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FAQ - 8 June 2016

08 June 2016   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. Can VAT be claimed on building materials?

Q: The Client A went into build contract with B (builder) to build a residential house for R 1 000 000. A is non VAT vendor and B is VAT registered. The 1 000 0000 was paid to B to purchases the building material and do the construction of the property. A requested that B must claim VAT on the purchases for building material and pay it over to A is this correct? 

A: You state that Client A is not a vendor and also that it relates to a supply of services relevant to a residential property.  It is not clear what the agreement is with respect to the "building material”, but it may not make a difference.  Even where the vendor (B) is not acting in the capacity of an agent, Client A will not be able to make a deduction (as Client A is not a vendor).  

Vendor B would only have input tax (and be able to make a deduction) if he acted as the principal.  An output tax would then be included in the consideration agreed on in the building contract.  

We are not sure why Client A believes that the supplier must pay amounts to the recipient.  It doesn’t appear that there is an agreement to reduce the agreed upon consideration.  There would also not be a supply by Client A to vendor B.  

2. Is VAT charged on supplies made on a flight?

Q: Will it be standard or zero rated if you are invoicing an international company that supplies newspapers all over the world to airlines. The newspapers are consumed locally and have therefore always charged VAT. I am specifically talking about papers that are consumed inflight.

A: In terms of the relevant part of the definition in section 1(1), "exported”, in relation to any movable goods supplied by any vendor under a sale or an instalment credit agreement, means "delivered by the vendor to … a foreign-going aircraft when such ship or aircraft is going to a destination in an export country and such goods are for use or consumption in such … aircraft…”

The delivery to the "catering companies” may well be an instance (as in your view) where the "vendor may only elect to levy tax at the zero rate where the vendor ensures that the movable goods are delivered (irrespective of the contractual conditions of delivery) to any of the … airports listed in the definition of "designated commercial port" from where the movable goods are to be exported by the qualifying purchaser.”  In other words, it is not exported as required by section 11(a) (i).  

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.  


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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