Can a PBO that is a vendor claim input VAT on a fixed property purchase?
14 April 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: Can a PBO (registered
in terms of s10 of the Income Tax Act but NOT a welfare organization in terms
of section 30 of the income tax act) that is a registered VAT vendor claim any
VAT charged on the purchase of the property?
The PBO wishes to purchase a property in order to further
its public benefit activities (PBAs) which are exempt supplies in terms of the
VAT act. The PBO also makes a small amount of taxable supplies which is why it
is registered as a VAT vendor. In terms of the Transfer Duty Act, any transfer
duty on the property sale is exempt in terms of section 9(1)(c)(ii). However,
as the seller is VAT registered, the seller is levying output VAT on the sale.
Can the PBO apply for a VAT exemption on this specific transaction? Or can the
input VAT be claimed based on the exemption in terms of the Transfer Duty Act.
A: Our guidance
assumes that the public benefit organisation has been approved by SARS in terms
of section 30(3) of the Income Tax Act.
You are then correct that it would qualify for an exemption from
Transfer Duty if the "property acquired by such public benefit organisation…
the whole, or substantially the whole, of which will be used for the purposes
of one or more public benefit activity carried on by such public benefit
organisation…” – section 9(1)(c) of the Act.
Section 9(15) merely ensures that only VAT or Transfer duty is paid and
therefore doesn’t provide any relief.
A similar ‘exemption’ is however not contained in the
Value-Added Tax Act. As the public
benefit organisation will be using it for purposes of exempt supplies it would
also not be able to make a deduction if they were registered as a vendor. The organisation can therefore not apply to
SARS for the output tax not to be levied.
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.