FAQ - 9 March 2016
09 March 2016
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. Can a VAT vendor claim input VAT on a property sold to him by a
Q: If an
unregistered person sells a property to a VAT registered Company, can the new
company claim input VAT?
A: In terms
of the definition of input tax in section 1(1) of the Value-Added Tax Act ‘an
amount equal to the tax fraction (at the time the supply is deemed to have
taken place) of the lesser of any consideration in money given by the vendor
for or the open market value of the supply (not being a taxable supply) to him
by way of a sale by a resident of the Republic (RSA) … of any second-hand goods
situated in the RSA’ will be input tax.
According to the definition "second-hand goods” means goods which were
previously owned and used and we submit that in this instance the fixed
property is in fact second hand goods as defined. (Note: It is therefore not the transfer fees,
we assume transfer duty, that is deducted but of course the input tax on the
transfer fees would also qualify.)
The deduction can then be made
‘where the goods or services concerned are acquired by the vendor wholly for
the purpose of consumption, use or supply in the course of making taxable
supplies or, where the goods or services are acquired by the vendor partly for
such purpose, to the extent (as determined in accordance with the provisions of
section 17) that the goods or services concerned are acquired by the vendor for
In terms of section 17(1) the
input tax must be an amount which bears to the full amount of such tax or
amount, as the case may be, the same ratio (as determined by the Commissioner
in accordance with a ruling as contemplated in section 41A or 41B) as the
intended use of such goods or services in the course of making taxable supplies
bears to the total intended use of such goods or services. SARS issued a binding general ruling (number
16) that prescribes the turnover-based method of apportionment.
Remember that the input tax (or
portion) may only be deducted to the extent that payment has been made – see
recipient of second-hand goods must obtain and maintain a declaration by the
supplier stating whether the supply is a taxable supply or not, and must
further maintain sufficient records to enable specific particulars to be
ascertained as is stipulated in section 20(8) of the VAT Act.
2. Is there a legal right to
withhold a client’s documents when there are fees outstanding?
Q: Where in the Tax Administration Act does it stipulate
that it is illegal for an accountant or tax practitioner to hold onto a
client’s documents when the client has an outstanding account with them? One
cannot prevent a taxpayer from meeting his tax obligations. Would not releasing
an eFiling profile and documentation to a new client be illegal?
A: There is
nothing in the Tax Administration Act that deals with this.
The general rule is that all
documentation and information that was provided to the practitioner or obtained
and/or produced by the practitioner in relation to the client’s instruction,
belongs to the client. This includes the
supporting documentation that the practitioner used in order to complete the
financial statements or tax return.
Accordingly, as a general rule, it is the client who is entitled to ask
for such documents and records from the previous tax practitioner.
A tax practitioner must support
the profession by support and co-operating with other tax practitioners as this
is an essential element of professional character. It is therefore in everyone’s
best interest to support other practitioners and to deal with fellow
practitioners in a manner that will not detract from the reputation and
well-being of the profession as a whole.
Other than the above, this is
more a legal issue of whether or not you as the member has a valid lien over
the documents in question. The
withholding of client records, when the client has not paid the practitioner is
a legal issue and depends on the contract that the practitioner has signed with
his client. The Code of Professional Conduct does not deal with the withholding
of client records as such. Where the practitioner wishes to withhold the client
records they would need to refer to the contract / agreement with the client to
agree on whether the withholding of documents is an option available to the
practitioner. The collection of debt is a legal issue and the practitioner
would be advised to seek legal advice and follow normal debt collecting
SARS's view is that it is against
the law to refuse the request. They
believe that it prevents the taxpayer from meeting his or her obligations to
file a return.
Accordingly, if there is no legal
right to withhold client’s documentation, the practitioner should hand the
relevant documentation over to the superseding practitioner.
Disclaimer: Nothing in these queries and answers 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 answers, SAIT do not accept any responsibility for consequences of decisions taken based on these queries and answers. It remains your own responsibility to consult the relevant primary resources when taking a decision.