Client is a closed corporation owning a commercial property . Client wishes to register for vat . Will the client be able to claim notional input tax on the current value of the property, currently owned, upon registration?
Important:
This answer is based on tax law year ending 28 February 2017.
Answer:
Registration as a vendor results in a change, from holding the asset not for purposes of making taxable supplies, to now holding it for that purpose. This is a tax event envisaged by section 18(4), because the goods (and services on hand on the effective date of registration) will be applied for use in the course of making taxable supplies. The requirement (in that section) is that “tax has been charged in respect of that supply.” If it was not acquired from a vendor section 18(4)(c) will apply – second hand goods.
The deduction is made in terms of section 16(3)(f) and the documents to substantiate the deduction is set out in Interpretation Note 49, item E of Table C – Special deductions against output tax.
Because the goods (or services) will be deemed to have been supplied in that tax period (in terms of section 18(4)) of the change in use the deduction must be made in that period. The person has five years from this date to make the deduction if the documents are not available in this period.