MaxKnowledge — Knowledge base — VAT Rulings.1-converted

Graf- en verassingsgelde word deur ’n streeksdiensteraad van ’n begrafnisondernemer gevorder wat op sy beurt die gelde van sy kliënte verhaal. Moet BTW gehef word op die verhaling deur die begrafnisondernemer van graf- en verassingsgelde?

Antwoord

Waar bedrae namens ’n derde party uitbetaal word, word aanvaar dat sodanige besteding nie vir die ondernemer se eie rekening is nie en slegs ’n verhaling uitmaak. In die omstandighede sal geen byvoeging tot daardie bedrae gemaak hoef te word nie en sal die ondernemer nie geregtig wees om enige insetbelasting ten opsigte van daardie bedrae te eis nie. (Sien artikel 54(2).)

‌28/3/1-19 June 1992

‌2‌

‌Safe custody services – banks Bewaringsdienste - banke‌

Question

Do safe custody services fall within the definition of financial services in section 2 and are these services

consequently exempt from VAT in terms of section 12(a)?

Answer

It was agreed with the Clearing Bankers Association of South Africa that the safe custody of cash after hours and

in night safes would be regarded as a financial service and therefore be exempt from VAT in terms of section

12(a). However, safe custody services comprising the supply of safety deposit boxes do not constitute financial services or services necessary for the supply of financial services and are therefore subject to VAT at the standard rate in terms of section 7(1)(a). Where these services are supplied to non-resident clients they should also be subject to VAT at the standard rate.

‌28/3/1-7 May 1992

For further information regarding this issue consult the CBA list which was distributed to all Receivers’ offices on

14 July 1992.

‌3‌

‌Lay-by agreements - amounts retained - cancelled transactions Bêrekooptransaksies – bedrae behou – gekanselleerde transaksies‌

Question

Will VAT be levied on the retention amount held by a retailer when a refund or credit is passed to a customer who cancels a lay-by transaction?

Answer

In terms of section 8(4)(b) read with the definition of "consideration" in section 1, any amount retained by the seller or any amount recovered from the purchaser under a lay-by agreement, when such agreement is cancelled, is deemed to be consideration for a service supplied by the seller (vendor). VAT will therefore be payable on such amounts in terms of section 7(1)(a).

28/3/1-6 March 1992 and amended on 1 September 2002.

‌4‌

‌Zero-rated farming supplies Nulkoers boerderylewerings‌

Question

The supply of any of the listed items for a consideration of not less than R500 per item is subject to tax at the zero rate. Is the R500 requirement in respect of each invoice or each line item reflected on the invoice?

Answer

The requirement of R500 applies to every listed item in Schedule 2 and not necessarily to each line item supplied

per invoice.

‌28/3-29 August 1991 Note‌

The Act has meanwhile been amended. The R500 rule does not apply as from 1 June 1992. Goods supplied for agricultural purposes can be obtained at the zero rate in terms of section 11(1)(g), regardless of the amount purchased. The purchaser, however, must be a registered vendor in possession of a valid notice of registration indicating that he is a farmer and a tax invoice must be issued stating the registration number of the purchaser.

‌5‌

‌Sportklub - mediese uitgawes Sports club - medical expenses‌

Vraag

’n Sportklub gaan uitgawes aan ten opsigte van mediese en fisioterapeutiese behandeling wat aan sy eie en ander spelers gelewer word. Kan die sportklub ’n insetbelastingkrediet eis ten opsigte van die uitgawes wat hy aangegaan het?

Antwoord

Aangesien die uitgawes aangegaan word om die sportklub in staat te stel om belasbare lewerings te maak kan die sportklub die belasting wat hy op mediese en fisioterapeutiese behandeling van spelers betaal het as ’n insetbelastingkrediet terugeis. (Sien artikels 16(2), 16(3), 17(1) en 20.)

‌28/3/29-14 January 1993

‌6‌

‌Prompt payment discounts

‌Diskonto vir stiptelike betaling

Question

Due to industry practise it is extremely difficult to apportion prompt payment or settlement discounts taken between standard and zero-rated supplies as they relate to the original invoice. Can the ratio based on the sales mix of the current month’s turnover be used as a basis for apportionment?

Answer

The amount of tax in respect of settlement discounts may be apportioned between zero-rated and standard-rated

supplies in the ratio based on the sales mix of the current month’s turnover. (See section 21(5).)

‌28/3-29 August 1991

‌7‌

‌Return of goods - credit notes Terugsending van goed - kredietnotas‌

Question

A vendor cannot, because of the nature of the goods supplied, determine when goods returned were supplied. It is also not possible to relate the goods returned to the original invoice. Can the requirements of section 21(3) be relaxed in order that credit notes issued be treated as credit notes in terms of the Act?

