Income Tax Deductions v Value-Added Tax Deductions

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 (“Income Tax 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”).   

VAT Rules in SA to be Updated for Internet Age

Author: Ruan Jooste (BDlive) Proposals to amend value-added tax (VAT) legislation to include electronic services and products supplied by international firms to South African consumers are under way. VAT laws in South Africa are not written to cater for digital transactions, such as online downloads of movies, music, games or access to content in the cloud (an internet-based storage mechanism).

VAT Registration of Foreign e-commerce Suppliers

National Treasury released a tax bill in October 2013, following the Budget Speech in February and draft tax legislation on 4 July 2013, proposing changes to the VAT Act to require VAT registration of certain local and foreign suppliers of electronic services where consumption takes place in South Africa. In terms of the tax bill, local and foreign suppliers of electronic services will be required to register for VAT purposes where the services are supplied from a place in an export country and where a SA resident receives these services.

A Custom(ised) VAT Analysis

Author: Ross Robertson (Norton Rose Fulbright) A recent decision of the Supreme Court of Appeal has attracted a significant amount of attention. The court dismissed an appeal by a licensed foreign exchange dealer, Master Currency, against a revised value-added tax (VAT) assessment for two of its branches in the duty-free area at OR Tambo International Airport. Historically, the company had assumed that no VAT was chargeable as it was operating the branches in the duty-free area of the airport, which it considered to be located outside the Republic. The South African Revenue Service (SARS) disagreed with the taxpayer’s interpretation of a “duty-free area”, stating that the fees received by the two branches

The negative impact of e-commerce VAT on education

Educational institutions making exempt supplies will likely be negatively impacted with the impending introduction of VAT on e-commerce transactions in South Africa with effect from 1 April 2014. One could even go as far to say that educational institutions had it good under the reverse charge mechanism (also referred to as VAT on ‘imported services’) as there was arguably no VAT leakage when dealing with foreign suppliers of certain e-c ommerce services.

Claiming VAT inputs

 Commissioner for the South African Revenue Service v De Beers Consolidated Mines Limited 74 SATC 330, the current policy of the South African Revenue Service (SARS) is for a vendor to claim an input tax credit in respect of any Value-added Tax (VAT) paid on an expense, a direct or immediate link must exist between that expense and a taxable supply made by that vendor. The ultimate purpose for incurring the expense is ignored.

VAT Registration of Foreign Business

Author: Carmen Moss Holdstock (Cliffe Dekker Hofmeyr) The draft Taxation Laws Amendment Bill 2013 (TLAB) was released for public comment on 5 July 2013. Among other things, the TLAB proposes that, in order to curtail foreign businesses that supply goods and services in ‘cyber space’ from escaping the VAT net, all foreign businesses supplying digital goods and services will be required to register as VAT vendors in South Africa.

Proposed new VAT rule for foreign e-commerce suppliers

The draft Taxation Laws Amendment Bill for 2013, released for public comment in early July 2013, has proposed an interesting new rule applicable to foreign suppliers of e-commerce products. Presently foreign suppliers of e-books, e-music, e-movies or e-software programmes that transact over the internet with their South African customers are not required to register as vendors for value-added tax (“Vat”) purposes. South African Vat legislation does not cater for place of supply rules in order to determine which jurisdiction has taxing rights in respect of supplies made by foreign suppliers to South African customers.