FAQ - 13 September 2016
14 September 2016
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. Can notional VAT
be claimed on a sale of a business?
Q: VAT vendor
(Close Corporation) is purchasing a business from a Non VAT vendor (seller) -
The business is a shop/cafe. Can the VAT vendor claim notional input tax credit
on this transaction?
A: You are
referring to paragraph (b) of the definition of input tax in section 1(1) of
the Value-Added Tax Act. The input tax
in this instance is "an amount equal to the tax fraction … 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 on or after the
commencement date by a resident of the Republic (RSA) … of any second-hand
goods situated in the Republic … 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” or partly so.
The goods (in this instance the business, but not goodwill
for instance) will be "second-hand goods” as defined.
In terms of section 16(2) the following documents must
support the deduction:
a) VAT 264 form.
b) Proof of payment.
In addition to the above, the following information and
documents must be verified and retained by the vendor making the deduction:
- Where the supplier is a natural person, his/her identity
number and a photocopy of his/her identity document.
- Where the supplier is not a natural person, the name and any
legally allocated registration number of the supplier and a photocopy of the
business letterhead or other similar document of the supplier.
2. What expenses can
be included for the purposes of a base cost?
Q: My client has
sold a property (not primary residence). Can he add prior period levies (2003 -
2010) to the base cost?
A: In terms of
paragraph 20(2), the expenditure incurred by a person in respect of an asset
(for purposes of base cost) does not include any of the following amounts:
(a) borrowing costs, including any interest as contemplated
in section 24J or raising fees;
(b) expenditure on repairs, maintenance, protection,
insurance, rates and taxes, or similar expenditure; and
(c) the valuation date value of any option or right to
acquire any marketable security contemplated in section 8A (1),
other than borrowing costs and expenditure contemplated in
3. Does an NPO pay
Q: Does a NPO
that has section 18A exemption and is tax exempt still liable to pay transfer
duty on the purchase of a property?
A: The exemption
from the Transfer Duty is not available to an NPO.
Section 9(1)(c) of the Transfer Duty Act provides that "no
duty shall be payable in respect of the acquisition of property by:
- a public benefit organisation contemplated in paragraph (a)
of the definition of `public benefit organisation' in section 30(1) of the
Income Tax Act, 1962 (Act No. 58 of 1962), that has been approved by the
Commissioner in terms of section 30(3) of that Act; or
- in respect of property acquired by such public benefit
organisation, institution, board or body, 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, institution, board or
body, as the case may be: Provided that if at any time subsequent to the
acquisition thereof it is used otherwise than in the manner contemplated in
this paragraph, duty shall become payable in respect of the acquisition of that
property and the date upon which that property was first so otherwise used
shall for the purposes of section 3(1) and section 4 be deemed to be the date
of acquisition thereof”.
So it is not the section 18A approval, although it requires
section 30 approval, but the section 30 approval that is required and them
substantially requirements that are relevant.
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.