Value-Added

Tax (Part 2)

PRESENTED BY PROF
SURENDRAN PILLAY
Contents
Recap
Section 13 to 73
Group exercises
Binding general rulings
 Section 13 – 14 Imported
goods/services
Section 13 – VAT is payable to Customs on imported goods in accordance with
the following computation:
15% multiplied by the total of:
• Value of goods for customs duty plus
• 10% of customs duty value plus
• Import surcharges and customs duty
Note this effectively amounts to an input tax deduction for the vendor in the
VAT201 return.
Section 14 - Imported Service – An imported service is defined in section 1 of the
Act as the supply of services by a supplier who is a resident or carries a business
outside the Republic to a South African resident to the extent that the services
are used to make non-taxable supplies.
The recipient (VAT Vendor) is required to declare output tax which relates to the
period in which the service was rendered. Important to note that even if the
recipient is a non-vendor output tax must still be declared in a VAT 215 form.
Section 15 - Accounting
basis of VAT
VAT is accounted for on an accounting basis
Accounting bases can be two type:
Payment basis or
Invoice basis (default)
The primary difference between the two is the timing of supply.
On the invoice basis the supply occurs at the earlier of invoice or payment (the
exception is fixed property-timing takes place when amounts are paid)
On the payment basis the time of supply for output and input is when payment is
made or received.
Section 15(2)(b) - natural persons whose taxable supplies do not exceed R2,5million
or not expected to exceed R2,5 million can register on the payment basis. Section
15(2)(a) , 15(2A), 15(3) to 15(9) excluded from the 2025 Tax knowledge list.
 Section 16 Calculation of Tax Payable
Section 16(1) confirms that VAT payable will be computed in accordance with this section.
Section 16(2) provides that no input tax deduction shall be made unless there is a valid tax invoice. Documentary
requirements in relation to tax invoices are contained in section 20(4) of the Act.
Note 16(2)(f) the vendor is in possession of documents as prescribed by the Commissioner substantiating the
vendors entitlement to the deduction.
Section 16(2)(g) - refers to a ruling as documentation in support of a deduction. Refer BGR 36.
Section 16(3) confirms the net VAT payable is determined by subtracting input tax from output tax.
Section 16(3)(a)(i) – deduct input tax in respect of brand new goods (based on invoice)
Section 16(3)(a) (ii) – deduct input on second hand goods to the extent payment of consideration has been
made.Note in terms of para (b) of the input tax definition the notional input tax is based on the lower of cost and
market value.
In respect of fixed property note section 16(3)(a) (iiA) which provides that can only claim VAT to the extent that the
purchase price has been paid when the property has been registered.
Section 16(3)(b)(i) – if acquirer of a property registered under payment basis can only deduct input tax to the extent
payment has been made.
Section 16(3)(g) provides that the deduction of input tax which was claimable in a previous VAT period (but not
claimed due to not having a tax invoice) can be claimed once the tax invoice is obtained.
Section 16(3)(f) confirms the input tax adjustment deduction in section 18(4) and section 18(5).
Section 16(3)(h) allows for a relief input tax deduction adjustment where there has been a change in use adjustment
(usually under section 18(1) and the supply is mixed (vendor would of claimed partial input tax but declared full
output tax under the change in use adjustment). 15/115 x lower of adjusted cost/MV x %non taxable supply usage.
Once a vendor has an tax invoice he has to claim input tax deduction within 5 years. (Link to prescription and income
tax).The determination of input tax is governed by section 17 of the Act.
 Fixed property
Fixed property sold by a vendor

Seller: must levy vat at the standard rate unless the sale qualifies as the sale of a going concern and is zero-rated

(section 11(1)(e)). Section 9(3)(d) determines the time of supply as the earlier of when any payment has been made or a

transfer has been registered. However, section 16(4)(a) and section 16(4)(b) provide that a vendor must account for

output tax as payments are received.

• Purchaser: is exempt from the payment of transfer duty as output VAT was levied, and the vendor may claim an input tax credit only

to the extent that was actually paid (section 16(3)(a)(iiA) and section 16(3)(b)(i)).