Answer

As long as the amount in respect of which credit is granted is stated on the credit note, the provisions of section 21(3)(a)(v) need not be complied with. Where it is impossible to identify the transaction to which a credit note refers, section 21(3)(a)(vii) need not be complied with.

‌28/3-29 August 1991

‌8‌

‌Catering services - industrial caterer Onthaaldienste – industriële spysenier‌

Question

Does the supply of meals by an industrial caterer to employees fall within the definition of "entertainment" in

section 1?

Answer

The utilisation of catering services is the provision of "entertainment" as defined in section 1.

‌28/3/1-10 January 1992

‌9‌

‌Catering services - deductibility of input tax Spyseniersdienste – aftrekbaarheid van insetbelasting‌

Question

Can a company which makes use of the services of a caterer claim an input tax credit in respect of tax paid on

the provision of such services?

Answer

In terms of section 17(2)(a), input tax is denied for goods and services acquired by a vendor for the purposes of entertainment, except where the specific goods and services are acquired by the vendor to provide entertainment for which a charge which covers all direct and indirect costs of such entertainment or is equal to the open market value of such supply of entertainment is made. Thus, where the company subsidises the supply of entertainment (e.g. food and beverages) no input tax credits on expenses incurred in relation thereto may be claimed. This is also applicable where only part of the cost is recovered from the employees. No output tax would be charged on these supplies which are subsidised by the principal in terms of section 8(14).

‌28/3/1-10 January 1992 and amended on 1 September 2002.

‌10‌

‌Catering services - management fees Spyseniersdienste - bestuursgelde‌

Question

May a vendor claim an input tax credit on a catering service management fee in respect of the provision of meals

for staff?

Answer

If the catering concern is registered as a vendor, it must charge output tax on the fees and issue a tax invoice in terms of section 20(1A) whether requested to do so or not, where the consideration for the supply exceeds R1

000. This output tax should be accounted for in the catering enterprise’s VAT 201 return. The vendor who acquired the service may only claim the input tax credit on the total fee charged if all the direct and indirect costs (including the management fee) are recovered from the employees. (See section 17(2)(a).)

‌28/3/1-10 January 1992

‌11‌

‌Property transactions - sale of employees’ dwellings Eiendomstransaksies – verkoop van wonings - werknemers‌

Question

A vendor, although registered for VAT purposes, mainly makes exempt supplies. Occasionally the vendor purchases homes of employees who have been transferred and then sells these properties at a later date to recover costs. Would this activity be the carrying on of an enterprise and should VAT be charged on the sale?

Answer

Although the vendor’s main activity is the making of exempt supplies he would be carrying on an enterprise as defined in section 1 to the extent that properties are bought and sold. VAT would therefore be charged at the standard rate in terms of section 7(1)(a) on the sale of these houses.

28/3/1-25 November 1991

‌12‌

‌Sale of assets - taxable and exempt supplies Verkoop van bates – belasbare en vrygestelde lewerings‌

Question

Assets were acquired for making taxable and exempt supplies. Will the sale of these assets be subject to VAT?

Answer

Where assets are used for making both taxable and exempt supplies, the sale of the assets will attract VAT in terms of section 8(16). The vendor may, however, claim an input tax credit in respect of the portion used for exempt supplies in terms of section 16(3)(h).

‌28/3/1-25 November 1991

‌13‌

‌Professional golfers - prize-money/winnings Professionele gholfspelers – prysgeld/wengeld‌

Question

Will the prize-monies received by professional golfers be subject to VAT?

Answer

Where no amount is paid (ie a competition entry fee) which would fall within the ambit of being a bet on the outcome of an event or occurrence as contemplated in section 8(13), no VAT will be chargeable in respect of any amount paid by the PGA as a prize or winnings to the recipient professional golfer and accordingly no deduction may be claimed by the PGA under the provisions of section 16(3)(d).

Any amount won by a professional golfer as prize-money in any PGA tournament cannot be regarded as being in respect of a supply of a service by the professional golfer to the PGA and such amount will not figure in the total value of taxable supplies made by the professional golfer in the course of carrying on all enterprises contemplated in section 23(1).

‌28/3/1-6 November 1991

‌14‌

‌Professional golfers - appearance money Professionele gholfspelers - teenwoordigheidsgeld‌

Question

Is appearance money which a professional golfer receives subject to VAT?

Answer

Appearance money payable to a professional golfer is chargeable with VAT in terms of section 7(1)(a) in respect of the supply of a service where the professional golfer is a vendor for purposes of the Act.

‌28/3/1-6 November 1991

‌15‌

‌Professional golfers - tournament entrance fees Professionele gholfspelers - toernooitoegangsgelde‌

Question

Will the entrance fees payable by professional golfers for participation in PGA tournaments be subject to VAT?

