Unit 7 Value Added Tax 2022

lOMoARcPSD|5079203
Unit 7 Value Added Tax 2022
Taxation (University of Limpopo)
Studeersnel wordt niet gesponsord of ondersteund door een hogeschool of universiteit

Gedownload door Yolanda Mtawu (yolandamtawu@gmail.com)
lOMoARcPSD|5079203
2022/04/19
VALUE ADDED TAX (VAT)
Accountancy Dream @ UL
VALUE ADDED TAX(VAT)
• VAT is an indirect tax that is levied on the supply of goods and services. (Normal
tax is a direct tax as it is levied on persons.)
• Levied in terms of the Value-Added Tax Act 89 of 1991
(VAT Act).
• VAT came into effect on 30 September 1991 at 10% - It replaced
General Sales Tax. 7 April 1993 – 14% - 1 April 2018 -15%
• Levied at either 15% or 0%.
• VAT levied by a vendor – output tax.
• The vendor that is charged VAT – input tax.
• Calculation of VAT payable / refundable
• VAT is not RECEIVED BY OR ACCRUED TO a vendor for the purposes of the Gross
Income definition as the person acts as an agent on behalf of SARS
1
lOMoARcPSD|5079203
2022/04/19
CALCULATION OF VAT
•Calculate output tax

• Calculate input tax
• Determine if there are any adjustments
• Output less Input = VAT payable or
(refundable)
• NB terminology: Value (excl VAT) and
: Consideration /open MV
(incl VAT= 115%)
LEVYING (IMPOSITION) OF OUTPUT TAX
• Output tax is levied: on the (TAXABLE) supply (and

deemed supply) of goods and services (in South
Africa) by a vendor in the course or furtherance of an
enterprise (all aspects must be present) (section
7(1)(a))
• A "taxable supply":
at the standard rate (currently 15%) - section
7(1)(a)
at the rate of zero-percent - section 11
• Exempt supplies are excluded from an enterprise!
No input tax can thus be claimed
2
lOMoARcPSD|5079203
2022/04/19
ENTERPRISE
• An enterprise is:
üAny enterprise or activity carried on
continuously or regularly.
üIn or partly in South Africa by any person
(also partnerships).
• Whereby goods and services are supplied for
a consideration (whether for profit or not).
• Consideration = value plus VAT
ENTERPRISE
Specifically excluded from enterprise (page 898
(proviso’s to def)):
ü Service rendered by employees (no VAT on
salaries vs independent contractors (iii))
ü Hobbies – private, recreational pursuit of a
natural person (iv)
ü Exempt supplies (page 898) (v)
ü Commercial accommodation ≤ R120 000
(previously R60 000) per 12 months (ix)
ü Certain supplies by foreign branches
3
lOMoARcPSD|5079203
2022/04/19
SUPPLY OF GOODS AND

SERVICES
• Supply means to provide or to make available
• Supply - Includes all forms of supply
• Whether voluntary, compulsory, or by
operation of law
• Irrespective of where the supply is effected
• Any derivative of “supply” is included
• Specifically included are:
Performance i.t.o a sale, rental agreement,
instalment credit agreement
SUPPLY OF GOODS AND

SERVICES
• Goods - includes
Corporeal (tangible) movable (includes animals) things (≠
intellectual property / shares / goodwill)
Fixed property and any real right to fixed property
Electricity
But excludes
• Money
• Any right under a mortgage bond OR pledge of any such
thing OR fixed property
• Revenue stamps (except collector’s piece or investment
article or postal stamps)
4
lOMoARcPSD|5079203
2022/04/19
SUPPLY OF GOODS AND

SERVICES
• Services
• ■Means anything done or to be done
■Including
▸Granting, assignment, cession, or surrender of
any right or
▸Making available of any facility or advantage
■Excluding
▸Supply of goods, money or any stamp, form or
card contemplated in par (c) of the
definition of “goods”
VENDOR (REGISTRATION
REQUIREMENTS)
Compulsory (s 23(1))
ü Value of taxable supplies > R1 000 000 or have a written
contractual commitment to make taxable supplies in next
12 months > R1 000 000 (any 12 month period) per person,
not per enterprise.
ü Cessation of business, replacement of capital assets or
abnormal circumstances not included in value
ü Electronic services is liable to register at end of month
where the total value of taxable supplies > R50 000 (s
23(1A))
ü Category F vendor - 4 month tax periods (taxable supplies <
R1.5 mil & apply to SARS) – Deleted from 1 July 2015
(applicable tax periods commencing on or after this date)
5
lOMoARcPSD|5079203
2022/04/19
2022/04/19
VENDOR (REGISTRATION
REQUIREMENTS)
ü Conducting an enterprise or acquiring a going concern and taxable supplies >
R50 000 (12 month period)
ü Note that if the taxable supplies is expected to exceed R50 000 the vendor
must register on the payments basis until taxable supplies actually exceed R50
000 after which the vendor will move to the invoice basis in the next tax period.
ü An activity – likely to make taxable supplies only after a period of time
ü Welfare Organisation, foreign donor funded project, share block company or
municipality
ü Commercial accommodation > R120 000 (previously R60 0000) for 12 month
period
Agent
ü Receives or makes a supply of goods or services for or on behalf of a principal
ü The agent can issue a tax invoice and must be within 21 days of supply (s 54(1))
23
CONSIDERATION VS VALUE
üThe price of an item is R1 000.

