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Vat: Welfare Organisations & motor cars
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2012/07/24 at 01:01:17 PM GMT
Posts: 56
Vat: Welfare Organisations & motor cars

S1 of the Vat Act defines a "Motor car” as follows: "includes a motor car…minibus…and is constructed …wholly or mainly for the carriage of passengers, but does not include-

(a) vehicles capable of accommodating only one person or suitable for carrying more than sixteen persons, or


In terms of S17 (2)( c ) registered vat vendors may not claim an input tax deduction on acquisition of motor cars as defined except in certain cases eg motor car dealers .

Scenario: An orphanage, which is a welfare organisation - is a PBO and registered for Vat, buys a minibus (supplied by a registered vat vendor) for the transport of its children to and from school etc etc. The children concerned are pre-primary and primary school children.  Hence, the minibus is able to transport at least twenty children (passengers) at a time. The home is not contravening the traffic laws in terms of overloading since the relevant ordinance makes allowance for this situation.


Based on the definition of motor car as set out above, it would seem that the Home would be able to claim the input tax as a deduction on the acquisition of the minibus. Why? Because, in this particular case it may legally transport more than 16 persons  a time. That is the deduction is not prohibited in terms of S17 (2) (c).  

What do you think?

2012/07/30 at 01:36:37 PM GMT
Posts: 16

Hi Michael,

I seem to agree that the vehcile which you are describing falls outside of the definition of 'motor car' and therefore one may well claim the input VAT. My only question to you would be whether any fees would be charged for this service, and at what rate? 

2012/07/30 at 05:14:32 PM GMT
Posts: 56

Hi Dieter

Thanks for your reply.

Being part & parcel of its welfare activities, no fees are charged .A similar situation would be where parents fetch and carry their children to and from school.

By the way are you looking at this from a transport business angle(taxi service)?


2012/08/06 at 08:05:57 PM GMT
Posts: 56

Hi Everyone

It seems  that the vehicle described above falls outside the definition of Motor car. This being so, would this mean that a business enterprise that buys such a vehicle from another registered vendor is entitled to claim input tax on such vehicle  where it transports its employees’ children to school.If you don’t think so,why not?

2012/08/07 at 10:54:48 AM GMT
Posts: 16

Hi Michael,

Would it be generating any form of taxable supply (standard/zero)? If it is an exempt supply would you not agree that no input would be claimble?


2012/08/07 at 12:43:03 PM GMT
Posts: 56

Hi Dieter

Thanks for your input(no pun intended).

The transport of employees ‘children to school is a cost to the company (registered vendor) which is a benefit for the relevant employees in the course of its enterprise making taxable supplies. That is ,there is no charge(fare)  made for transporting the children to school and hence would not be an exempt supply as envisaged by section 12(g)(road/rail business passenger services).For this reason I think that a case can be made  for claiming input tax(as defined in S1 of Vat Act) on the relevant vehicle.

Over to you.


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