Can an individual VAT vendor claim input VAT on a certain property purchase?
Important:
This answer is based on tax law year ending 28 February 2018.
Answer:
For purposes of the guidance that follows we accepted that the tax is input tax as defined in paragraph (a) of the definition in section 1(1) of the Value-Added Tax Act. We also accept that with ‘commercial rental’ you referred to “commercial accommodation”, which according to section 1(1) means—
(a) lodging or board and lodging, together with domestic goods and services, in any house, flat, apartment, room, hotel, motel, inn, guest house, boarding house, residential establishment, holiday accommodation unit, chalet, tent, caravan, camping site, houseboat, or similar establishment, which is regularly or systematically supplied but excluding a dwelling supplied in terms of an agreement for the letting and hiring thereof”. A supply in terms of an agreement for the letting and hiring thereof is an exempt supply – see section 12(c)(i).
The deduction can then be made ‘where the goods or services concerned are acquired by the vendor … by the vendor partly for the purpose of consumption, use or supply in the course of making taxable supplies, 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).