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Summary Value added tax (VAT)
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VAT- When starting a question always state:
o “All section references are to the Vat Act”
,OUTPUT TAX
Commercial rental income Amount x 15/115
Residential income Par12(c) = exempt supply -
If we supply accommodation to employees this is residential and
thus exempt
Transportation by mini buss S12(g) transportation of fair paying passengers by road or railway is -
an exempt supply
Interest income Financial service = exempt -
Insurance settlement Amount x 15/115 x TS%
Insurance “motor car” If input tax was previously denied then there is NO output tax -
Insurance “replacement” Replacement of items is NOT a payment received in money -
Thus NO output tax
Insurance “ paying for 3rd party” There is a payment of money
Output tax= amount x 15/115 x TS%
IMPORTED goods (par13) BLNS country
(amount +import duties) x 15%
Normal country
(amount x 110%)+ import duties) x15%
(remember imported goods also has a input tax consequence)
IMPORTING service Amount x NON-TS % x 15%
“consultation fee”
Fringe benefit This is a transport by road= exempt and there is NO output -
“ bus tickets for staff”
Fringe benefit There is output tax on:
➔ Assets given to employees
➔ Right of use of asset
➔ Services made available by employer -> changes to
employee uses for private use
(amount – input tax) x 15/115 x TS%
COSATU subsidies A subsidy given to employees is a supply of MONEY and not a -
supply of goods/services , thus this is NOT a fringe benefit which
attracts VAT and thus NOT a deemed supply on which output tax
must be levied
(this is NOT an exempt supply)
Training of staff Training given to staff on how to operate a machine
➔ Not educational training = exempt
If you remunerate staff for time whilst on training
➔ No output tax can be levied
Proceeds from sale of computer Amount x 100%
Trademark (supplied) Incorpeal = goods BUT this is however excluded from the definition
of goods
So it is thus a supply of a service
Supply of service x 15/115 x 100%
Trading stock SOLD to wife The supply is deemed to take place at the OMV (market value)
(connected )
Bad debts recovered Amount x 15/115
Early settlement allowance We purchased trading stock on credit for R43 000 BUT paid R40 000
as early settlement
= variable allowance
Therefore the R3000 x 15/115
Laptop was taken into personal use For example
, (change in use) 70% TS -> 0%TS
Then there is a deemed supply of goods
OMV x 15/115
Suspensive sale Output tax = cash value x 15/115
Cash value:
Monthly installments x months
+ deposit
-finance charge
= cash value
Finance lease There is output tax on the date of delivery
Cash = cost + vat
Progressive supplies (s9(3)(b) The person who supplies charges output tax in respect of each
payment received
Earlier of:
➔ Payment is received/due
➔ Invoice is issued
Rental agreement (s9(3)(a) Even though there is 1 supply, output tax is accounted for on each
monthly amount
Earlier of :
➔ Receipt
➔ Payment is due
Creditor sells assets of debtors Requirements = s8(1)
towards satisfaction of debt The goods sold are deemed to be taxable supplies in the hands of
the creditor
(the creditors doesn’t have to be a vendor BUT the debtor does)
Selling price x 15/115
Irrecoverable debts recovered s22(2)` We have to levy output tax
Input claimed x (recovered/ written off)
BUT if the vendor is on the payment basis then there is NO
adjustment for irrecoverable amount s22(1) proviso (ii)
We are the creditor ( and we don’t S22(3) there will be output tax levied
settle) (irrecoverable debts) 15/115 x amounts outstanding older than 12 months
DEEMED DISPOSAL
“ceasing to be a vendor”
- Delivery vehicle LESSOR of :
➔ CP
➔ OMV
Less any amounts outstanding less than 12 months x 15/115
- Furniture If it was solely used for business:
Lessor of :
➔ CP
➔ OMV
X 15/115
- Debtors Time of supply : earlier of : -
➔ Invoice
➔ Payment
However there is no output tax because it is already accounted for
when the invoice is issued
- Trading stock Lessor of :
➔ CP
➔ OMV
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