Fixed property sold by a non-vendor

• Seller – No VAT

• Purchaser:

must pay transfer duty however, if the purchaser is a vendor, the property is a second-hand good and the vendor intends

utilising the fixed property in the course of making taxable supplies, the vendor may claim a full notional input tax credit

on the cost of the property. If the vendor is on the payment basis, the notional input tax is deductible when the payment

for the property is paid (section 16(3)(b)(i)). However if the vendor is registered on the invoice basis the vendor will

only be able to deduct the notional input tax once the property is registered in the name of the vendor and payment is

made for the property (section 16(3)(a)(i) and (ii)).

Section 17 – Permissible
deductions in respect of input
tax
In order to determine whether input tax is deductible it is important to
determine the purpose for which the goods were acquired.
If they were acquired to make wholly taxable supplies then input tax is fully
deductible
If they were acquired to make wholly exempt supplies then no input tax is
deductible
The question is where goods are acquired to make both taxable and exempt
supplies.
If goods are used for making 95% or more taxable supplies then100% of the
input tax deduction may be claimed.
If goods are used for making less then 95% then the input tax deduction must
be apportioned in accordance with the percentage made for taxable and non
taxable supplies.
Section 17
The only method of apportionment approved by SARS is the turnover
method of apportionment.
The formulae is as follows: A = B X C/D
Where A is the deductible input tax
B is the total amount of input tax
C is the value of all taxable supplies
D is the value of all supplies (both taxable and non taxable)

Also refer VAT 404 Guide – Turnover-based method of apportionment

formula (refer to page 50 of the Guide)
Section 17(2)
Input tax may NOT be claimed by the vendor on the following…
◦ Goods/services acquired for the purpose of ‘entertainment’
◦ Acquisition of a “motor car” as defined
◦ Fees or subscriptions paid by the vendor iro any membership of any club,
association, society… of a sporting or recreational nature.
Section 17(2)
The provision of any food, beverages, accommodation, entertainment, amusement etc of
any kind by a vendor whether directly or indirectly to anyone in connection with an
enterprise carried on by him…
EXCEPT…
Vendor makes taxable supplies of entertainment
Welfare organisation provided those goods and services are acquired in furtherance of
the aims of the organisation.
Personal subsistence or vendor/employee ‘out-of-town’
Meals as part of a transport service where he charges VAT
Seminars or similar events where direct and direct costs have been passed to the client.
Entertainment goods and services by a local authority as part of a sporting or recreational
facility to the public.
Input credits are allowed!
Section 17(2)
Motor car includes station wagon, minibus, double cab light delivery
vehicle normally used on public roads; 3 or more wheels; wholly or
mainly for the carriage of passengers… EXCLUDING
◦ Cars capable of carrying only 1 or > 16 persons
◦ Unladen mass > 3’500 kg
◦ Caravans and ambulances
◦ Hearses, game-viewing vehicles

Notwithstanding the definitions, the input tax will be allowed if:-

◦ Motor car supplier acquires it for the purpose of making a taxable supply
◦ ‘Demo’ vehicles acquired for temporary use prior to a taxable supply

Denial only affects ‘acquisition’ cost…

Revision Example
RB Ltd is resident VAT vendor in the business of marketing and advertising. The following
transactions took place in the 2021 year of assessment:
1.RB Ltd bought a filter coffee machine for employees. Employees are not charged any
money for using the machine and ZB Ltd claimed R14000 input tax on the purchase of the
machine.
2.RB Ltd paid a staff member to attend an 3 day advertising seminar in Durban. RB Ltd is
based in Gauteng and paid R10000 for his food and hotel accommodation.
3.RB Ltd organised a promotion seminar for one of its clients to various customers. The
costs of meals and refreshments were R10000. The customers were not charged for this
seminar.
4. RB bought a bakkie for as a transport vehicle for its advertising boards in the Gauteng
area
Required
Discuss the VAT implications of the above transactions. Include relevant sections of the Act
to support your views (12 marks) (18minutes).
Revision Example
Solution
1.The machine is used to provide beverages which is included in the
definition of entertainment in section 1 of the VAT Act. None of the
exceptions apply.
2. As the staff member is staying more then one night away from his
usual residence for business purposes the input tax maybe deducted in
terms of the exceptions to section 17(2)(a).
3.Although RB has organised the seminar they have not passed the
direct and indirect costs of meals to the participants and the input tax
cannot be deducted in terms of section 17(2).
4.The prohibition contained in section 17(2) will not apply as it is not
intended for the carriage of passengers.
 Group exercise
GDS (Pty) Ltd (a resident category B vendor) is in the business of manufacturing and retailing
stationary products in South Africa. On 8 January 2017 GDS (Pty) Ltd (“GDS”) acquired a
vacant office building located in South Africa from Mr Henry Theroux (an unconnected resident
non-vendor) for R7 980 000 (being the open market value of the building). The property was
originally acquired by Mr Theroux subsequent to 1 October 2001 at a cost of R4 000 000.
The directors resolved that 25% of the building would be utilised for residential accommodation
for some of their employees. A further 50% of the building would be utilised as additional office
space for the sales division and 25% of the building would be utilised by the treasury division
of GDS. In terms of the purchase/sale agreement GDS paid R4 000 000 on registration of
transfer (26 February 2017) and the balance owing was left as an interest free loan owing to
the Mr Theroux and repayable in full on 1 October 2019. Transfer duty of R715 300 was paid
on registration of transfer.

