Author: Seelan Moonsamy (ENSafrica) The question of whether VAT must be levied on costs that are on-charged often arises, particularly when no VAT was incurred on the cost in the first instance. The issue is most prevalent in the services industry where a consultant, for example, seeks to recover from his client certain costs that the consultant has incurred in rendering services to the client.
Category: VAT
Considering the VAT effect of dividends
Author: Herman Viviers (North-West University) “A dividend in specie generally constitutes a distribution made to the beneficial owner of a share in any form other than in cash” Considering the VAT consequences for a VAT vendor who declares dividends to its shareholders, may at first appear to be simple. However, the VAT treatment seems to become more complex as soon as one tries to justify it in terms of the provisions contained within the Value-Added Tax Act (89 of 1991) (“VAT Act”). The purpose of this article is to take a closer look at the VAT consequences where a VAT vendor declares dividends (either in cash or in specie) to the beneficial owners of its shares and to justify it in terms of the provisions of the VAT Act.
Beware of VAT zero-rating on sale of commercial property
Author: Ben Strauss (Cliffe Dekker Hofmeyer) If commercial immovable property is sold as a going concern and if certain requirements are met, then the sale can be zero-rated for value-added tax (VAT) purposes, in terms of s11(1)(e) of the Value-Added Tax Act, No 89 of 1991 (VAT Act). Among other things, it is a requirement that (i) the seller carries on an enterprise in relation to the property and (ii) the enterprise is an income-earning activity on the date of transfer of the enterprise. The term ‘enterprise’ is defined widely in s1 of the VAT Act and it is trite that the leasing of commercial immovable property is an enterprise for purposes of the definition.
Import VAT – When and how to claim
Author: Cliff Watson, Tax Director Grant Thornton Johannesburg The question of when to claim the VAT paid when importing goods has been on the mind of all importers in recent years, as so many have been getting this wrong and suffering penalty and interest charges as result. The question has also been on SARS’ radar and became one of its focus areas when doing VAT audits. The main issue driving these concerns is that VAT legislation was amended twice in a 12-month period. Situation prior to 1 April 2014 Up to 30 March 2014, a vendor was entitled to claim the VAT paid on the value of goods imported to South Africa only when the goods have been invoiced or paid, whichever was the earlier, during that tax period.
How to substantiate an input tax deduction without a tax invoice
The VAT process is fairly simple if you have a tax invoice to substantiate your entitlement to an input tax deduction. However, if the supplying vendor fails to issue you with a tax invoice, the question then arises as to whether you, as the recipient vendor, can rely on section 20(7) or section 16(2)(f) of the Vale-Added Tax Act No 89 of 1991 (the “VAT Act”) by using the contract between the parties to substantiate your entitlement to an input tax deduction? This was the question posed in an appeal in the Western Cape High Court case of South Atlantic Jazz Festival (Pty) Ltd v CSARS 2015. South Atlantic Jazz Festival (Pty) Ltd (the ”appellant”) held annual jazz festivals and had concluded sponsorship agreements with various companies (”sponsors”) in terms of which the sponsors paid money and provided goods and services to the festivals and, in return, the appellant provided branding and marketing. All parties were registered VAT vendors. The court Read More …
Davis Tax Commission (“DTC”): First interim report on VAT
First interim report on South African VAT system : DTC confirms SA has efficient VAT system The South African tax system has changed significantly since the recommendations of the Katz Commission in 1995, shortly after the introduction of VAT which at the time, signalled a fundamental shift in South Africa’s taxation landscape. It was on this basis that in 2013 the then Minister of Finance, Mr Pravin Gordhan, announced the members of the Davis Tax Committee (“DTC”) that would assess the South African tax policy framework, and its role in supporting the objectives of inclusive growth, employment, development and fiscal sustainability.
DAVIS TAX COMMITTEE OPENS THE DOOR FOR HIGHER VAT RATE TO BE CONSIDERED
Author: Ferdie Schneider, National Head of Tax at BDO South Africans can be justifiably proud of the fact that our country is deemed to have one of the most efficient VAT systems in the world. This accolade emerged from the Davis Tax Committee’s first interim report on Value Added Tax (VAT) which was released for comment recently, with the source of the favourable rating coming from none other than the International Monetary Fund. But perhaps the most important take-away from the interim report is that it definitely opens the way for a potential “moderate” increase in the VAT rate, especially as this is seen by the committee as having a less distortionary effect on macro-economic activity than an increase in direct taxes would have – both personal taxes and corporate taxes.
VAT clauses in sale agreements relating to immovable property
Parties to sale agreements of immovable property should take great care when drafting the value-added tax (VAT) clauses. Consider the recent case of Lezmin 2358 CC v Tomeridian Properties CC and others [2015] JOL 33210 [GJ]. The facts of the case are complex. Put simply, the seller sold commercial immovable property to the buyer. The sale agreement, which went through a few permutations, stated that: “The purchase price is the sum of R25 000 000 (Twenty Five Million Rand) exclusive of VAT which is payable…”
Voluntary VAT registration: when to raise your hand & recent regulations
Author: Varusha Moodaley – Tax Associate at ENSafrica A person is obliged to register as a value-added tax (“VAT”) vendor where such person makes taxable supplies (comprising of standard and zero-rated supplies) in excess of R1 million in a consecutive period of 12 months. A person may however, voluntarily register for VAT where the person has already made taxable supplies exceeding R50 000 in a 12 month period, or where the person carries on an enterprise and has not yet exceeded the R50 000 threshold, but reasonably expects that the R50 000 threshold will be exceeded within 12 months from the date of registration.
VAT clauses in sale agreements relating to immovable property
Parties to sale agreements of immovable property should take great care when drafting the value-added tax (VAT) clauses. Consider the recent case of Lezmin 2358 CC v Tomeridian Properties CC and others [2015] JOL 33210 [GJ]. The facts of the case are complex. Put simply, the seller sold commercial immovable property to the buyer. The sale agreement, which went through a few permutations, stated that: