FAQ - 21 September 2016
21 September 2016
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. Can you claim input VAT on a motor vehicle (non-commercial) which will be used as a prize?
Q: My customer has asked me if he can claim input vat on a motor-vehicle which will be used as a prize give away for the business?
A: Section 17(2)(c) of the Value-Added Tax Act prohibits a deduction of input tax in respect of any motor car supplied to or imported by the vendor. In terms of proviso (iii) this paragraph shall not apply where
(aa) that motor car is acquired by the vendor for the purposes of awarding that motor car as a prize contemplated in section 16 (3) (d) in consequence of a supply contemplated in section 8 (13); or
(bb) the supply of that motor car is in the ordinary course of an enterprise which continuously or regularly supplies motor cars as prizes to clients or customers (other than to any employee or office holder of the vendor or any connected person in relation to that employee, office holder or vendor) to the extent that it is in consequence of a taxable supply made in the course or furtherance of an enterprise.
Item (bb) may be relevant in your case. Note the requirement “continuously or regularly supplies motor cars as prizes to clients”. Item (bb) allows a vendor to claim VAT incurred on a motor car as input tax where the motor car has been acquired for purposes of awarding it as a prize to his customers. The supply of the motor car as a prize must take place in consequence of a taxable supply made. The prize need therefore not be awarded as a result of betting transactions. An example would be where all purchasers of certain goods stand a chance to win a motor car.
2. Can you claim medical deductions for a dependant who is no longer on your medical aid?
Q: I have a client who contributes to a medical aid and his wife and daughter are dependants. During the 2016 tax year, when the daughter turned 21 he took her off his medical aid and contributed to a medical aid in her own name, however, she is still dependent. Will he be able to deduct these contributions together with that of him and his wife?
A: We accept that the question relates to the 2015 or later year of assessment. There is no longer a deduction, but a rebate.
The requirement is that the medical scheme fees tax credit applies in respect of fees paid by a (the) person to a medical scheme registered under the Medical Schemes Act – see section 6A(2)(a)(i). The amount of the medical scheme fees tax credit the depends on whether it was in respect of benefits to the person and one (or more) dependant.
For the purposes of section 6A a ‘dependant’ in relation to a person means a ‘dependant’ as defined in section 1 of the Medical Schemes Act – see section 6A(4). In terms of the Medical Schemes Act a “dependant” means (a) the spouse or partner, dependent children or other members of the member's immediate family in respect of whom the member is liable for family care and support.
A “child” as defined in section 6B(1) means a person’s child or child of his or her spouse who was alive during any portion of the year of assessment, and who on the last day of the year of assessment—
(a) was unmarried and was not or would not, had he or she lived, have been—
(ii) over the age of 21 years and was wholly or partially dependent for maintenance upon the person and has not become liable for the payment of normal tax in respect of such year…
The fact that the child is the member, is irrelevant – the individual must just be a child as defined above.
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.