Whether construction carried out by a vendor for a PBO will be subject to VAT
21 November 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: I need to
determine whether or not a client of mine who carried out a road construction
for a public benefit organisation, will be exempt from VAT of subject to vat at
the zero rate for the value of the construction activities carried out for the
I have this case on hand now as I received the VAT schedule
from my client, and invoices relating to the road construction were without VAT
I decided to check with you before I submit the VAT returns
on behalf of my client.
A: There is no
indication that the services rendered (road construction) were supplied outside
the RSA and there is therefore no reason why it should fall within the ambit of
section 11(2) of the Value Added Tax Act.
It would therefore not qualify to be zero rated. The supply is also not exempt from the tax –
refer to section 12 of the VAT Act.
The rate of zero per cent applies in respect of the service
rendered and not due to the nature of the recipient. In other words the fact that the recipient is
a public benefit organisation (approved or not) is irrelevant as far as levying
the tax at the rate of zero per cent applies or the section 12 exemption.
The consideration is therefore inclusive of the output
Disclaimer: Nothing in
this query and answer should be construed as constituting tax advice or a tax
opinion. An expert should be consulted for advice based on the facts and
circumstances of each transaction/case. Even though great care has been taken
to ensure the accuracy of the answer, SAIT do not accept any responsibility for
consequences of decisions taken based on this query and answer. It remains your
own responsibility to consult the relevant primary resources when taking a