Answer

An entrance fee payable by a professional golfer for the right to participate in any tournament organized by the Professional Golfers’ Association [PGA] is regarded as being tantamount to a playing fee and as such will be chargeable with VAT in terms of section 7(1)(a) in respect of the supply of a service by the PGA to the professional golfer concerned.

‌28/3/1-6 November 1991

‌16‌

‌Electronic data interchange Elektroniese data-verwisseling‌

Question

Will tax invoices and debit and credit notes transmitted by way of the electronic data interchange be regarded as

valid tax invoices and credit notes?

Answer

it is accepted that tax invoices, debit and credit notes may be issued as electronic documents, but certain

requirements must be complied with in order to be regarded as valid tax invoices, debit and credit notes.

The South African Revenue Services requirements in this regard are as follows:

The tax invoices, debit or credit notes must contain the mandatory information for tax invoices, credit or debit notes as stipulated in sections 20(4), 21(4)(a) and 21(4)(b) of the Act respectively. Documents must be transmitted in encrypted form at least 128 bit encryption format. Both the supplier and the recipient of the supply must retain the documents in readable and encrypted form for a period of five years from the date of the supply. If a service provider is used, he must also retain the documents for a period of five years. Both the supplier and the recipient of the supply must have the necessary codes or other means available to enable SARS auditors to compare the documents in readable form with those in encrypted form. The transmitted electronic document will constitute the original tax invoice, credit or debit note. Hard copies extracted from the system must bear the words "computer generated copy tax invoice", "computer generated copy credit note" or "computer generated copy debit note" thereon. All further copies must also bear such words. The recipient of the supply must confirm in writing that he is prepared to accept electronic tax invoices, credit and debit notes under the conditions set out herein. Such authority must be retained by the supplier for a period of five years after the

last electronic document issued to the recipient. No other tax invoice, credit or debit note may be issued in

respect of the specific supply, unless such document is marked as a copy of the original document.

‌28/3/1-25 November 1991 and amended on 1 September 2002.

‌17‌

‌Makelaarsgelde - toedelings Brokerage fee - apportionment‌

Vraag

’n Makelaar reël versekering vir ’n ondernemer. ’n Gedeelte van die versekering het betrekking op die internasionale vervoer van passasiers en goedere en die reëling daarvan is dus onderhewig aan die nulkoers ingevolge artikel 11(2)(d). Kan passasierskilometers as toedelingsbasis gebruik word om die komponent van die makelaarsgelde te bepaal wat aan die nulkoers onderhewig moet wees?

Antwoord

Die passasierskilometers gereis behoort ’n akkurate toedeling van die makelaarsgelde daar te stel en mag dus as

’n toedelingsbasis gebruik word. (Sien artikel 17(1).)

‌28/3/1-15 November 1991

‌18‌

‌Honorariumfooie Honorarium fees‌

Vraag

’n Gimnasium betaal honorariumfooie aan ’n sportklub. Is hierdie fooie onderhewig aan BTW?

Antwoord

Die honorarium wat deur die gimnasium aan die sportklub betaal word is vir dienste gelewer deur die sportklub aan die gimnasium, naamlik die beskikbaarstelling van die sportklub se geriewe aan die gimnasium. Indien die sportklub ’n geregistreerde ondernemer is, moet BTW ingevolge artikel 7(1)(a) gehef word.

‌28/3/1-17 Februarie 1992

‌19‌

‌Driving schools - motor cars - input tax credit Bestuurskole – motors - insetbelastingkrediet‌

Question

Will a driving school, which acquires a motor car as defined for VAT purposes be able to claim the VAT paid as an

input tax credit?

Answer

An input tax credit may be claimed only if the vehicle purchased falls outside the scope of the definition of "motor car" in section 1. The use of the motor car does not fall into the exclusion in terms of the proviso to section 17(2)(c) and an input tax credit may not be claimed. The nature of the vehicle and not the use to which the vehicle is put will determine whether or not an input tax credit may be claimed.

‌28/3/1-8 June 1992

‌20‌

‌Property rates - recovered from tenants Eiedomsbelasting – verhaal van huurders‌

Question

A landlord recovers a proportion of property rates incurred by him from his tenants in respect of commercial

rental. Should the landlord charge the tenants VAT on the property rates recovered?

Answer

Although property rates charged by local authorities fall outside the scope of paragraph (c) of the definition of "enterprise" in section 1, the recovery of these costs by the lessor from the lessee forms part of the total rental consideration, irrespective of whether it is specified as a separate component of the rental consideration. VAT must accordingly be levied on the total rental consideration in terms of section 7(1)(a).

