An attack by SARS backfired in an appeal in the Western Cape High Court when the Court delivered its judgment in South Atlantic Jazz Festival (Pty) Ltd v Commissioner for the South African Revenue Service [2015] ZAWCHC 8 (judgment delivered on 6 February 2015). The facts The appellant, a registered VAT vendor, had, for a number of years, been the organiser of an international jazz festival. In order to finance and facilitate the holding of the festival, it sought sponsorships from large enterprises. The enterprises undertook to provide cash, goods or services to an agreed value, in consideration for which they were given preferential advertising and branding rights. In the matter before the Court, the enterprises concerned were South African Airways, the City of Cape Town, Telkom and the South African Broadcasting Corporation.
Category: VAT
VAT status of payments to welfare organisations clarified by the High Court
Author: Gerhard Badenhorst (Tax Executive at ENSAfrica) The SA Red Cross Air Mercy Service Trust (“the Trust”) approached the High Court for a declaratory order regarding the value added tax (“VAT”) status of payments it receives from the health departments of provincial governments to provide air rescue services as and when required. In its judgment delivered on 6 May 2015, the High Court found in favour of the Trust that the payments qualify for VAT at the rate of zero per cent. It was common cause that the Trust is a welfare organization and that its activities constitute welfare activities, being the rescue or care of persons in distress.
VAT on Letting of residential property
If an asset is acquired for the purpose of making vatable supplies in a VAT registered enterprise, the VAT input tax paid should be able to be claimed back from SARS. When the asset is sold, a portion of the selling price must be paid to SARS as output VAT. On the other hand, if an asset is acquired for the purpose of making VAT exempt supplies, the input tax cannot be claimed and the subsequent sale of such asset will not give rise to output VAT.
Overhaul VAT laws for digital economy, says PwC
Author: Thabiso Mochiko (BDlive) Governments need to upgrade value added tax (VAT) laws to keep up with the digital economy, according to consulting firm PwC. SA’s existing tax law on digital related services, amended last year, imposes VAT on electronic services such as educational materials, games, e-books, audio visual content, and music. But local and global authorities are looking at expanding the scope to include services such as software applications and online advertising.
VAT treatment of supplies to non-residents
On 30 March 2015 the tax court delivered judgment in the matter of ABD CC v Commissioner for the South African Revenue Service. The matter concerned the Value-Added Tax (VAT) treatment of the supply of goods and services to non-residents in circumstances where such goods and services are physically supplied to and consumed by a person within South Africa. The vendor had certain agreements in place with foreign tour operators in terms of which the vendor would arrange tours in South Africa. The foreign tour operators, in turn, sold tour packages to their customers, who were foreign tourists wishing to visit South Africa.
What’s good for the goose…
In the recent judgement by a full bench of the Western Cape High Court, in the matter of ABC (Pty) Ltd v the Commissioner for the South African Revenue Service (6 February 2015), the South African Revenue Service (SARS) was reminded that, what’s good for the goose, is good for the gander. The taxpayer, being a vendor for purposes of value-added tax (VAT), staged annual international jazz festivals in Cape Town. In the course of that enterprise it concluded sponsorship agreements with South African Airways, the City of Cape Town, the SABC and Telkom (Sponsors).
High Court overrules tax court on input VAT claim on sponsorships
Author: Prof Peter Surtees (Norton Rose Fulbright South Africa) If a taxpayer receives money, goods and services from sponsors in return for providing branding and marketing services to the sponsors, output VAT is payable on the value of these receipts. And if the sponsors decline to furnish tax invoices for the money, goods and services they receive from the taxpayer in return, may the taxpayer infer an input claim from available evidence? The tax court ruled that, when output VAT was due on the value of the receipts; the taxpayer could claim no input credits in the absence of tax invoices. On 6 February 2015 in ABC (Pty) Ltd v CSARS Case No A 129/2014 the High Court of the Western Cape overruled the tax court’s decision.
Budget 2015: VAT untouched
Author: Deborah Tickle, Partner International Corporate Tax KPMG. Taxpayers were warned as far back as October 2014 that Budget 2015 would not be a happy one for them. Finance Minister, Nhlanhla Nene made it abundantly clear that more tax revenue was needed in the 2015/2016 year to cover the country’s budget deficit or “gap” between expenditure and revenue. The only question was which taxes would increase to “mind” this gap.
The VAT treatment of joint venture interests
Substantial uncertainty has arisen over the last few months pursuant to the Value-added Tax (VAT) treatment of interests in unincorporated joint ventures. This has especially become relevant in the context of property owners owning an undivided interest in property and forming a joint venture so as to lease the property to third parties. From a strict legal perspective, the joint venture may have had to register as a separate vendor in terms of s51 of the Value-Added Tax Act, No 89 of 1991 (VAT Act), it being a body of persons. In this context the requirement is to register as a separate VAT vendor irrespective of the question whether a partnership is formed between the property owners.
Using the VAT system to decrease the Budget deficit
Author: Ferdie Schneider, National Head: Tax, BDO South Africa The Minister has various options at his disposal concerning how he could use VAT as a fiscal instrument to raise revenue and reduce the budget deficit that has occupied the brain trust in government. South Africa’s VAT rate has been constant since 1993 when it was raised from 10% to 14%, it is also relatively low compared to international standards. Emerging markets average at approximately 18%, whereas developed countries average at approximately 17%.