FAQ – 28 May 2014
28 May 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. Can previously input tax on disallowed
invoices in terms of sec 16(2) be claimed in a later period after the invoices
have been corrected?
Q: A client that started their business last year had a great deal of
input invoices for the initial stock purchased. Their supplier has their
database at head office in Germany and did not ensure the customer VAT number
was loaded. SARS disallowed over R160k of input due to invalid VAT invoices.
The corrected VAT invoices reflecting the clients VAT number have now been
received. Can previously
disallowed input tax be claimed when the corrected VAT invoices are received
from suppliers? Is this submitted as adjustments in the current period?
A: An adjustment,
in terms of section 18(4) of the Value-Added Tax Act, would only be available
if the goods were acquired before this effective date and then (subsequently to
the effective date) applied, wholly or partly for consumption, use or supply in
the course of making taxable supplies (or partly so). From the
information provided, it was accepted that the goods were obtained subsequent
to the effective date of the vendor’s registration as indicated on the VAT
103. Our guidance is based on this assumption.
Section 16(3)(g) allows for the deduction of the
following amounts, namely ‘… any amount of input tax in relation to any supply
or other deduction in respect of which subsection (2) of this section has
operated to deny a deduction and the vendor has obtained, during the tax
period, the prescribed documents or records in relation to that supply’.
The denial in section 16(2) ("subsection (2) of this
section”) was in terms of section 16(2)(a) which reads as follows: No deduction
of input tax in respect of a supply of goods or services… shall be made in terms
of this Act, unless … a tax invoice or debit note or credit note in relation to
that supply has been provided in accordance with section 20 … and is held by
the vendor making that deduction at the time that any return in respect of that
supply is furnished.
The vendor must make the deduction in a the tax period which
ends no later than five years after the end of the tax period during which the
tax invoice for that supply should have been issued as contemplated in section
20(1) in terms of proviso (i)(aa) to section 16(3).
The deduction is made as an adjustment (in block 18).
2. Travel allowances
without a logbook
Q: A person that earns remuneration cannot
claim business km expenses for a travel allowance or right of use of motor
vehicle, without a logbook. Can
a person that earns more than 50% of his remuneration from commission claim the
expense without a logbook?
earners would also fall within the ambit of sec 8(1)(a)(i) should they receive
a travel allowance, as the travel allowance would be granted to by a
‘principal’ as defined in sec 8(1)(a)(iii) to the recipient commission earner.
The commission earner would therefore need to keep an accurate logbook in order
to reduce the taxable portion of the travel allowance by the business portion
of the expenses as stipulated in sec 8(1)(a)(i)(aa), which portion must be
calculated in terms of sec 8(1)(b). In the absence of such a logbook, the
taxable portion of the travel allowance may not be reduced with the business
portion of the expenses.
Furthermore, sec 102(1)(b) of the Tax Administration Act
(No. 28 of 2011) determines that the burden of proof that an amount is
deductible or not taxable, rests upon the taxpayer. Therefore, should the
taxpayer not have received a travel allowance, but have incurred travel
expenses in his own capacity, he would not be able to claim a deduction in
terms of sec 11(a) of the Act read with sec 23(g) of the Act, as he would not
be able to discharge the burden of proof that the amount was in fact incurred
for business purposes. Various case law, of which Golby v Secretary for
Inland Revenue 1969 (2) SA 377 (A) [31 SATC 59] is one case, held that
taxpayers are required to prove to what extent they are entitled to deduct
certain travelling expenses. The only way in which a taxpayer can prove
business kilometres travelled is through a credible logbook which cannot be
completed retrospectively. Furthermore, SARS issued a notice in 2010, requiring
a taxpayer to keep a logbook should he/she want to reduce the taxable portion
of a travel allowance or claim travel expenditure as a deduction.
3. Sec 10(1)(o)
Income tax exemption for a resident working on an oil rig
Q: I have a
perspective client who works on board an oil rig outside the RSA as a sub-sea
engineer (apparently he works on the drilling equipment). Am I correct in
saying that his income earned from working on the Oil Rig falls under Section
10(1)(o) of the Income Tax Act ? Which means that as long as he is
working on board the oil rig for a minimum of 183 days in a one year cycle his
income earned is exempt and that he is not required to work the 60 consecutive
days. Also did I read correctly that the 183 minimum days are not required
from the 2015 financial year or does this pertain to a difference section of
the Income Tax law?
providing this guidance, it is assumed that your client is a ‘resident’ as
defined in sec 1 of the Income Tax Act (No. 58 of 1962) (hereinafter referred
to as ‘the Act’). Sec 10(1)(o)(i) of the Act would exempt any remuneration as
defined in par 1 of the Fourth Schedule derived by an officer or crew member of
a ‘... ship engaged –
(bb) in the prospecting, exploration or mining (including surveys and
other work of a similar nature) for, or the production of, any minerals (including
natural oils) from the seabed outside the Republic, where such officer or crew
member is employed on board such ship solely for purposes of the "passage”
of such ship, as defined in the Marine Traffic Act, 1981 (Act No. 2 of 1981),
if such person was outside the Republic for a period or periods
exceeding 183 full days in aggregate during the year of assessment...’ (own
Passage is defined in the said act as ‘... navigation through
the territorial waters in a continuous and expeditious manner for
the purpose of—
(a) traversing those waters without entering internal waters or
calling at a roadstead or offshore installation outside internal waters; or
(b) proceeding to or from internal waters or a call at any such
roadstead or offshore installation,and includes stopping and anchoring, in so far as such stopping or
such anchoring is incidental to ordinary navigation or is rendered necessary by
vis major or distress or is for the purpose of rendering assistance to
persons, ships or aircraft in danger or distress’.
It would from the wording of the definition of passage in sec 1 of the
Marine Traffic Act appear that the sec 10(1)(o)(i)(bb) exemption would only be
available to ships navigating (i.e. moving) through the territorial waters in a
continuous and expeditious (i.e. done with speed and efficiency) manner for
either of the said purposes. Given the fact that the person is working on an
oil rig, which would constitute an ‘offshore installation’ according to the
definition thereof in sec 1 of the Marine Traffic Act, the person would not be
working a ship whose sole purpose is ‘passage’. Consequently the sec
10(1)(o)(i)(bb) exemption would not be available.
The only exemption that may therefore be applicable is sec
10(1)(o)(ii), provided that the oil rig is situated outside the Republic’s
territorial waters. In terms sec 4(1) of the Marinetime Zones Act (No. 15 of
1994) (hereinafter referred to as ‘the MZ Act’), South Africa’s territorial
waters consists out of the ‘... sea within a distance of twelve nautical miles
from the baselines...’. A nautical mile is defined in sec 1 of the MZ Act as
being a distance of 1852 metres. The employer would however be able to provide
you with information as to whether the oil rig is operating outside South
Africa’s territorial waters.
Should the oil rig be operating outside of South Africa’s territorial
waters and all the other requirements of sec 10(1)(o)(ii) are met, then the
remuneration of your client would be exempt. The client would therefore have to
comply with both the 183 days and 60 continuous days requirement in order to
qualify for the exemption.
The only blanket exemption existing in sec 10(1)(o) which does not
have the 183 days and 60 days requirement is sec 10(1)(o)(iA), which would only
be available to ‘…officers or crew members of a South African ship as defined
in section 12Q(1) mainly engaged in –
international shipping as defined in section 12Q(1); or
(bb) in fishing outside the Republic’.
This sec 10(1)(o)(iA) exemption would, however, not be available to