Required
Discuss and calculate the VAT and/or transfer duty implications for both the Mr Theroux and
GDS in respect of the purchase/sale agreement relating to the building. (10 marks)
You may assume that the Commissioner has given a binding private ruling that for purposes of
any possible input tax apportionment that the percentages reflected in the information given
may be used.
 Section 18- Change in Use
Adjustments
Section 18(1)- Total change VAT to full non-vat use. Deemed output on MV at
15/115. No deemed output where input was denied.
Section 18(2)-Partial change VAT to Non Vat: Assets used in the enterprise are
now used less in the enterprise. Difference in taxable supply use x lesser of cost
or MV x vat fraction. No deemed output where input was denied. Only for capital
goods. Does not apply to capital goods less than R40 000. (Level 1)
Section 18(3)-VAT must be accounted on fringe benefits
Section 18(4)-Full Non VAT to VAT - Good previously not used in the enterprise
are now used in the business claimed as a section 16(3) input tax deduction
limited . Lower of cost or MV x 15/115 x %vat use. No input for assets where
input should be denied.
Section 18(5)-Partial Non VAT to VAT: Input tax (section 16(3)) on Lower of Cost
or MV X 15/115 x change in use between taxable use and non-taxable use
before conversion. Only for capital goods and should be more than 10% change.
Does not apply to capital goods less than R40 000. (Level 1)
Note the Taxation knowledge list requires section 18(2) and 18(5) to be at level
1.
 Section 18 adjustment summary
Event Tax to Non Tax of Non tax of 100% to Percentage Percentage
100% Tax increase decrease

Section Section 18(1) Section 18(4) Section 18(5) Section 18(2)

Value of MV x 15/115 A (tax fraction) X B A (tax fraction) X B A (lower of adj cost

adjustment (lower of adj cost (lower of adj cost or MV) x (B
and MV) X C and MV) X C (percentage use
(percentage taxable (percentage taxable before change)-C
use)( X D use )- D (previous (percentage use
(percentage paid if taxable percentage after change) x
second hand) use) 15/115