üIf the vendor sells the item, output tax must be
charged at 15%.
üThe output tax will be calculated as R1 000 x 15/100
(15%) = R150.
üThe vendor will issue an invoice (or receive cash) of R1
150.
üThe consideration of the supply = R1 150.
üThe value of the supply = R1 000 or R1 150 x 100/115
= R1 000.
üThe output tax = R1 150 x 15/115 = R150.
6
lOMoARcPSD|5079203
2022/04/19
OUTPUT TAX
•Taxable supplies include both standard rated and zero-

rated supplies.
•Standard rated supplies – taxed at standard rate – 15%
•Zero-rated supplies – taxed at zero rate – 0%
•Exempt supplies – not taxed (excluded from
enterprise)
•It is therefore imperative to know which supplies are
standard rated, zero-rated and which are exempt.
•Furthermore – there is an important difference
between zero-rated and exempt supplies and it deals
mainly with the claiming of input tax.
ZERO-RATED SUPPLIES (S 11)
üExports of goods
o Direct exports are signed and delivered at
address in an export country by vendor or
cartage contractor liable to vendor (must
meet certain requirements)
o Indirect exports – ownership of goods
change in RSA (except transport by sea or
air) at standard rate - VAT refund if fulfil
7
lOMoARcPSD|5079203
2022/04/19
ZERO-RATED SUPPLIES
• Exported services
• Sale of a business as a going concern

• –Transportation, e.g. foreign air travel (or by road) (s 11(2)(a), (b) & (d))
• –Ancillary services to exported goods (non-resident & non-vendor) (s 11(2)(e))
• –Services physically rendered outside RSA (s 11(2)(k)) zero-rated
Except for electronic services (from 1 April 2015)
• –Services to non-residents (not physically rendered outside RSA) (s 11(2)(l))
only if supplied directly to non-resident AND
the non-resident is outside of RSA when the service is supplied
• NOT ZERO % IF:
• Services to land or im provem ents in RSA, or
• M ovable property in RSA
• –unless exported to non-resident afterwards, or
• –part of a supply of the non-resident to another registered vendor
• Stellenbosch Farm ers W inery Ltd v CSARS
ZERO-RATED SUPPLIES (S 11)

Other
üSeed, fertiliser etc. for farming purposes
üGold coins
üBasic foods (brown bread, milk, fresh fruit & veg etc.)
üPetrol, diesel, bio fuels, paraffin
üMunicipal rates, excl. other services (separate charge
@ 15%)
üGoods supplied to a foreign company, but delivered to
a registered vendor in SA and used by the recipient
wholly or mainly for taxable supplies (s 11(1)(q))
8
lOMoARcPSD|5079203
2022/04/19
EXEMPT SUPPLIES (S 12)

•Financial services (S 12(a) and s 2)
Includes: interest paid, transfer of shares, issue of debt security
Excludes: fee based services like bank charges etc.
•Residential accommodation (not commercial accommodation, i.e. guest houses, hotels etc.) (Silke 32.11.3) (s
12(c))
•Supply of donated goods and services by an association not for gain (Silke 32.11.2) (s 12(b))
•Other (see Silke 32.11.4)
ü Sale or letting of land outside SA
ü Supply of services by a body corporate funded from levies vs. home-owners associations
ü Transport of fare-paying passengers by road or rail (in South Africa) (excluding game viewing)
ü Public education
ü Crèche and after-school care
ü Employee organizations', i.e. trade unions
ACCOMMODATION
▸Residential accommodation: EXEMPT
▸”dwelling” as def, under an agreement for the letting and hiring, place of residence of a
natural person; including
–Lodging or board and lodging by an employer or local authority
–Differentiate in regards to commercial accommodation
▸Commercial accommodation: TAXABLE (Silke 32.11.3.2)
– (Examples 32.21 – 32.23 SILKE)
▸Lodging or boarding (includes domestic goods & services) regularly or systematically
supplied excluding a “dwelling” under an agreement for the letting and hiring thereof
▸Includes: old-age homes, hospice, orphanage, handicapped.
▸if accommodation (which can include domestic service) provided for an unbroken period
exceeding 28 days:
▸Value: Consideration = 60% of all-inclusive charge
▸Note that domestic goods include water
9
lOMoARcPSD|5079203
2022/04/19
STANDARD RATED SUPPLIES -