‌28/3/1-8 June 1992

‌21

‌Kommissie - dienste gelewer voor die aanvangsdatum

‌Commission - services rendered prior to the

implementation date

Vraag

’n Ondernemer verkoop huurkontrakte waarby die huurder die gebruiksreg van ’n losie in ’n sportstadion vir ’n periode van tien jaar verkry. Al die huurkontrakte is voor die aanvangsdatum gesluit en die ondernemer is geregtig op ’n kommissie ten opsigte van die verkoop daarvan. Die ondernemer ontvang die kommissie van die sportklub aan wie die sportstadion behoort na die aanvangsdatum. Moet die ondernemer BTW hef op die kommissie wat hy ontvang?

Antwoord

Geen BTW is betaalbaar op kommissie wat verband hou met dienste wat voor die aanvangsdatum voltooi

is nie al word sodanige kommissie eers na die aanvangsdatum uitbetaal. (Sien artikel 78(3A)(b).)

‌28/3/29-14 January 1993

‌Question‌‌‌

Advertising services - commencement date

Advertensiedienste - aanvangsdatum

An invoice is issued to a client on 30 September 1991 in respect of advertising services rendered during

the month of September 1991. Must VAT be levied on the total invoiced amount?

Answer

Advertising services were taxable supplies for the purposes of the Sales Tax Act. The invoice must reflect

VAT on the full amount levied in terms of section 78(5)(b) read in conjunction with section 78(3)(b).

‌28/3-30 August 1991

‌23‌

‌Cancellation of a tax invoice - credit note

‌Kansellasie van ‘n belastingfaktuur - kredietnota

Question

The cancellation of a tax invoice is achieved through the issuing of a credit note. Will the issuing of a new tax invoice contravene section 20(1)(i) which stipulates that it is unlawful to issue more than one tax invoice for each taxable supply?

Answer

Where a credit note is issued to cancel a tax invoice the effect thereof will be to cancel the supply in respect of which a tax invoice was issued. Accordingly there will not be two tax invoices issued in respect of the same supply. The issue of a new tax invoice in respect of the new supply is therefore in order. (See section 21(3).)

‌28/3/23-5 February 1992

‌24‌

‌Going concern - purchased prior to VAT registration

‌Lopende saak – aangekoop voor BTW-registrasie

Question

A person commenced an enterprise on 1 January 1992 and applied for registration within 21 days of becoming liable to do so. The vendor purchased a going concern after the commencement date of his enterprise but prior to receipt of his VAT registration number. Will this transaction be subject to tax at the zero rate as contemplated in section 11(1)(e)?

Answer

Where branch offices of SARS are satisfied that the going concern of a registered vendor has been purchased, that the business is a going concern and that the purchaser was not registered due to ignorance or an oversight, but that he qualified for registration, the date of registration in terms of section 23(4) can be backdated to the date at which the going concern was purchased. The transaction will then be subject to VAT at the zero rate.

‌28/3/1-12 February 1992

‌25‌

‌Directors’ fees - paid into partnership

‌Direkteursfooie – oorplasing na vennootskappe

Question

Directors receive fees for services rendered in their capacities as directors of various companies. These fees are then paid to partnerships of which they are members. Will the transfer of these fees from the companies of which they are directors to the partnerships of which they are members, be subject to VAT?

Answer

Fees received by directors will not attract VAT as they constitute remuneration as contemplated in the Fourth Schedule to the Income Tax Act and are therefore not deemed to be the carrying on of an enterprise in terms of the third proviso to the definition of "enterprise". The subsequent transfer of these funds will not constitute consideration and will therefore not be subject to VAT.

‌28/3/1-11 June 1992

‌26‌

‌Opvoedkundige dienste - pre-primêre onderwys

‌Educational services - pre-primary education

Vraag

Voldoen die registrasie van ’n voorskoolse opvoedkundige sentrum by die Departement van Volkswelsyn

en Pensioene aan die vereistes van ’n erkende opvoedkundige owerheid?

Antwoord

In die mediaverklaring van 30 September 1991 is vrystelling verleen aan crèches en naskoolsentrums wat aan die vereistes van enige staats- of provinsiale gesondheidsowerheid voldoen. Gevolglik sal enige crèche of naskoolsentrum van ’n openbare aard wat aan die vereistes van sodanige owerheid voldoen van BTW vrygestel wees. Die begrip "van ’n openbare aard‘’ wat in hierdie konteks gebruik word, beteken dat die fasiliteit aan die publiek of ’n sektor van die publiek beskikbaar is en nie dat die inrigting deur die Staat of ’n inrigting wat nie op winsbejag ingestel is, bedryf word nie.

‌28/3-19 August 1991 en gewysig op 1 September 2002.

‌Nota

As gevolg van die invoeging van artikel 12(j), wat vanaf 1 Maart 2002 in werking tree, is dit nou duidelik dat die diens van die versorging van kinders deur ‘n créche of naskoolversoringsentrum ‘n vrygestelde lewering is.

‌Vraag‌‌‌

Invordering van skulde - prokureur

Collection of debts - attorney

Is die gelde (invorderingskommissie) wat ’n prokureur ontvang vir die suksesvolle invordering van skulde

belasbaar?

