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Suggested Activity Plan - Lecture 01 - VAT (2024)
Suggested Activity Plan - Lecture 01 - VAT (2024)
Examples 1 & 2
o Attempt examples 1 and 2 in the lecture guide without the solution
o Mark your attempts and note reasons for lines you got wrong
o [HINT: if you do not get (at least) 80% of these two examples correct, you need to revisit your
notes from second year]
Example 3
o Pay attention to the calculation of the treatment of the VAT and note the following:
It is irrelevant that the person from who the vendor acquired the second-hand machine is
a non-vendor (i.e. not registered for VAT purposes)
The vendor CAN claim the (deemed) input tax on a second hand machine acquired
because:
the purchase price is paid in full
the machine is to be used in the vendor's business (i.e. for business purposes)
Calculation of deemed input tax using the tax fraction
Example 4
o Pay attention to the following:
A watch was acquired by the employer to give to the employee and as such the input tax
was claimed on the purchase.
The watch is granted to an employee
If the watch was re-sold, the employer would have had to pay output tax on the "sale"
Therefore you have to determine "deemed" output tax on the fact that the employer
no longer has the watch - almost as if the employer had sold the watch
Calculation of the (deemed) output tax using the tax fraction
Example 5 (VERY IMPORTANT)
o Pay attention to the following:
There are five different variations of similar situations
Note the sequence of the calculation in each case
Note when to use 0.3% and when to use 0.6%
Note what happens when the employee bears (full) cost of maintenance
Note that in 4.5.5 only 60% of the use is for business purposes and how that affects the
calculation
Note that in 4.5.1 and 4.5.2, the employer was unable to claim the input tax on the purchase
of the vehicle, but for calculation of the deemed output VAT paid to SARS, the value of the
motor vehicle is calculated without the input tax (as if the employer COULD claim the input
tax)
Example 6
o Pay attention to the following:
Note reasons for the treatment of deemed output tax from the facts given and how to
answer a question about indemnity payments received.
Note that there is a difference if an insurance company:
replaces the assets lost or
reimburses the insured
Note that there is a difference if a vendor is reimbursed for an item depending on if they
could claim the input tax when they originally purchased the item insured; or
could NOT claim the input tax when they originally purchased the item insured.
You are also encouraged to form study groups and take turns to explain topics to fellow student(s) in a
way that a non-tax student will be able to understand it.