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:
It would be important to know if the seller is a vendor and whether the property was held for purposes of making taxable supplies. The tax implications are vastly different if not, but that is not relevant to the issue raised.
In terms of the definition of input tax (in section 1(1) of the Value-Added Tax Act) either the tax levied by the supplier (if registered as a vendor) or the tax fraction of the consideration (if transfer duty applies) will be input tax.
The deduction of input tax can then be made ‘where the goods … 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).