Time of Day of change in Day of change in End of year End of year

adjustment use use
Section 16(3)(h) Yes No No No

De minimus rule Could apply Could apply Not applicable Not applicable
Section 18
Section 18(6) – Any reduction in terms of section 18(2) and 18(5) is
deemed to take place in the last day of the income tax year of assessment
or February if the vendor is not a taxpayer.
Section 18(7) – The period for determining the change in use for section
18(2) and 18(5) is a 12 month period ending on the last day as specified
by section 18(6).
Section 18(8) - If input tax is deducted on second hand goods and the
sale/purchase agreement is subsequently cancelled or modified such that
the input tax deduction is now considered excessive the excess can be
used to reduce the input tax deduction or deemed to be tax charged in
the period.
Section 18(9) – excluded from the Tax knowledge list
Section 18(10) – excluded from the Tax knowledge list
Section 18 examples
Mr A purchase 5 grass cutters to be used in his nursery and each grass cutter cost
R2300 (including VAT). At the time of acquisition he intended to sell the cutters in
the course of his business and deducted the full input tax on acquisition of the
grass cutters. Mr A decided to take one cutter for his personal use. The market
value at the time of taking the cutter home was R3450.
Calculate the VAT implications of Mr A taking the grass cutter home.
Solution: Since Mr A has now changed the use of the grass cutter from 100%
taxable use to 0% taxable use, section 18(1) is now applicable and VAT output to
be levied as R3450 (omv) x 15/115 = R450.
If Mr A originally purchased the cutters for making 55% taxable supplies, the
following adjustments would arise:
Output tax = 15/115 x 100% x R3450 = R450
Input tax (section 16(3)(h)) = 15/115 x R2300 x 45% = R135
Section 18 examples
Mr A acquired a 3D printer for his business at R69000 (including VAT)
and 60% of his business related to taxable supplies. At the end of year 1,
Mr A determined that 40% of his business relates to taxable supplies.
The open market value of the printer at the end of year 1 was R57500.
Calculate the VAT implications for Mr A
Solution
Since there has been a percentage decrease in taxable usage section
18(2) is applicable. Output tax is thus chargeable : 15/115 x R57500 x
(60%-40%) = R1500.
 Section 18A
Why do we need section 18A: Seller of a going concern has a business with trading stock of
R115 including VAT . Remember section 18A only applies to going concerns that are actually
zero rated under section 11(1)(e).SARS is tax neutral/positive in the situation below since R15
input for seller is offset by at least R15 output when purchaser resells the goods.
Purchaser
Deducts input at 0 since it is zero rated. On
Seller
subsequent sale SARS expects at least R15 output
Deducted input of 15 on the
on the sale. As long as purchaser uses the stock for
stock. Output at 0 as zero rated
taxable supplies SARS should recover at least 15
output when the purchaser sells the stock
SARS is in a fiscal loss position if the purchaser uses the stock for non-taxable purposes as there
will be no output when the seller sells the goods:
Purchaser
Seller Deducts input at 0 since it is zero rated. On
Deducted input of 15 on the subsequent sale SARS will receive no output tax
stock. Output at 0 as zero rated payment as the purchaser make non taxable
supplies.

Solution is to tax the purchaser on non-taxable use upfront to compensate for the net input of
R15 (fiscal loss)
 Section 18 A – Supply of
Going Concern
Deems non-taxable use of a going concern to be subject to output tax adjustment for the acquirer of the going
concern which is zero rated under section 11(1)(e).
When all or at least 95% , of the assets of the going concern were used to make taxable supplies,
the seller levies output tax at 0% and the purchaser cannot deduct input tax
Where more than 50% of the assets of the going concern were used to make taxable supplies,
the seller levies output tax at 0% and the purchaser cannot deduct input tax. However the seller
can claim an additional input tax credit in respect of those assets where input tax was denied as it
was being used partly for non taxable supplies and is subsequently used to make wholly taxable
supplies.
The purchaser must also raise output tax based on the percentage of non-taxable use by the
purchaser. This adjustment is computed as follows:
1. Determine the value of the going concern
2. Reduce the value by the value of assets specifically relating to 100% taxable supplies as well as
items where input tax was denied (as used for non taxable use).
3. Multiply the answer by the non taxable use
4. Compute vat by multiplying the answer in step 3 by 15%.
Refer Silke example
Section 18 A
Where less than 50% of consideration relates to a going concern

If less than 50% of the selling price relates to the going concern the seller
should charge VAT at 0% only on the going concern portion and standard
rate the non-going concern portion. The seller can claim the section 16(3)
(h) deduction in respect of assets used for non-taxable purposes.
The purchaser may claim input tax credits where assets acquired at
standard rate (non going concern portion assets) and used for taxable
supplies. The purchaser cannot claim input tax on the zero rated portion
or going concern portion of the consideration.The purchaser will be
required to make a section 18A adjustment where he does not apply the
going concern portion for only taxable supplies.
Section 18B now replaced by section 18D.
 Section 18 A example
Example
At the last meeting, held on 25 February 2019, the board of directors of SB (Pty) Ltd discussed investments options
to be considered by the company. It was at this meeting that the board of directors agreed to consider opportunities
to expand the company’s operations. The board of directors decided to consider one of two investment
opportunities tabled. The board of directors were uncertain of the VAT implications that these transactions would
present to the company and tasked Mrs Maria De Villiers to provide feedback in this regard at the next meeting.
Option 1:
Issa Saab Group Ltd (“IS”), a resident company, is planning on selling its software development division on 31 March
2019. IS uses the division to make wholly taxable supplies. The software development division is separate from other
divisions of IS. IS is an unconnected person to SB and a registered VAT vendor. The software development division,
including its buildings will be sold for R32 000 000 excluding VAT. The selling price includes all the assets of the
software development division and all the other items necessary for it to be capable of operating as a going concern.
The following assets were included in the purchase price of R32 000 000, excluding VAT:
◦ laptops, desktop screens, servers and processors, with a value of R9 000 000 on the date of sale, which are solely used in the
software development process by the developers. The laptops, desktop screens, servers and processors will be used by SB to
make wholly taxable supplies; and
◦ a coffee machine with a value of R34 000.