COMMERCIAL ACCOMMODATION
ü If accommodation (which can include domestic service) provided
for an unbroken period exceeding 28 days:
ü Value: Consideration = 60% of all-inclusive charge.
ü Person stays shorter than or 28 days – full value of supply subject
to VAT @ 15%.
ü Person stays > than 28 days - value = 60% of all-inclusive charge.
ü Example: Person stays 30 days and is charged R15 000.
ü Value = R15 000 x 60% = R9 000
ü Output VAT = R9 000 x 15% = R1 260.
ü Consideration, therefore = R15 000 + R1 260 = R16 260.
ü All-inclusive charge includes domestic goods and services.
DEEMED SUPPLY OF GOODS AND SERVICES (S 8 &

18)
• Cease to be an enterprise (vendor) Section 8(2)
• Indemnity payments (Section 8(8))
–Contract of insurance (not long-term),
–On consideration received to extent of loss, on taxable
supplies
–Not if total reinstatement (loss or damage) and input tax
was denied
–NOT if insurer replaces damaged goods
–Value: 15/115 x consideration received x % taxable supply
–Time: date of receipt
10
lOMoARcPSD|5079203
2022/04/19
DEEMED SUPPLY OF GOODS AND

SERVICES (CONT.)
• Branch or main business outside RSA (s 10(5)):
ü normal rules relating to import & export.
• Payments exceed consideration: no refund > 4
mnths.
• Fringe benefits: -asset given to employee
-use of an asset or company car
-free or cheap services
-release of debt owed by an
employee
INPUT TAX (S 17)

•If used to make both taxable AND exempt supplies → APPORTION
ü Intended use - section 17(1)
ü Apportionment - use turnover-based method, determined once a year (Silke
32.20.1) (Notes pg 948)
ü De minimis-rule: if 95% or more is used to make taxable supplies No
apportionment (s 17(1)) (Silke 32.20). (Notes pg 948 -949)
•Must be a vendor, seller must have charged VAT and must have a valid TAX
INVOICE to claim input.
ü Input tax denied: section 17(2) (Silke 32.21)
▸For the purposes of “entertainment” as defined
▸Subscriptions except professional (i.e. SAICA)
▸Motor car (NB not game-viewing and hearses)
▸Medical or dental schemes
11
lOMoARcPSD|5079203
2022/04/19
DENIAL OF INPUT TAX -

ENTERTAINMENT
Entertainment, includes:
the provision of food and beverages, accommodation, entertainment,
amusement, recreation, as well as the assets used to make the supply.
Prohibition not applicable to:
•Business of supplying entertainment and charged for or supplied for bona fide
promotional purposes or excess given away to employees or welfare organisation
•Entertainment supplied to employee and charged for
•Personal subsistence of employee while away from usual place of residence
•Vendors operating taxable passenger transport services
•Including other types of entertainment (other than meals and refreshments)
supplied on board a ship or flight
•Vendors organising seminars and events for reward
DENIAL OF INPUT TAX – ACQUISITION

OF MOTOR CAR
• Motor car includes, station wagon, minibus, double cab “bakkie”, three or more
wheels and constructed mainly (>50%) to carry passengers.
• Excludes:
•Carrying only one person
•Carrying > 16 persons
•Caravans and ambulances
•Game-viewing vehicles
•Hearses
The denial does not apply to:
•Car dealers
•Care-hire business at an economic rental
•Acquired motor car as prize (betting)
•Regularly supplies motor cars as prizes
12
lOMoARcPSD|5079203
2022/04/19
DEEMED OR NOTIONAL INPUT TAX ON

