NOTIONAL VAT

NOTIONAL VAT

Do you know that you can claim vat from a non-VAT vendor?

  1. A taxpayer may deduct notional input tax on property acquired from a non-VAT registered business or individual.  In the case of fixed property, the deduction may only be made once the time of supply, that is the earlier of the date of registration of transfer of the goods or the date any payment in respect of the consideration is made, occurs. In the case of taxpayers registered on the invoice basis, the deduction may be made once the fixed property is registered in the name of the taxpayer and is limited to the extent of payment of any consideration made during that tax period. The deduction in the case of vendors registered on the payment’s basis, may be made to the extent of payment of any consideration.
  • Second-hand goods The VAT Act allows taxpayers under certain circumstances to deduct input tax on second-hand goods acquired from non-VAT where no VAT is payable to the supplier, or where the goods are supplied by a taxpayer but do not form part of the business. This is known as a notional or deemed input tax deduction.

The conditions under which a notional input tax deduction may be made are as follows:

• The goods must be “second-hand goods” as defined in section 1(1)

• The supply may not be a taxable supply (for example, the goods are purchased from a non-vendor) • The supplier must be a South African resident and the goods supplied must be situated in RSA

• The purchaser must have made payment for the supply, or at least made part payment as a notional input tax deduction is only allowed to the extent that payment has been made

• The goods must be acquired by the vendor wholly or partly for consumption, use or supply while making taxable supplies

• The vendor must be in possession of the prescribed records as per section 20(8). (See Chapter 13 for more details on the prescribed records)

• The notional input tax deduction on gold and goods containing gold may be allowed provided that the goods are sold in the same or substantially the same state as when the goods were acquired.

The notional input tax is calculated by multiplying the tax fraction (presently 15/115) by the lesser of the consideration paid or the OMV (Open Market Value). Where the OMV is less than the consideration paid, the OMV will be used to calculate the notional input tax deduction.