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SARS clarifies a vendor's entitlement to claim input tax in respect of second-hand gold
- 06 May 2020
- Tax Administration
- Varusha Moodaley
Tuesday, 26 September 2017
Important:
This article is based on tax law for the tax year ending 28 February 2018.
Author: Varusha Moodaley
Subjection to certain exceptions, the Value-Added Tax Act, No 89 of 1991 (VAT Act) entitles a vendor to claim a notional input tax deduction in respect of second-hand goods acquired under a non-taxable supply, where such second-hand goods are acquired from a resident of the Republic for the purpose of consumption, use or supply in the course of making taxable supplies.
However, with effect from 1 April 2015, vendors were prohibited from claiming notional input tax deductions in respect of the acquisition of second-hand goods comprising of ‘gold’ or of ‘goods containing gold’. The exclusion was introduced to curb fraudulent notional input tax deductions in respect of the acquisition of gold and gold jewellery. The amendment, however, had a negative impact on legitimate transactions within the second-hand gold industry. The definition of second-hand goods was accordingly amended with effect from 1 April 2017 in order to limit the extent of the exclusion; thus allowing a notional input tax deduction in respect of the acquisition of second-hand goods in certain specific circumstances.
The term ‘second-hand goods’ is now defined in s1 of the VAT Act to mean, among other things, goods which were previously owned and used, but does not include:
- goods consisting solely of gold unless acquired for the sole purpose of supplying such goods in the same state without any further processing;
- gold coins contemplated in s11(1)(k) of the VAT Act; or
- any other goods containing gold unless those goods are acquired for the sole purpose of supplying those goods in the same or substantially the same state to another person.
Vendors acquiring second-hand gold or goods containing gold under a non-taxable supply are accordingly not entitled to claim a notional input tax deduction in respect thereof unless the exceptions to the definition of ‘second-hand goods’ are met.
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This article first appeared on cliffedekkerhofmeyr.com.