On 31 March 2019, the software development division will be an income-earning activity. Both SB and IS will agree
in writing that the software development division will be disposed of as a going concern and that the supply will be
inclusive of VAT at the rate of zero per cent.
SB plans to use the building and its assets for software development purposes and to commence a money lending
business. Based on their most reliable estimate, the directors resolved that the money lending division will utilise
10% of the building and the remaining assets.
(2019 UKZN Test 1)
Section 18 A
Required
Calculate, showing workings, the value-added tax (“VAT”) implications
of Option 1.
(8 Marks)
You can assume that:
◦ all the requirements of section 11(1)(e) of the VAT Act would be met; and
◦ the sale transaction would take place on 31 March 2019.
Section 18A example
VAT implications for SB as the purchaser of the software development
division of IS:
Both SB and IS are VAT vendors. The sale and purchase of the software
development division qualifies as a going concern sale in terms of
section 11(1)(e) of the VAT ACT, and hence will be subject to VAT at the
rate of 0%. IS will have no output tax liability and SB will have no input
tax claim.
Since SB will be using the assets acquired from IS for making both
taxable supplies (software development at 90%) and exempt supplies
(provision of credit – section 2 of the VAT Act) at 10%), SB would be
required to make an output adjustment in terms of section 18A,
Taxable supplies generated by SB will be 90%, this is not equal to or
exceeding 95% per section 17(1)(i) and section 18A(1) proviso, so it will
not be deemed 100% taxable supplies. SB may only claim input tax to the
extent of taxable supplies, and, as a result may only claim 90% of any
input tax it is entitled to.
Section 18 A
A section 18A adjustment will arise for SB, calculated as follows:
Total value of assets acquired (Step 1)
R32 000 000
Less – value of assets used for making wholly taxable supplies (step 2)
R9 000 000
(Laptops, desktop screens, servers and processors)
Less – assets where input VAT is denied (coffee machine)
R34 000
(meets the definition of "entertainment", section 1 and section 17(2)(a) of the VAT Act)
Total
R22 966 000
Assets used to make exempt supplies (100%-90% = 10%)
R2 296 600
Output VAT liability at 15% R344 490
Section 18C and 8(29)
Where a leasehold improvement are erected for no consideration, special
deemed rules (section 8(29) applies and confirms that the supply is
deemed to be made in the course or furtherance of an enterprise for the
lessee. Value of the supply is deemed to be nil (section 10(29) and the
time of supply is when improvements are completed (section 9(12)). Note
section 8(29) will not apply if the improvements are made for wholly non
taxable supplies.
The deemed supply rule is only applicable if improvements made by the
lessee are consumed by the lessor to make exempt supplies.
To the extent that no consideration is paid for the improvement the lessor
must make an adjustment in terms of section 18C as follows:
A x B x C where A = 15/115; B= amount per the lease agreement or OMV
and C = % use of non-taxable supply.
Section 18C example
Vendor A (lessee) makes leasehold improvements of R575 000 in order to conduct it
enterprise. Vendor A incurs expenditure of R575 000 in making the leasehold
improvements. Vendor A receives no consideration from Vendor B (lessor) for making
the improvement and is not obliged to make any improvements per the lease
agreement. Vendor B uses the improvements for making wholly taxable supplies.
Tax consequences:
Vendor A may deduct input tax on expenses actually incurred (i.e R75 000 - R575000
x 15/115). In terms of section 8(29) vendor A is deemed to supply the leasehold
improvement in the furtherance its enterprise. The time of supply in terms of section
9(12) is when the leasehold improvements are completed.The value of the leasehold
improvement is R0 (section 10(28). Output tax for vendor A is thus 0.
Section 18C will also apply since leasehold improvements are made for no
consideration and are not wholly erected for making exempt supplies. Section 18 C
adjustment = 15/115 x R575 000 x 0% = R0
 Section 18D
Section 18D(2) of the VAT Act which deems a change in use output tax adjustment for a property developer
where residential property (which has been developed by the property developer) is applied temporarily for
leasing purposes.
Note a developer means a vendor who continuously or regularly constructs fixed property consisting of a
dwelling for the purpose of disposing of the property after construction (section 18D(1) and “temporarily
applied” means applying the fixed property for supplying a dwelling for a period of not more than 12
months (section 18D(1)).
Section 18D(2) confirms that the time if supply will occur under section 9(13) which is the earlier of the tax
period for which the agreement was entered into or property was first occupied and that the vale of the
supply will be the adjusted cost of the fixed property in accordance with section 10(29).
Section 18D(3) provides that is a vendor sells the property during the temporarily applied period the vendor
must account for output tax on the sale of the fixed property.
Section 18D(4) states that property supplied under section 18D(3) must be accounted for as consideration
under section 10(2).
Section 18D(5) states that where the property is supplied under section 18D(3) the vendor will be allowed a
relief input tax deduction in terms of section 16(3)(o) with the value being determined under section
10(29).
Section 18D will come into operation on 1 April 2022.
Section 18D Example
Mr A is a property developer and resident category C VAT vendor. Due to
difficult economic circumstances he decided to let out a rental property on
30 June 2022 for 12 months. The property has an open market value of
R2300 000 and an adjusted cost R1 725 000 on 30 June 2022 (date of change
in use). Mr A received an offer for the property in January 2023 and sold the
property for R3 450 000 (its open market value) on 12 February 2023. The
fixed property was registered in the deeds registry on 28 February 2023 and
payment was received on 28 February 2023.

