I need to establish whether a client who purchase a farm can claim back Transfer duty?
Important:
This answer is based on tax law year ending 28 February 2018.
Answer:
The fact that “the buyer was deregistered for VAT” would only be relevant if the supply was a zero rated supply.
The section 9(15) (of the Transfer Duty Act) exemption applies where the transferor of the property will account for value-added tax in respect of the transaction.
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. It is not the transfer duty paid.
The deduction of input tax can then be made ‘where the goods … concerned are acquired by the vendor … for the purpose of consumption, use or supply in the course of making taxable supplies, or partly so 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.
The deduction is also no made on strength of the invoice from the attorneys.
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).