SECOND-HAND GOODS (DEFINED IN S 1)
•Must be second-hand = previously owned and used
•From 1 April 2015 definition does NOT include gold and goods that
contain gold (not only gold coins)
•Different rules if fixed property
•Goods must be in RSA on date of sale
•Notional input tax credit where acquired from a non-vendor
•Value: Use tax fraction (15/115) on:
•Lesser of consideration given by vendor OR open market value
•Time: Can only be claimed to the extent that payment was made
•NB If consequently exported. Value of supply=purchase price. Second-
hand goods exclude animals, gold coins
IMPORTATION OF GOODS
(OTHER THAN BLNS
•TimeCOUNTRIES
- date on Customs –BillFOR
of EntryHOME
(date entered
for home consumption)
CONSUMPTION)
For home (domestic) consumption:
•Value -VAT at 15% calculated on the total of:
-The customs duty value plus
-10% of customs value plus
-Any non-refundable customs duty and import
surcharges paid
•If registered licensed warehouse = 0%
13
lOMoARcPSD|5079203
2022/04/19
IMPORTATION OF GOODS
(BLNS COUNTRIES)
•Time - date on which goods physically

enter RSA
•Value -VAT at 15% of “customs duty value”
(no customs duty paid)
•NOTE: VAT paid on importation is not
“output tax” as defined, paid by importer
whether vendor or not.
GOODS IMPORTED & ENTERED

FOR STORAGE IN CUSTOMS &
EXCISE
•If goods haveSTORAGE
value is:
not been enteredWAREHOUSE
for home consumption
•Greater of:
–Customs duty value + 10% of customs duty value +
customs duty; or
–Consideration paid in money (if not paid in money
OMV)
•Calculated as value x 15%
•Input tax claimed once the goods is released ito the
Customs & Excise Act (not on date of payment or
invoice) (s 16(3)(b)(ii) & (iii))
14
lOMoARcPSD|5079203
2022/04/19
IMPORTED SERVICES
(S 13 & 14)
Only levied if a non-resident supplier supplies a service to a resident (whether a vendor

or not), and
■The service are not used to make taxable supplies
■Recipient of service liable for VAT:
Time - Earliest date of :
▸The issue of an invoice or
▸The making of any payment by the recipient
Value – 15% x greater of:
▸Value of consideration or
▸Open market value
■If imported service = remuneration no VAT payable
■CSARS v De Beers Consolidated Mines Limited
■Example 32.11 SILKE
ADJUSTMENT TO INPUT AND

OUTPUT TAX
Adjustment to input tax
ü Bad debts written off
ü Settlements discounts
ü Change in use
Adjustment to output tax
ü Bad debts recovered
ü Discounts received
ü Change in use
15
lOMoARcPSD|5079203
2022/04/19
MOTIVATION
Conquering the impossible.

Achieving the unthinkable.
Thank you
Accountancy Dream @ UL 32
16

Unit 7 Value Added Tax 2022

Uploaded by

Copyright:

Available Formats

You might also like

Unit 7 Value Added Tax 2022

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Unit 7 Value Added Tax 2022

Uploaded by

Copyright:

Available Formats

lOMoARcPSD|5079203

Unit 7 Value Added Tax 2022

Taxation (University of Limpopo)

Studeersnel wordt niet gesponsord of ondersteund door een hogeschool of universiteit

VALUE ADDED TAX (VAT)

VALUE ADDED TAX(VAT)

•Calculate output tax

LEVYING (IMPOSITION) OF OUTPUT TAX

• Output tax is levied: on the (TAXABLE) supply (and

SUPPLY OF GOODS AND

SUPPLY OF GOODS AND

SUPPLY OF GOODS AND

üThe price of an item is R1 000.

•Taxable supplies include both standard rated and zero-

ZERO-RATED SUPPLIES (S 11)

• Sale of a business as a going concern

• –Ancillary services to exported goods (non-resident & non-vendor) (s 11(2)(e))

• –Services physically rendered outside RSA (s 11(2)(k)) zero-rated

Except for electronic services (from 1 April 2015)

• –Services to non-residents (not physically rendered outside RSA) (s 11(2)(l))

only if supplied directly to non-resident AND

the non-resident is outside of RSA when the service is supplied

• NOT ZERO % IF:

• Services to land or im provem ents in RSA, or

• M ovable property in RSA

• –unless exported to non-resident afterwards, or

• –part of a supply of the non-resident to another registered vendor

• Stellenbosch Farm ers W inery Ltd v CSARS

ZERO-RATED SUPPLIES (S 11)

EXEMPT SUPPLIES (S 12)

STANDARD RATED SUPPLIES -

DEEMED SUPPLY OF GOODS AND SERVICES (S 8 &

DEEMED SUPPLY OF GOODS AND

INPUT TAX (S 17)

DENIAL OF INPUT TAX -

DENIAL OF INPUT TAX – ACQUISITION

DEEMED OR NOTIONAL INPUT TAX ON

•Time - date on which goods physically

GOODS IMPORTED & ENTERED

Only levied if a non-resident supplier supplies a service to a resident (whether a vendor

ADJUSTMENT TO INPUT AND

Conquering the impossible.

You might also like