Reimbursing employees has VAT risks

Employers often reimburse staff for a variety of costs, most of which bear VAT. The VAT Act allows vendors as an input tax credit, any VAT incurred in respect of items acquired for the purposes of making taxable supplies. Deduction is also allowed where the supply was made to a person, acting on behalf of such vendor, who is the principal for the purposes of that supply, where the tax invoice is issued to such agent. Even in the absence of a valid agency agreement, SARS used to allow an input tax deduction in respect of reimbursed costs, presumably on the basis that it would be contrary to the spirit of the Act to have a cascading of tax. (Irrecoverable VAT forms part of cost of sales resulting on tax being levied on tax.)

Note a change in requirement when issuing a VAT invoice

Author: David Warneke SARS recently issued a binding general ruling clarifying the requirement that the address of the recipient and supplier be reflected on a tax invoice, debit or credit note.  The ruling is effective from 11 March 2014 and it applies for an indefinite period. In terms of the ruling, a businesses may elect to reflect either: The physical address from where the enterprise is being conducted; The postal address of the enterprise; or Both the physical and postal addresses of the enterprise.

The VAT registration amendments: will these changes streamline the registration process?

The Taxation Laws Amendment Act, No 31 of 2013 introduced amendments to the VAT registration provisions contained in the Value-Added Tax Act 89 of 1991 (“the VAT Act”), aimed primarily at streamlining the VAT registration process. These amendments came into force on 1 April 2014.

Import VAT – New Rules

By Basil Dikobe, Tax Manager, Grant Thornton Johannesburg The requirements for claiming VAT when importing goods to South Africa have always been contentious and the affected VAT vendors are often unsure about the documentary evidence they need to retain to survive a SARS VAT audit. Even SARS offices interpret or enforce the provisions of the VAT Act differently. For example, some allow the clearing agent’s invoice as proof of import and others accept payment to the clearing agent as proof that VAT has been paid. Even the timing for claiming the input tax deduction has been disputed. These uncertainties have resulted in many VAT vendors receiving significant assessments, penalties and interest charges from SARS.

Deductions for income tax and VAT

Broadly speaking, in their ordinary business operations, certain entities are entitled to claim certain deductions for income tax and value-added tax (VAT) purposes. In this article we discuss the tests used by South African courts and in practice, for income tax and VAT purposes, in order to determine whether a taxpayer will be entitled to such deductions. Consideration will be given specifically to the deduction of legal expenses incurred by a taxpayer in terms of section 11(c) of the Income Tax Act No. 58 of 1962 (the Act) and the deduction of input tax in respect thereof in terms of section 1 read with section 7 of the Value-Added Tax Act No. 89 of 1991 (the VAT Act).

Value Added Tax – Tax invoices and the payment of VAT

Cash-strapped companies that are staring liquidation in the face sometimes resort to desperate measures to convince the court hearing an application for winding-up that they are not, in fact, insolvent and should not be wound up. A novel and imaginative method was adopted by the company, a VAT vendor, in ITC 1865 [2013] 75 SATC 250, though it is unlikely to become popular or to find its way into tax-planning manuals. The taxpayer issued fictitious VAT invoices to create the illusion of a revenue stream In an effort to show the court hearing the liquidation application that it was not insolvent,

Davis Committee considering VAT at 16%?

Author: Ingé Lamprecht| JOHANNESBURG – An increase in the standard value-added tax (VAT) rate of 14% by one or two percentage points could reduce the pressure on the fiscus and would bring South Africa more in line with a number of international jurisdictions around the world. However, it will be an extremely unpopular move with unions and other political groups, who argue that it will be to the detriment of the poor. The Tax Review Committee, headed by Judge Dennis Davis, is currently considering potential amendments to the VAT system, with a specific focus on efficiency and equity.

South Africa’s VAT changes: The impact on e-commerce

Author: Bowman Gilfillan  The buying and selling of services over the internet has become ubiquitous. This article provides an update on the efforts of the South African Revenue Service (‘SARS’) and National Treasury (‘Treasury’) to bring foreign e-commerce suppliers on to a level tax playing field, by requiring them to register under the Value-Added Tax Act 1991 (‘the VAT Act’). In South Africa, it is usually the case that an entity selling goods or services will (i) be charged VAT (normally at a standard rate of 14%) on its inputs by its suppliers, (ii) charge VAT on its outputs to its customers, and

Income tax and VAT consequences of e-tolls

Author: Beric John Croome – ENSafrica Introduction The levying of tolls for the use of certain highways in Gauteng, the so called e-tolls, took effect on 3 December 2013.  It is therefore appropriate to consider the income tax consequences arising from the payment of e-tolls in those cases where an employee is reimbursed for business travelling or is provided with a vehicle owned by their employer or where an employee receives a travelling allowance to finance the expenditure incurred whilst travelling on the employer’s business.  In addition, brief reference will be made to the income tax consequences facing fleet owners and cartage contractors.

VAT registration of foreign online suppliers not limited to supplies of e-books

Authors: Varusha Moodaley and Seelan Moonsamy (ENS) The recent amendments to the VAT legislation introduced by the Taxation Amendment Act, No 31 of 2013, gives effect to government’s proposal that all foreign businesses supplying e-books, e-music and other digital goods and services in South Africa be required to register as South African value-added tax (“VAT”) vendors. Government indicated that the proposal is in line with international trends such as regulations adopted by the European Union requiring such suppliers to register for VAT in the country where the consumer resides. The amendment has the effect that from 1 April 2014, all persons supplying electronic services from a place outside of South Africa will be required to register as VAT vendors where they make supplies of electronic services to South African customers who are either tax resident in South Africa, or where payment for the services by such customers