VAT _Pt 2

Time and Value of Supply

The Time of Supply is the earlier of the Invoice date or Payment date

The rules for Time and Value of Supply in VAT are set out in Sections 9 and 10, respectively.

The Value of Supply is

Unless the parties are connected persons, in which case it's when goods are removed/made available or when services are rendered

the consideration for the supply MINUS the VAT portion

A Tax invoice triggers the liability for output VAT, and possessions of a TAX invoice triggers the right to claim input VAT

Based on section 10(2) of the VAT Act

Value of Supply- Commercial Accommodation

Residential accommodation in a dwelling is exempt from VAT if supplied in terms of an agreement of lease, but commercial accommodation is subject to VAT

MEANING

If someone rents out a house, flat or apartment to someone as their place of residence under a lease agreement, they do not have to charge VAT on the rent

However if someone rents out a room, house, flat, or other type of accommodation to someone for commercial purposes such as hotel, motel, guest house or any other establishment, they are requied to charge VAT

Because Residential accomodation in a dwelling is exempt from VAT

This is because commercial accommodation is subject to VAT

Types of Commercial Accommodation

room

hotel

apartment

motel

inn

In any house

guest house

Lodging or board and lodging

together with domestic goods and services

boarding house

flat

residentual establishment

holiday accommodation unit

chalet

tent

caravan

camping site

houseboat

similar establishment that is regularly or systematically supplied

Lodging or board and lodging for the following are subject to VAT

children

physically or mentally handicapped persons

In a home for the aged

Hospice

Domestic goods and services subject to VAT with the supply of commercial accommodation include

A telephone, television set, radio, or similar article

Furniture and other fittings

electricity, gas, air conditioning, heating

meals

Cleaning and maintenance

Laundry

Nursing services

Water

When domestic goods and services are supplied at an all-inclusive charge for an unbroken period exceeding 28 days, the consideration for the supply is deemed to be 60% of the all-inclusive charge

If the supply of domestic goods and services(such as cleaning, meals, laundry, etc.) is provided for an unbroken period exceeding 28 days, the consideration (or the amount charged for the supply) is deemed to be 60% of the all-inclusive charge

This means that only 60% of the total charge will be subject to VAT

Zero Rating

About

If annual turnover is over R1 Million and they only make zero-rated supplies, they must register as a vendor

Despite the 0% Rate, input tax can still be claimed

Different from someone making exempt supplies, which VAT Input cannot be claimed

Basically the vendor is making taxable supplies, but at a rate of 0% and can claim VAT Input

Goods Zero-Rated

Taxable supplies subject to VAT at 0%

Leased or Chartered goods used exclusively in an export country

Going concerns that are sold

Goods used in the repair or modification of certain goods

Gold supplied to the SA Reserve Bank or a registered bank

Goods exported through the Export Incentive Scheme

Certain Agricultural goods

Exported Goods

Certain types of fuel

Basic Food Stuff

Compensation paid by republic authority under certain circumstances

Fixed property supplied to cabinet member in charge of land reform

Imported goods stored in a licensed warehouse not entered home for consumption

Services Zero-Rated

Certain municipal rates and telecommunications services provided by international providers may also be zero-rated, subject to specific conditions

Section 11(2) of the VAT Act in South Africa provides a list of services that are zero-rated

Insuring or arranging insurance for international trips

Certain services related to the repair or maintenance of foreign-going ships or aircrafts

Transport of passengers or goods between places outside of South Africa

Certain services related to intellectual property for use outside of South Africa

Illuminating kerosene

Services rendered outside South Africa

Services rendered to a non-resident who is not a vendor

Supplies to independent branches outside SA

Exempt Supplies

About

A person who only makes exempt supplies is not considered to be carrying on an enterprise and cannot register as a vendor

If a person is registered because they also make taxable supplies, they can only claim input tax deductions for their taxable supplies

Example

Transportation by Rail/Road

If a transport business provides the service of transporting paying passengers and their belongings by road or railway, and the business operates the transport themselves, then that service is exempt from VAT.

Letting of Res Accommodation/Land

Educational Services

However, this exemption only applies if the transport service is provided as part of the business's usual activities and not as a one-time occurrence.

Trade union subscriptions

The supply of residential accommodation in a dwelling, as well as the supply of a "right of occupation" to certain retired persons and the supply of lodging or board and lodging as a fringe benefit or hostel for employees

Education services are exempt from Value-Added Tax (VAT) in South Africa, provided they meet certain requirements

or tax-exempt Public Benefit Organizations (PBOs) offering adult basic education and training

vocational or technical education

Including being supplied by registered schools or colleges, public or private higher education institutions.

Or education and training for religious or social workers or persons with physical or mental impairments.

A non-profit organization distributing certain goods that were donated to them.

Goods that are duty-free and have not been cleared through customs for sale in South Africa

non-resident supplies the goods from outside South Africa, and the goods are imported into South Africa by the South African resident

In this case, the non-resident would not have to pay VAT on the sale of the goods to the South African resident.

the South African resident would be responsible for paying VAT on the importation of those goods

The supply of crèche or after-school care for children

⭐The sale or letting of land outside the Republic

Certain services provided by property managers.

housing developments for seniors

Home Owners Associations (HOAs).

managing properties like apartment buildings

Basically, the exemption means that property managers do not have to charge their clients VAT for these types of services

Political parties and bargaining councils, can provide things to their members without having to pay taxes on them

Members pay for these things themselves through their membership fees.

Financial Services

VAT is not charged on dividends received as they are not payment for any supply.

Financial service suppliers cannot register as VAT vendors, and VAT inputs must be apportioned between taxable and exempt supplies.

Examples of VAT-exempt financial services include currency exchange, payment or transfer of ownership of cheques, debts cession, interest charging and provision of credit, life insurance policies and subscriptions, pension fund contributions, and cryptocurrency exchange.

A tax court case held that a company administering funeral policies had to charge VAT on the share of the premium received for its services.

However Fees paid for arranging or consulting on financial services are not exempt from VAT.