Can a VAT vendor PBO claim input VAT on a certain property transaction?
Important:
This answer is based on tax law year ending 28 February 2018.
Answer:
For purposes of our guidance we accepted that public benefit organisation is not an “association not for gain” or a “welfare organisation” – which are specifically defined in terms of section 1(1) of the Value-Added Tax Act. In this regard we would like to refer you to “VAT 414 Guide for Associations not for Gain and Welfare Organisations” (“SARS' Guide”) which provides extensive guidance in this regard with regard to the non-profit organisation (NPO).
The deduction of input tax can 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 of the Value-Added Tax Act) that the goods or services concerned are acquired by the vendor for such purpose’ – see paragraphs (a) or (b) of the definition in section 1(1).
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).