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VAT Pt 4 - Coggle Diagram

- - - - Input tax deduction is equal to the tax fraction of the cost of the second-hand goods, which is calculated as 15% of the total cost of the goods.
      - The sale must take place in the Republic of South Africa, and the seller must be a Republic resident insofar as the asset is concerned.
      - A vendor can claim input tax deduction on second-hand goods bought from a non-vendor, even if no VAT was charged on the sale.
      - meet certain record-keeping requirements
        
        a description of the goods
        
        the volume or quantity
        
        such as recording the date of acquisition
    - - Must be for taxable supplies
      - Valid tax invoice needed
  - - - The vendor must then use the following formula to determine the amount of input tax that can be claimed:
        
        Total value of taxable supplies x VAT inputs common to both types of supply claimable / Total value of all supplies (taxable & exempt)
        
        VAT inputs common to both types of supply refer to the input tax that can be directly attributed to both taxable and exempt supplies. This could include expenses such as rent, utilities, and general office expenses.
    - - If the proportion of taxable use is 95% or more, the full input tax may be claimed.
  - - - A motor car is defined as any motor vehicle of a kind
        
        which has three or more wheels
        
        and is constructed or converted wholly or mainly for carrying passengers
        
        normally used on public roads
        
        Vehicles capable of accommodating only one person or suitable for carrying more than 16 persons
        
        caravans
        
        ambulances
        
        Vehicles of unladen mass of 3 500 kilograms or more are not considered motor cars.
      - A vendor can claim input tax on motor cars purchased for the purpose of selling or leasing the car to customers in the ordinary course of an enterprise which continuously or regularly supplies cars in this way
        
        Or when the subsequent supply of that motor car is in the ordinary course of an enterprise which continuously or regularly supplies motor cars as prizes to clients or customers.
      - No VAT input can be claimed for motor cars purchased or imported by the vendor, including those purchased for temporary use or demonstration purposes.
        
        However, a vendor can claim an input tax credit on repair, maintenance, insurance, or accessories related to the motor car, except if the accessory is for entertainment purposes
      - VAT Input can also be claimed for any vehicle which does not fall within the definition of a motor car, provided that it is used for taxable supplies.
        
        In a case where a vendor claimed input tax on a vehicle used in a courier business, the court concluded that as the vehicle was not constructed wholly or mainly to carry goods, no VAT input could be claimed.
      - Examples of purchases where VAT input is prohibited
        
        The purchase of a motor car for the use of a managing director
        
        An example of a purchase where a VAT input is allowed is the purchase of a scooter for delivering medicines to customers.
        
        The purchase of a minibus capable of carrying more than 16 persons for use in a road transport business
    - - if a vendor provides entertainment as part of their regular business operations and charges customers for the cost of providing that entertainment, they are still able to claim input tax on the goods or services acquired for the purpose of providing that entertainment.
      - Entertainment is defined in section 1 to include any
        
        beverages
        
        accommodation
        
        food
        
        entertainment
        
        amusement
        
        recreation
        
        or hospitality for business purposes
      - VAT on entertainment may be claimed as input if entertainment is supplied to employees/officers/connected persons of the vendor and the charge covers all direct and indirect costs (being the entertainment).
      - Section 17(2) prohibits claiming VAT as input tax by a vendor for entertainment expenses
        
        Entertainment is defined as providing various goods and services for the purpose of amusement, recreation, and hospitality by a vendor in connection with their enterprise.
        
        if a business's primary function is to provide entertainment, such as a movie theater or a theme park, then the input tax on the goods and services provided as part of that entertainment can be fully claimed
        
        This is because the entertainment is seen as an integral part of the business, and the cost of providing it can be considered a cost of making taxable supplies.
      - VAT on entertainment may be claimed as input by a welfare organization if the services are acquired to further the organization's aims.
      - VAT on subsistence expenses, such as food and hotel accommodation, can be claimed as input if the employee or office holder is away from his usual residence and working place for at least one night on business
        
        Subsistence expenses refer to the costs associated with food, drink, and accommodation that are necessary for an employee or office holder to carry out their work duties while away from their usual residence and working place
        
        for at least one night on business, then the business can claim the VAT paid as input tax.
    - - VAT input cannot be claimed on fees/subscriptions paid for membership of a sporting, social or recreational club, association or society.
      - This prohibition does not apply to membership fees for professional associations.