Required
Calculate any VAT implications that may arise in terms of section 18D of the
VAT Act.
Section 18D example
Mr A is a “developer” and “temporarily applied” in a dwelling not exceeding 12 months
the requirements of section 18D(1) . In terms of section 9(13) the time of supply is
earlier of occupation or the period in which the agreement comes into effect which is 30
June 2022. Output tax is to be raised calculated under section 10(29) on the adjusted
cost of R1725000. Output tax will be levied as follows: 15/115 x R1725000= R225000.
No vat will be levied on the rental income received since the rental income is exempt. In
terms of the subsequent disposal, this was done during the temporarily applied period
and section 18D(3) applies. The property disposed will result in output tax of R450 000
(R3450 000 x 15/115). The time of supply will the 28 February 2023 (section 9(3)(d) read
together with section 16(3)(a)).
A subsequent input tax deduction under section 16(3)(o) will be allowed for Mr A under
section 18D(5) as follows:
R1725 000 x 15/115 = R225 000.
The purpose of the additional input tax deduction is to effectively reverse the output tax
adjustment on the temporarily applied period.
Section 19
Section 19 - Vendor is deemed to be a recipient of goods acquired prior
to incorporation and to have paid the tax when the person from whom
the goods were acquired is reimbursed.
Section 20 and Section
21
Refer to section 20(1) and 20(4)
If a supply value is less (per the original invoice) than what it is then the
supplier must increase the value of the transaction and issue a debit
note (this will increase output tax for the supplier and input tax for the
purchaser)
If a supply is more than (per the original invoice) than what it is then
the must decrease the value of the transaction and issue a credit note
(this will decrease output tax for the supplier and input tax for the
purchaser)
Note the documentary requirements for credit notes and debit notes
are the same as for invoices (section 21(3))
Section 22 –
Irrecoverable Debts
In terms of section 22(1) a vendor can deduct input tax deduction on a irrecoverable debt
provided the output tax on the sale to which it relates was properly declared in the VAT
return.
The vendor must have made entries in his accounting system to record that the debt is
written of and have ceased recovery action taken by himself.
In terms of section 22(2) an amount is subsequently recovered , output tax must be
accounted for on the amount recovered
Section 22(3) provides that where a vendor deducted input tax on a supply from a creditor
and has not paid the creditor within 12 months he must account for output tax on the
supply after 12 months have passed.
Section 22(4) provides that where a vendor does pay the supplier at a later stage he is
allowed to deduct input tax on the tax fraction of the amount paid.
Section 22(5) is deleted
Section 22(6) no deduction under section 22(1) in respect of companies that are part of the
same group of companies.
Group exercise 2
A Ltd (a resident category C vendor) had a debtor (B Ltd) of R150,000
(who was 3 months outstanding) at financial year end date 30 June
2021. As at 30 June 2022 the debtor was considered irrecoverable and
written of a bad debt in the income statement. A Ltd ceased all recovery
action at 30 June 2022. B Ltd was liquidated on 30 August 2022 and A
Ltd received settlement of R30000 on the 30 August 2022.
A Ltd also purchased stock from SP Ltd on 1 June 2021 for R100000
excluding VAT and did not pay the supplier until 30 August 2022.
Required
Determine the VAT effect of the above transaction on A Ltd
Section 23 -
Registration
Section 23(1) confirms that if a person carries on an enterprise in the
Republic it has to register as a vendor provided the value of the taxable
supplies exceeded R1million at the end of any 12 month period.
With businesses will be required to register if the taxable supplies have
exceeded R1million for the 12 month period or existing or future
business have a contractual commitment to make taxable supplies in
the next period of 12 months.
A person can also register voluntarily if turnover in a 12 month period
has exceeded R50000 or is likely to exceed R50000.
Section 24 to 27 - Deregistrations;
VAT notification, unaffected
liabilities and tax periods
Section 24 provides that a vendor shall cease to be liable to be
registered where the Commissioner is satisfied that the total value of
the vendors taxable supplies will not be more than the amount referred
to in section 23 of the Act.
Section 27 refers to the categories of vendors with A and B being two
month periods (A starting in December and B starting in January) C
being one month, D being 6 months (ending February and August) E
being 1 year and F being 4 months (ending the last day of June October
and February). Note per the SAICA Tax Knowledge list the category of
Vendor will be given.
Section 32 and 50 –
Objections and
Branches
Section 32 - any decision given in writing by the Commissioner to
refuse registration of a person or to cancel registration of a person or
refusing to approve a method for determining the ratio contemplated in
section 17(1) is subject to objection and appeal.

