A taxpayer has an annual VAT period ending at the end of June of each year. The taxpayer was registered for VAT with effect from July 2015. In April 2015 the taxpayer acquired a 25% undivided share in a rental property from one of the joint owners
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
The VAT Act Section 16(3)(f) of the VAT Act allows a vendor a deduction of amounts calculated in accordance with, amongst others, section 8(4) of the VAT Act “in relation to any goods or services applied during the tax period”. Section 18(4)(b)(i) of the VAT Act determines that where goods or services have been supplied to or imported by a person on or after 30 September 1991, VAT has been charged on the supply, and no deduction of input tax has been made, such goods are deemed to be supplied to the vendor in the tax period that the vendor first uses the goods or services in a taxable activity. Proviso (i)(ee) to section 16(3) of the VAT Act determines that where any vendor is entitled to deduct any amount in a particular tax period, the vendor may deduct that amount from the amount of output tax attributable to a later tax period which ends no later than five years after the end of the tax period during which the vendor for the first time became entitled to the deduction. Application of the principles Based on the information supplied the VAT vendor became entitled to the deduction in terms of section 18(4)(b)(i) of the VAT Act in the 2015 tax period (i.e. the tax period that ended 30 June 2015). The VAT vendor would accordingly be entitled to make the deduction in any tax period ending on or before 30 June 2020. The VAT vendor would accordingly be entitled to make the adjustment in the 12-month tax period ending 30 June 2020, provided that the VAT vendor holds the prescribed documentation (refer to VAT Interpretation Note 92 for prescribed documentation) to make a deduction in terms of section 18(4) of the VAT Act. Based on the above conclusion it is not necessary to deal with the second part of your enquiry.