Antwoord

As gevolg van die skrapping van artikel 2(1)(m) met ingang van 1 April 1995 word skuldinvorderingsdienste nie meer as ’n finansiële diens beskou nie en is sodanige dienste dus aan BTW teen die standaardkoers ingevolge artikel 7(1)(a) onderhewig.

‌28/3-9 August 1991 en gewysig op 19 September 1995.

‌28‌

‌Ondernemer lewer dienste aan homself -

insetbelastingkrediet

‌Vendor supplies services to himself - input tax credit

Vraag

’n Ondernemer lewer belasbare dienste aan ander ondernemers. Die ondernemer is geregtig op ’n insetbelastingkrediet ingevolge die bepalings van artikel 16(3) en die dienste is ook nie van die aard waarvolgens ’n insetbelastingkrediet ’n ondernemer ingevolge artikel 17(2) ontsê kan word nie. Die ondernemer maak self van die dienste gebruik in die loop van sy onderneming. Moet die ondernemer homself belas op die dienste wat hyself gebruik?

Antwoord

Die ondernemer moet nie BTW hef op die dienste wat hy aan homself lewer nie. Die ondernemer is egter geregtig op ’n insetbelastingkrediet ten opsigte van dienste wat hy aan homself lewer aangesien die dienste aangewend word om belasbare lewerings te maak. (Sien artikel 17(1).)

‌28/3/29-29 January 1992

‌29‌

‌Question‌

Mineral rights - second-hand goods

Minerale regte – tweedehandse goed

A company acquires mineral rights from non-vendors which will enable it to develop an area for mining purposes. In return the non-vendors will receive shares in the company. Is the company entitled to a notional input tax credit in respect of the acquisition of the mineral rights?

Answer

The disposal of mineral rights by a non-vendor to a vendor constitutes the supply of second-hand goods for purposes of claiming an input tax deduction in terms of section 16(3)(a)(ii), read with paragraph (b) of the definition of input tax in section 1.

Transfer duty will be payable in respect of the disposal of mineral rights and the issue of shares to the

vendor companies will constitute payment for purposes of paragraph (b) of the definition of "input tax".

‌28/3/12-29 January 1993

‌Vraag‌‌‌

Insetbelasting - toedeling

Input tax - apportionment

Die kosteberekeningsbasis is die mees praktiese metode vir ’n ondernemer om die gedeeltelike belasbare gebruik van goedere en dienste te bepaal. Kan daar van hierdie metode gebruik gemaak word om insetbelasting aftrekbaar te bereken?

Antwoord

Ten einde die bedrag aan insetbelasting wat as ’n aftrekking geëis kan word, te bepaal, moet die direkte toedelingsbasis eers gebruik word. Die insetbelastingaftrekking wat geëis kan word ten opsigte van die verkryging van enige goed of dienste wat nie direk aan die doen van belasbare lewerings toegeskryf kan word nie, mag vanaf die November 2000 belastingtydperk slegs volgens die omsetgebaseerde metode geëis word, behalwe waar die Kommissaris skriftelike toestemming vir ‘n ander spesiale metode verleen het – Sien die BTW Gids vir Ondernemers (BTW 404) uitgereik gedurende April 2000, saamgelees met voorbehoudsbepaling (iii) van artikel 17(1), asook BTW Nuusbrief No. 15 gedateer Augustus 2000.

‌28/3-11 September 1991 en gewysig op 1 September 2002.

‌31‌

‌Prizes in money - incentive to employees

‌Pryse in geld – aansporing vir werknemers

Question

A vendor conducts competitions for personnel in terms of which prizes are allocated to staff members in an attempt to increase productivity. Is the vendor entitled to an input tax credit in respect of prizes awarded to staff members?

Answer

An input tax credit for money prizes awarded to employees in terms of an incentive competition may not be claimed. Such an incentive constitutes remuneration for the rendering of services by an employee to his employer in the course of his employment. (See proviso (iii) to the definition of "enterprise".)

If the prize awarded to an employee takes the form of goods or services acquired by the employer, an input tax deduction may be claimed subject to the provisions of section 17, but as the prize constitutes a fringe benefit, output tax must be accounted for when the prize is given to the employee in terms of section 18(3).

‌28/3/8 20 January 1993

‌32‌

‌Vraag‌

Onderverhuring van wonings - huisvesting

Sub-letting of dwellings - accommodation

Maatskappy A verhuur ’n woningkompleks aan maatskappy B wat op sy beurt die wonings onderverhuur

aan uiteindelike huurders.

Is die hoofhuur tussen A en B vrygestel van BTW in terme van artikel 12(c)?

