APPORTIONMENT

APPORTIONMENT CALCULATION

The only approved method which may be used to apportion input tax in terms of section 17(1) of the VAT Act without specific prior written approval from the Commissioner is the turnover-based method:

Formula: y =   a  x  100 (a + b + c) 1
Where:
“y” = the apportionment percentage;
“a” = the value of all taxable supplies (including deemed taxable supplies) made during the period;
“b” = the value of all exempt supplies made during the period; and
“c” = the sum of any other amounts not included in “a” or “b” in the formula, which were received or which accrued during the period (whether in respect of a supply or not).
Notes:
The term “value” excludes any VAT component.

“c” in the formula will typically include items such as dividends and statutory fines (if any).

Exclude from the calculation the value of any capital goods or services supplied, unless supplied under a rental agreement / operating lease (i.e. not a financial lease or instalment sale agreement).

Exclude from the calculation the value of any goods or services supplied where input tax on those goods or services was specifically denied.

The apportionment percentage should be rounded off to 2 decimal places.

Where the formula yields a result of 95% or more, the full amount of VAT incurred on mixed expenses may be claimed (referred to as the de minimis rule).

Remember that this calculation is only required where the input tax incurred is for both taxable supplies and other non-taxable purposes such as exempt supplies or private use.
In other words, the calculation is required where the expense cannot be directly attributed to either taxable or non-taxable purposes, but is partially attributable to both types of supplies.

This is sometimes referred to as an expense which is incurred for making “mixed supplies” or for “mixed purposes”.

Note that if the expense is incurred wholly for taxable supplies, the full amount of input tax can be claimed, but if it is wholly for exempt supplies, no input tax can be claimed.
In practice, it is often difficult to accurately determine the apportionment percentage according to the turnover based method in each and every tax period.

It is therefore acceptable practice:

to calculate the estimated percentage using the turnover figures from the previous year’s financial statements and to apply that percentage for claiming input tax in each individual tax period for the current year.

Obtain the Trial Balance figures

Recalculate apportionment ratio (refer turnover based method)

Print apportionment calculation ratio document

Link VAT to the GL account for mixed purposes, as per the apportionment ratio

Apply the recalculated apportionment ratio and identify possible saving

Create a claim sheet for the ratio adjustment

ADDITIONAL COMMENTS

Team leader

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Audit Analyst

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