Must VAT be charged on transactions between subsidiaries,or is there some form of relief?
Question: We are a subsidiary to an holding company. We are registered as a branch for VAT purposes, and so is the holding company. Thus we have two VAT numbers.There are other subsidiaries within the holding company that are also registered separately for VAT. My question would be, must we charge VAT for transactions between subsidiaries or not?
Answer: The VAT registered subsidiary making a supply to a fellow subsidiary (separately VAT registered) MUST charge VAT on the supply made to the fellow subsidiary.The fellow subsidiary will then be able to claim the input VAT,provided that the valid "tax invoice” requirements are satisfied(Section 20 of the Value-added Tax Act). There is presently no relief for these situations in the VAT Act.As these are connected parties, if the value of the supply is less than the open market value, then the supply is deemed to be at open market value.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.