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Can a notional input VAT credit be claimed on purchases of used material from homeless persons?

19 March 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: My client has a recycling business. He does not the manufacture paper and plastic but distributes them. The client purchases these used materials from non- vendors (basically homeless people) as he is buying rubbish paper.

Can the client claim notional input VAT on these purchases? If so, what is the procedure?

A: Your client (assuming he's a vendor) can claim notional input VAT on the purchases if he has a tax invoice to substantiate the purchase (see section 20 of the VAT Act). The tax invoice should also specify that the goods are second hand.

Additionally, the vendor must maintain records as provided for in section 20(8) of the VAT Act.

The provision states:

"...where a supplier makes a supply (not being a taxable supply) of second-hand goods...to a recipient, being a registered vendor, the recipient shall in the form as the Commissioner may prescribe, maintain a declaration by the supplier stating whether the supply is a taxable supply or not and shall further maintain sufficient records to enable the following particulars to be ascertained".

The abovementioned declaration is the VAT264 and can be accessed here:

http://www.sars.gov.za/AllDocs/OpsDocs/SARSForms/VAT264%20-%20Declaration%20for%20supply%20of%20second%20hand%20repossessed%20or%20surrendered%20goods%20-%20External%20Form.pdf

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 decision.


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