Tax Technical Frequently Asked Questions
24 October 2012
Posted by: Stiaan Klue
SAIT – FAQ’S OCTOBER 2012
NOTIONAL INPUT VAT ON PROPERTY TRANSACTIONS
I know that there were talks of changes to the claiming of a notional input tax
on property transactions where previously the vendor was entitled to claim a
notional input tax based on the amount of transfer duty paid by that vendor if
property was purchased from a non-vendor. The proposed change was that the
vendor was now entitled to a claim of 14/114 of the lesser of the market value
or the cost price of the property. My question is, was these proposed amendments
A: Section 16(3)(a)(ii)(bb) of
the Value Added Tax Act – Fixed property as second hand goods.
The deemed input VAT can only
be claimed once;
property is registered in the name of the vendor and can only be claimed in as
far as payment has been made for the supply
The effective date of this
change is the date of promulgation of the 2011 Amendment Act (10 January 2012).
VAT: COMMERCIAL ACCOMMODATION
Q: What is meant with
commercial accommodation, and is VAT at the standard rate charged?
A: The supply of commercial
accommodation is a taxable supply. Commercial accommodation includes board or
lodging supplied together with domestic goods or services (for example, meals,
laundry services, the use of a telephone) in a house, flat, apartment, room,
hotel, guest house etc. The total receipts for the supply of the commercial
accommodation must exceed R60 000 for a period of 12 months before the activity
will fall within the definition of an "enterprise” as defined.
DWT: PAYMENT OF
DWT tax become payable on declaration of a dividend
DWT only becomes payable when the beneficial owner of the dividend has received
the dividend or has become entitled to the dividend.
Q: I have a debit loan account
in my company, can this be deemed a dividend.
in terms of section 64(2)(g) Income Tax Act however, will not apply in the
event that interest is charged on the loan at the "official rate” as defined in
paragraph 1 of the Seventh Schedule (section 64C(4)(d).
a connected person is released or relieved from any obligation, the amount of
the value extraction will be equal to the amount of the release or relief
provided by the company, section 64P. This has the effect that a dividend may
be declared, which is equal to the amount of interest that should have been
charged on the loan.
TAX: DEDUCTIBILITY OF STUDY FEES
you advise whethera professional person, say a clinical psychologist, can
deduct [from fees charged to existing clientsexpenditure incurred on
studying towards a PHD ,which qualification it is hoped will enhance earning
expenses incurred in acquiring a formal qualification is of a capital nature
and does not meet the requirements of section 11(a) of the Income Tax Act and
no deduction for these expenses is allowed anywhere else in the Income Tax Act.
Expenditure incurred in creating or acquiring, improving or extending the
taxpayers income-earning structure is of a capital nature; by contrast,
expenditure incurred in operating that structure is of a non-capital (revenue)
nature. In this instance your client is the income-earning structure and the
fact that he is studying towards a PHD means that he is improving or extending
that structure – himself (CIR v George Forest Timber Company Limited 1924 AD
516, 1 SATC 20).
a VAT vendor charge VAT to a government department if it renders services to
charging of VAT does not depend on who the recipient is. Section 7(1) of the
VAT Act requires that VAT must be charged on "the supply by any vendor of
goods or services supplied by him ...in the course or furtherance of any
enterprise carried on by him" unless the supply is specifically exempt in
terms of one of the provisions of s 12. Supplies to the Government are not
specifically listed as an exempt supply.
a vendor pays for accommodation and meals for an employee who is away on
business on behalf of the vendor, will the vendor be able to claim input VAT on
tax will not be denied in the event that the vendor pays for any meal
refreshment, or accommodation of a vendor, his employee or any self-employed
natural person who is required to be away from his usual place of business for
at least one night. A self-employed person is a person who is not an employee
of the vendor but who invoices the vendor for services rendered. A vendor may
only claim the input tax on the personal subsistence of a self-employed natural
person where the self-employed natural person is
by reason of his contractual obligation of the vendor
obliged to spend any night away from his usual place of business
the case where an employee who is out of town takes a client out for dinner,
the cost in such case will be regarded as a "mixed supply", and as
such, must be apportioned between the employee's subsistence and the
entertainment element. This means that whilst input VAT will be denied in
respect of the client's meal, it will be claimable in respect of the employee's
apportionment would not apply if the employee took a client out for a meal
whilst at his home office - in this case, the entire input VAT would be denied.
TAX: "FRUITS OF LABOUR”
thinking of forming a trust through which I will channel my income (consulting
fees), and thereafter make a distribution out of the trust to my wife to reduce
my tax rate, would this be legal?
A: I wish
to draw you attention to the matter of Meyerowitz v CIR 1963 (3) SA 863 (A),
25 SATC 287.
this matter the taxpayer created a trust and channeled certain receipts
(received by virtue of the taxpayers labour) through the trust, after which a
distribution was made to certain beneficiaries. The issue was whether the
taxpayer formed the trust for purposes of a tax avoidance scheme within the
scope of section 103(1) of the Act. It was held by the court in the affirmative
based on the abnormality that the fruits of the taxpayers labour accrued not to
him but to the beneficiaries of the trust. You might also want to consider
whether your have entered into an "impermissible avoidance arrangement” in
terms of sections 80A-80L of the Act.