How to go about to claim notional input VAT on a second hand immovable property and what documents are required by SARS for proof, do they just input it on their next VAT return?
Important:
This answer is based on tax law year ending 28 February 2016.
Answer:
The transfer duty is not input tax. In terms of the definition of input tax in section 1(1) of the Value-Added Tax Act ‘an amount equal to the tax fraction (at the time the supply is deemed to have taken place) of the lesser of any consideration in money given by the vendor for or the open market value of the supply (not being a taxable supply) to him by way of a sale by a resident of the Republic (RSA) … of any second-hand goods situated in the RSA’ will be input tax. According to the definition “second-hand goods” means goods which were previously owned and used and we submit that in this instance the fixed property is in fact second hand goods as defined.
The deduction can then be made ‘where the goods or services concerned are acquired by the vendor wholly for the purpose of consumption, use or supply in the course of making taxable supplies or, where the goods or services are acquired by the vendor partly for such purpose, to the extent (as determined in accordance with the provisions of section 17) that the goods or services concerned are acquired by the vendor for such purpose’.
In terms of section 17(1) the input tax must be an amount which bears to the full amount of such tax or amount, as the case may be, the same ratio (as determined by the Commissioner in accordance with a ruling as contemplated in section 41A or 41B) as the intended use of such goods or services in the course of making taxable supplies bears to the total intended use of such goods or services. SARS issued a binding general ruling (number 16) that prescribes the turnover-based method of apportionment.
Remember that the input tax (or portion) may only be deducted to the extent that payment has been made – see section 16(3)(a)(ii)(bb).
The recipient of second-hand goods must obtain and maintain a declaration by the supplier stating whether the supply is a taxable supply or not, and must further maintain sufficient records to enable specific particulars to be ascertained as is stipulated in section 20(8) of the VAT Act.