South African Revenue Services v De Beers Consolidated Mines Ltd (503/11) (1 June 2012) case may have far-reaching consequences for the private equity and venture capital industry.

VAT – Consequences of non-registration for VAT

The Value Added Tax Act 89 of 1991 (the VAT Act) requires VAT to be levied by a vendor on the supply of goods or services in the course or furtherance of an enterprise carried on by the vendor. A vendor is any person who is or is required to be registered in terms of the VAT Act. The fact that a vendor includes any person that is required to be registered makes it clear that a person’s liability for VAT is not dependent on whether the person is in fact registered as a vendor but rather whether the person is required to be registered as a vendor. The VAT Act requires registration as a vendor on either a prospective or retrospective basis. On a prospective basis, a person would be required to register as a vendor on the first day of the month in which the total value of … Continue reading

Tax Administration – Onus of proof for understatement penalty

As a basic principle, under section 102(1) of the Tax Administration Act 28 of 2011 (the TAA), the onus of proof that an amount is not taxable or that an amount is deductible, rests on the taxpayer, whereas under section 102(2) of the TAA, the onus of proof pertaining to the facts upon which an understatement penalty is imposed, is upon the South African Revenue Service (SARS). Too often, upon the conclusion of investigations or reviews, SARS threatens exorbitant understatement penalties for seemingly innocuous and easily resolvable queries. A good example is the classic turnover/expenditure reconciliation process which could produce, in certain instances, horrendous results for a taxpayer where the calculations are devoid of commercial logic.

Decision on the VAT treatment of the supply of student accommodation

An interesting judgment was recently delivered in the High Court (Gauteng Division, Pretoria) in the matter of Respublica (Pty) Ltd v Commissioner for the South African Revenue Service (as yet unreported). The matter concerned the value-added tax (VAT) treatment of the lease of a building to a university for purposes of student accommodation. Facts Respublica (Pty) Ltd (Vendor) owned an immovable property which it leased to the Tshwane University of Technology (University).

Value Added Tax – VAT on Residential property

Historically, it was smaller investors who bought and let residential property. However, more recently, even listed Real Estate Investment Trusts (REITs) are building, buying and letting large portfolios of residential property. No doubt the investors are looking to satisfy the demand for residential property, and to realise better yields than may be achieved in commercial property. The value-added tax (VAT) rules on the building, buying, letting and selling of residential properties are not simple. It is worthwhile recapping some of the general principles that apply.

Budget 2016 – VAT aspects of non-executive directors’ fees

The Minister proposed to review certain aspects pertaining to non-executive directors’ fees, as there appears to be a disconnect, or at least a difference of interpretation between the PAYE and VAT treatment of such fees. As a general principle, where an amount is paid to an individual (for example a non-executive director), regarded as independent under common law but not for purposes of the Fourth Schedule to the Act, the individual must levy VAT on those services supplied to their client, but only if that person is (or is required to be) registered as a vendor under the VAT Act. The aforementioned scenario rarely arises in practice though. However, PAYE at the applicable rate, must be withheld from the VAT exclusive amount charged by the individual to their client.

Rules for levying interest on the late payment of VAT

Author: Gerhard Badenhorst (Tax Executive at ENSafrica). The rules regarding the levying of interest on the late payment of value added tax (“VAT”) are often confusing, and the introduction of the Tax Administration Act, 28 of 2011 (the “TAA”) has contributed to the uncertainty as to the rules that apply. Levying of interest The TAA introduced a new interest regime for the levying of interest on unpaid taxes to ensure that the levying of interest is aligned across all taxes.

Value-Added Tax – Even More Reason to Come Clean

Author: Erich Bell, Senior Tax Consultant at BDO South Africa. The VAT Act requires VAT to be levied by a vendor on the supply of goods or services in the course or furtherance of an enterprise carried on by the vendor. A vendor is any person who is or is required to be registered in terms of the VAT Act. The fact that a vendor includes any person that is required to be registered makes it clear that a person’s liability for VAT is not dependent on whether the person is in fact registered as a vendor but rather whether the person is required to be registered as a vendor.