Antwoord

Die hoofhuur tussen A en B sal vrygestel wees van BTW ingevolge artikel 12(c) van die Wet indien die kompleks aan die omskrywing van "woning" in artikel 1 van die Wet beantwoord, en as maatskappy B die kompleks huur met die uitsluitlike bedoeling om huisvesting in daardie kompleks aan natuurlike persone te lewer.

‌28/3/1-5 December 1991 en geskrap vanaf 1 September 2002. (Sien beslissing no. 386.)

‌33‌

‌Subsidies - opvoedkundige inrigting

‌Subsidies - educational institution

Vraag

’n Universiteit ontvang subsidies van die Staat wat hom in staat stel om sy werksaamhede voort te sit. Is

BTW op die subsidies betaalbaar?

Antwoord

Staatsubsidies wat ontvang word is vergoeding ten opsigte van die lewering van vrygestelde dienste en sal dus nie aan BTW onderhewig wees nie. (Sien voorbehoudsbepaling (v) van die woordomskrywing van "onderneming".)

‌28/2/1-29 November 1991

‌34‌

‌Insurance consultants - commission earned

‌Versekeringskonsultante - kommissie verdien

Question

Will the commission earned on life insurance policies and short-term insurance policies by agents/consultants be subject to VAT?

Answer

As a result of the deletion of the words "or arranging" from section 2(1)(n) with effect form 1 April 1995, the commission earned in respect of life insurance policies is no longer exempt from VAT in terms of section 12(a) read with the definition of financial services in section 2.

‌28/3/1-16 September 1991

‌Note

Section 2(1)(n) has been deleted on 3 June 1996 with effect from 1 October 1996, but does not alter the

effect of this ruling.

‌Question‌‌‌

Life and short-term insurance – apportionment

Lewens- en korttermynversekering - toedeling

How is input tax to be apportioned between long and short-term insurance?

Answer

Where a consultant deals with long and short-term insurance policies, input tax will be allowed to the extent that it is wholly attributable to taxable supplies. Where goods or services acquired are partly attributable to the making of taxable supplies, as from the November 2000 tax period, the only method of apportionment that can be used without prior approval from SARS will be the turnover-based method.

Other methods may also be used for the apportionment between taxable and non-taxable usage of goods

and services acquired, but only with the approval of the Commissioner.

‌See VATNEWS No. 15 issued in August 2000.

‌28/3/1-16 September 1991 and amended on 19 April 2002.

‌Note

With effect from 1 April 1995 both long term and short term insurance commissions are subject to VAT at

the standard rate in terms of section 7(1)(a) in consequence to the amendment of section 2(1)(n).

‌19 September 1995

‌Question‌‌‌

Pawnbroker - storage charges

Pandjieswinkel - stoorgelde

Will VAT be levied on a storage fee charged by a pawnbroker?

Answer

A storage fee payable to a pawnbroker is regarded as a service necessary for the supply of a financial service and

is therefore exempt from VAT in terms of section 12(a).

‌28/3/1-6 March 1992 and amended on 1 September 2002.

‌Note

Due to the amendment to section 12(a) with effect from 3 June 1996 the storage fee charged by a

pawnbroker will be subject to VAT at the standard rate in terms of section 7(1)(a).

‌37‌

‌Toedeling - insetbelasting - belasbare en vrygestelde

lewerings

‌Apportionment - input tax - taxable and exempt supplies

Vraag

Universiteit A het oorhoofse koste (bv versekering, skoonmaakdienste, water en elektrisiteit en sekuriteitsdienste) wat aangegaan word vir beide die maak van belasbare sowel as vrygestelde lewerings. Daar is vasgestel dat die totale vloeroppervlaktes van departemente wat slegs belasbare lewerings en gedeeltelike belasbare lewerings maak 9,96 persent uitmaak van die totale vloeroppervlakte van die universiteit. Kan 9,96 persent van die BTW betaal op oorhoofse koste wat nie direk toegedeel kan word aan belasbare lewerings of vrygestelde lewerings nie, toegelaat word as ’n insetkrediet?

Antwoord

Ingevolge artikel 17(1) mag ’n ondernemer wat goed of dienste verkry het, gedeeltelik vir gebruik, verbruik of lewering in die loop van die doen van belasbare lewerings, ’n toedeling maak van die belasting betaal ten einde die insetbelasting te bereken. Hierdie toedeling moet gemaak word in die verhouding waartoe die doen van belasbare lewerings tot die totale gebruik van die bedoelde goed of diens staan. In die geval van Universiteit A waar oorhoofse koste met betrekking tot geboue aangegaan word en bepaal is dat 9,96 persent van die vloeroppervlakte gebruik word in die loop van die doen van belasbare lewerings, mag 9,96 persent van die vloeroppervlakte gebruik word in die loop van die doen van belasbare lewerings, mag 9,96 persent van die BTW op bogenoemde oorhoofse koste as insetbelasting geëis word.

