Can a taxi business register for VAT?
24 June 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: A taxi
business purchased a property, in order to run its sedan taxi business from
there. The taxi business is not registered for VAT. Can the business register
for VAT to claim its transfer duty and other vatable transactions?
A: Based on the
fact that it is not registered as a vendor for Value-Added Tax purposes we
accept that the business doesn’t have to be registered as such. The person (carrying on the "taxi business”)
can only apply to be registered as a vendor if it carries on an enterprise and
the deduction (of input tax) can then only be made if the goods or services
were acquired by the vendor (the person) wholly (or partly) for the purpose of
consumption, use or supply in the course of making taxable supplies – see
section 1(1) of the Value-Added Tax Act.
If the activities of the "taxi business” involve the supply
by the person in the course of a transport business of any service comprising
the transport by that person in a vehicle (other than a game viewing vehicle)
operated by him of fare-paying passengers and their personal effects by road,
not being a supply of any such service which would be charged with tax at the
rate of zero per cent under section 11(2)(a), it would be an exempt
That would mean that the person is not carrying on an
enterprise and the ‘tax’ incurred on the acquisition of the property will not
be input tax – see section 1(1). The
person would also not be able to register as a vendor – see section 23.
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.