25. SARS VAT Vendors Guide.pdf

56 vat 404 guide for vendors chapter 8 834 second

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VAT 404 – Guide for Vendors Chapter 8 8.3.4 Second-hand goods The VAT Act allows vendors under certain circumstances to deduct input tax on second- hand goods acquired from non-vendors where no VAT is actually payable to the supplier, or where the goods are supplied by a vendor but do not form part of the vendor’s enterprise. This is known as a notional or deemed input tax deduction. The conditions under which a deemed or notional input tax deduction may be made are as follows: The goods must be “second-hand goods” as defined in section 1(1). The supply may not be a taxable supply (for example, the goods are purchased from a non-vendor). The supplier must be a South African resident and the goods supplied must be situated in RSA. The purchaser must have made payment for the supply, or at least made part payment as an input tax deduction is only allowed to the extent that payment has been made. The goods must be acquired by the vendor wholly or partly for consumption, use or supply in the course of making taxable supplies. The vendor must be in possession of the prescribed records as per section 20(8). (See Chapter 13 for more details on the prescribed records). The notional input tax is calculated by multiplying the tax fraction (presently 14/114) by the lesser of the consideration paid or the OMV. Where the OMV is less than the consideration paid, the OMV will be used to calculate the notional input tax deduction. Example 18 – Limitation of notional input tax to the extent of payment of the consideration Facts: A second-hand goods dealer buys a used fridge from a non-vendor for R600 for resale. He pays the person R400 immediately and the balance of R200 in the next tax period. Result: Input tax is calculated as follows: R Deduct in tax period 1 – R400 × 14 / 114 = 49,12 Deduct in tax period 2 – R200 × 14 / 114 = 24,56 Total = 73,68 In the case of the supply of second-hand goods being “fixed property” which is not subject to VAT, the input tax is limited to the transfer duty payable if the property was acquired on or before 9 January 2012. The input tax in such cases may only be deducted once the time of supply for VAT purposes has occurred (that is earlier of the date on which any payment is made or the date on which the fixed property is transferred to the recipient vendor by registration in the deeds registry), and only after the transfer duty has actually been paid to SARS. In the case of second-hand goods being “fixed property” acquired after 9 January 2012, the limitation of the input tax deduction to transfer duty payable does not apply. However, the input tax may only be deducted if the fixed property is transferred to the recipient vendor by registration in the 57
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VAT 404 – Guide for Vendors Chapter 8 deeds registry (where applicable) and to the extent that payment towards the purchase price for the property has been made to the seller.
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