‌Sien Gids vir Ondernemers paragraaf 12.12.2.2 vir spesiale metodes.

‌28/3/1-10 Maart 1992 en gewysig op 1 September 2002.

‌Nota

Vanaf die November 2000 belastingtydperk mag slegs volgens die omsetgebaseerde metode geëis word, behalwe waar die Kommissaris skriftelike toestemming vir ‘n ander spesiale metode verleen het – sien die BTW Gids vir Ondernemers (BTW 404) uitgereik gedurende April 2000, saamgelees met voorbehoudsbepaling (iii) van artikel 17(1), asook BTW Nuusbrief No. 15 gedateer Augustus 2000.

‌Vraag‌‌‌

Kongresgelde - deposito’s betaal

Congress fees - deposits paid

Moet BTW op deposito’s betaal word waar inskrywingsgelde as deposito’s gevorder word en dan later

aangewend word teen die uitreiking van fakture op die tydstip waarop die kongres ’n aanvang neem?

Antwoord

Aangesien die inskrywingsgelde vir die kongres as deposito’s gevorder word wat eers later aangewend sal word wanneer fakture uitgereik word op die tydstip waarop die kongres ’n aanvang neem, sal die gelde nie beskou word as betaling gemaak vir die lewering nie tot tyd en wyl die deposito’s as vergoeding aangewend of verbeur word. (Sien woordomskrywing van "vergoeding" in artikel 1.)

‌28/3/1-25 Februarie 1992

‌Question‌‌‌

Returnable containers

Terugsendbare houers

Will the deposits on returnable containers attract VAT, and if so, must the VAT be refunded to the client on

the return of such containers?

Answer

Section 64(2) provides that the amount of any deposit payable to or refundable by a vendor, in respect of a returnable container, shall be deemed to include tax. In terms of the proviso to section 21(1)(d) "where the deposit in respect of the supply of a returnable container is refunded by any vendor, such vendor shall be deemed to have made the supply in respect of which the deposit was charged".

‌28/3/1-7 May 1992

‌40‌

‌Management fee - racehorses – winnings

‌Bestuursgelde – renperde - wengeld

Question

The owner of the racehorses and the manager share the income generated by the racehorses on a 50/50 basis in terms of an agreement drawn up between the two parties concerned. Who will be responsible to account for the VAT collected on the income generated by the horses?

Answer

The owner will be required to account for 100 per cent of the output tax on receipt of money generated by the horses. The 50 per cent of the income generated by the horses to which the manager is entitled in terms of the agreement is subject to VAT at the standard rate in terms of section 7(1)(a). The manager must account for output tax, while the owner will be entitled to an input tax deduction in respect of the consideration paid to the manager. (Sien sections 16(3) and 16(4).)

‌28/3/1-26 March 1992

‌41‌‌

‌Credit guarantee - foreign and local debts Kredietwaarborg – buitelandse- en binnelandse skulde‌

Question

Is the underwriting of an insurance policy in terms of which the insured is indemnified in the event of loss arising

in respect of foreign and local debts in South Africa a financial service?

Answer

The provision of indemnity under a credit agreement or a debt security is a financial service as contemplated in

section 2(1)(h) and therefore an exempt supply in terms of section 12(a).

28/3-9 August 1991 and amended on 1 September 2002.

‌Note

As from 1 October 1996 the insurance policy is subject to VAT at the standard rate in terms of section 7(1)(a) as

a result of the deletion of section 2(1)(h).

‌42‌

‌Prinsipaal/agent - insetbelastingkrediet - faktuur Principal/agent - input tax credit - invoice‌

Vraag

Kan ’n prinsipaal ’n insetbelastingkrediet eis ten opsigte van ’n belastingfaktuur wat aan sy agent uitgereik is?

Antwoord

Ingevolge artikel 54(2) word geag dat enige belasbare lewering van goed of dienste wat deur ’n verskaffer aan ’n agent gedoen word, aan die prinsipaal gedoen word. Gevolglik, is slegs die prinsipaal geregtig om die insetbelastingkrediet te eis. Die voorbehoudsbepaling by daardie artikel bepaal dat die relevante BTW- dokumentasie wel in die naam van die agent uitgereik mag word mits die agent voldoende aantekeninge in verband met sy prinsipaal behou.

‌28/3/2-19 November 1991

‌43‌

‌Insetbelastingkrediet - plante en blomme Input tax credit - plants and flowers‌

Vraag

’n Ondernemer verkry plante en blomme om sy kantore te verfraai. Ruikers word ook na personeel gestuur wat hospitalisasie ontvang. Kranse word ook gestuur na die begrafnisse van werknemers se naasbestaandes. Kan ’n insetbelastingkrediet ten opsigte van hierdie uitgawes geëis word?

