A taxpayer paid transfer duty on a property valued at R6 million, how should the taxpayer claim back the VAT and how is the VAT claimable calculated?
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
The VAT Act Paragraph (b) of the definition of “input tax” in section 1(1) of the VAT Act allows a vendor to claim a notional input tax credit in respect of second-hand goods acquired in terms of a transaction of sale that is not subject to VAT, to the extent that the second-hand goods are acquired for the purpose of consumption, use or supply in the course of making taxable supplies. The quantum of the deduction is computed by applying the tax fraction (15/115) to the lower of the consideration in money paid for the goods, and the market value thereof. Section 16(3)(a)(ii)(aa) of the VAT Act determines that a notional input tax credit may only be claimed by a vendor to the extent that the consideration for the supply has been settled by the vendor. Section 16(3)(a)(bb)(A) of the VAT Act furthermore determines that the notional input tax credit on the acquisition of fixed property may only be claimed once the property has been registered in the name of the acquiring vendor. Application of the principles A notional input tax deduction may be claimed on property acquired to be used for VAT enterprise purposes (e.g. as offices). The property must have been acquired in terms of a transaction constituting a sale. The amount of the deduction is computed by applying the tax fraction (15/115) to the lower of the actual purchase price of the property and the market value thereof at the time of acquisition thereof. The deduction may be claimed in the tax period in which the property has been registered in a Deeds registry in the name of the purchaser, and only to the extent that the purchase consideration has been settled. The claim is made in the normal VAT return submitted by the VAT vendor.