There are a few instances where VAT is not charged
at the standard rate of 15%. In the following newsletter, we distinguished
between the different supplies that attract VAT but does not necessarily have
the impact of a standard rate supply.
The VAT Act provides for certain
expenses where input VAT is denied, even if the expense is incurred in the
course of conducting an enterprise and if there are no input VAT consequences there
will ultimately be no output VAT consequences. The following circumstances are common
instances where input VAT will be denied:
of a motor vehicle:
When a motor vehicle is purchased
by a vendor, who is not a motor car dealer or car rental enterprise, the input
VAT on the purchase will be considered a denied supply.
The definition of “motor vehicle”
includes all vehicles designed primarily for the purposes of carrying
passengers. This definition covers ordinary sedans, hatchbacks, multi-purpose
vehicles and double cab bakkies. A single cab bakkie or a bus designed to carry
more than 16 persons will qualify for input VAT purposes. Any repairs and maintenance to vehicles,
irrespective of the type of vehicle, will also qualify for the claiming of
input VAT, as long as the cost is separately identified and invoiced.
–Fees and Club
Input tax in terms of subscriptions/membership
fees to sport, social, recreational and private clubs are denied supplies. Input
VAT may, however, be deducted on subscriptions to magazines and trade journals
which are related in a direct manner to the nature of the enterprise carried on
by the vendor.
However, fees for membership of professional bodies and trade
organisations paid on behalf of employees are not denied supplies and SARS
allows an input VAT to be claimed. Trade unions are exempt in this regard.
In the case of denied
supplies, no VAT may be claimed, and no output VAT needs to be declared, thus
these supplies don’t need to be declared on your VAT return.
A zero-rated supply is a taxable
supply, but VAT is levied at 0%. Vendors who make zero-rated supplies are still
able to deduct input tax on goods or services acquired in making of the zero-rated
Zero-rated supplies include certain
basic foodstuffs such as brown bread and maize meal, certain services supplied
to non-residents, international transport services, municipal property rates
Although a zero-rate supply is levied
at 0%, it is still a taxable supply and should be declared separately on the
vendor may be required to declare an amount of output tax even though they have
not actually supplied any goods or services. Deemed supplies will generally
attract VAT at either standard rate or zero rate.
common examples of deemed supplies at standard rate are trading stock taken out
of the business for private use and certain fringe benefits received provided
deemed supply will be declared on the VAT return under either your standard
rate or zero-rate codes.
Notional input VAT
A VAT vendor may in certain
circumstances deduct a notional input VAT credit in respect of secondhand goods
acquired from non-vendors where no VAT is actually payable to the supplier. Second-hand goods exclude animals, certain
mineral rights and goods containing gold or consisting solely of gold.
The following requirements must all be
met for a notional input credit to be deductible in respect of secondhand
must be previously owned and used (as per the second-hand good definition in
section 1 of the Act) and
must be used to generate taxable supplies and
seller must be a resident non-vendor and
must be located in South Africa and
must be no actual VAT levied on the transaction.
is important to keep all the documentation for all types of supplies for VAT
purposes and to have it available as SARS may require it to confirm VAT
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)