Section 50 provides that where a separate enterprise or branch is

carried on by a vendor the vendor may apply to the Commissioner to
have it separately registered. The Commissioner will then register any
branch or separate enterprise if they maintain an independent system
of accounting and can be separately identified by the reference to the
nature of activities carried on.
Section 50A provides that the Commissioner may deem separate
persons to be a single person carrying the activities of an enterprise.
The Commissioner may not make the decision unless 4 requirements
are met in Section 50A(2)
Section 51 of the Act provides that in respect of bodies of persons who
carry on an enterprise such body will be deemed to carry on enterprise
as a person separate from the members of such body.
Section 54 confirms that an agent making a supply on behalf of a
principle is deemed to be a supply made by the principle and not the
agent
Binding General Rulings
BGR 6 - Fast moving consumable goods industry – instances in which invoices and credit notes should be issued
BGR 11 – Forex rates in respect of invoices in foreign currency – daily exchange rate when time of supply occurs
or daily exchange rate on last day of the month preceeding the time of supply or monthly average rate in the
month preceeding the time of supply.
BGR 16 - Provides details of the turnover method of apportionment.
BGR 28 - Details of invoice/credit or debit note for an electronic services supplier.
BGR 36 – Alternative documentary proof to substantiate entitlement to an input tax deduction under section
16(2)(g). These are usually circumstances beyond the vendors control
BGR 41 –Non executive directors are not employees and do not earn remuneration and must register and charge
VAT in respect of services rendered in the Republic.
BGR 57 – “Consideration” as defined in section 1 paid by a vendor to a non-vendor for the supply of fixed
property does not include transfer duty.
BGR 64 – If a property developer applies a dwelling for residential letting an output tax adjustment under section
18D(2) (based on adjusted cost) must apply. If the property is sold in the 12 month period that it is temporarily
applied for it is a taxable supply and output tax must be declared on the consideration /OMV of the property and
a relief input is available under section 16(3)(o). If the developer continues to let the property after the 12
month period the developer must declare output tax in terms of section 18(1) and obtain relief input tax under
section 16(3)(o)
 Transfer Duty Act
Section 2(1) – refers to the imposition of transfer duty on the sale of
property at specified rates.
Section 9(15) confirms that no duty shall be levied in respect of the
acquisition of any property which is subject to VAT
References
SAICA Tax Legislation Handbook 2022. Lexis Nexis.
Silke: South African Income Tax 2022. Lexis Nexis.
Haupt, P. Notes on South African Income Tax 2018. Hedron.