Antwoord

Die verkryging van plante, blomme en ruikers val buite die omskrywing van onthaal en ’n insetbelastingkrediet word dus nie ingevolge artikel 17(2)(a) ontsê nie. Die ondernemer is dus daarop geregtig om ’n insetbelastingkrediet ten opsigte van die uitgawes te eis.

‌28/3/1-10 March 1992

‌44‌

‌Verhaling van koste - motorvoertuie Recovery of costs - motor vehicles‌

Vraag

’n Ondernemer huur ’n motor en ’n insetbelastingkrediet word ingevolge artikel 17(2)(c) hom ontsê. Die koste word van sy kliënt verhaal as deel van die vergoeding vir die diens wat hy aan sy kliënt lewer. Moet BTW op die verhaling van die koste gevorder word?

Antwoord

Die verhaling van koste as deel van ’n diens wat gelewer word vorm deel van vergoeding en BTW is dus daarop

hefbaar. Die kliënt kan dit dan weer op sy beurt as ’n insetbelastingkrediet eis.

Waar die motor aan die kliënt gelewer word en ’n insetbelastingkrediet die leweraar ingevolge artikel 17(2)(c) ontsê is, word die goed geag anders as in die loop of ter bevordering van die leweraar se onderneming gelewer te wees en sal BTW dus ingevolge artikel 8(14) nie hefbaar wees op die transaksie nie. Daar is dus nie ’n insetbelastingkrediet wat die kliënt kan eis nie.

Waar die ondernemer (leweraar) wel op ’n insetbelastingkrediet geregtig is, sal die transaksie aan BTW

onderhewig wees en die ontvanger sal ’n insetbelastingkrediet ingevolge artikel 17(2) ontsê word.

‌28/3/1-10 March 1992

‌45‌

‌Parkeergarages - plaaslike besture Parking garages - local authorities‌

Vraag

’n Plaaslike owerheid verhuur parkeergarages en terreine uit. Moet BTW op die verhuring daarvan gehef word?

Antwoord

Ingevolge Goewermentskennisgewing No. 2570 van 21 October 1991 bedryf ’n plaaslike owerheid ’n onderneming vir soverre parkeerterreine en garages uitverhuur word en sal BTW hefbaar wees op gelde wat ontvang word vir die uitverhuring daarvan. Enige gelde betaalbaar by parkeermeters sal egter nie aan BTW onderhewig wees nie.

‌28/3/1-10 March 1992

‌46‌

‌Mielieraad - heffings Maize board - levies‌

Vraag

Is die gewone, spesiale en algemene heffings wat deur die Mielieraad opgelê word kragtens die Wet belasbaar?

Antwoord

Die gewone, spesiale en algemene heffings deur die Mielieraad, insluitende heffings op mielies wat deur die raad

teen die nulkoers gelewer word, is aan BTW ingevolge artikel 7(1)(a) onderhewig.

‌28/3/1-22 April 1992

‌47‌

‌Eksekusieverkopings - balju - goed en vasgoed Sales in execution - sheriff - goods and fixed property‌

Vraag

Die balju verkoop ’n skuldenaar (nie ondernemer) se goed aan ’n ondernemer ter vereffening van ’n skuld. Omrede die nodige sertifikaat ingevolge artikel 8(1)(b) nie van die skuldenaar verkry kon word nie moet BTW op die verkoop van die goed gehef word. Wie is verantwoordelik vir die uitreiking van ’n belastingfatuur ten opsigte van die transaksie en sal die koper op ’n insetbelastingkrediet ten opsigte van die transaksie geregtig wees?

Antwoord

Indien die sertifikaat nie verkry word nie, is BTW ingevolge artikel 8(1) op die transaksie hefbaar. Die balju sal ’n belastingfaktuur uitreik en die koper sal op ’n insetbelastingkrediet geregtig wees ingevolge paragraaf (a) van die woordomskrywing van insetbelasting in artikel 1.

Waar die sertifikaat ten opsigte van die verkoop van vasgoed nie verkry kan word nie, moet die balju die Ontvanger nader om vas te stel of die persoon wel as ’n ondernemer geregistreer is al dan nie. Indien die persoon nie geregistreer is nie sal geen BTW op die transaksie hefbaar wees nie. Daar sal dus ook nie ’n belastingfaktuur uitgereik word nie. Die koper sal wel ’n insetbelastingkrediet kan eis ingevolge paragraaf (b) van die woordomskrywing van "insetbelasting" in artikel 1.

‌28/3/2-28 September 1991

‌48‌

‌Onthaal - werknemer verplaas Entertainment - employee transferred‌

Vraag

’n Werknemer word deur sy werkgewer verplaas. In afwagting op ’n permanente verblyfplek gaan hy intussen in ’n hotel tuis. Die werkgewer betaal hierdie koste namens hom. Is die werkgewer geregtig op ’n insetbelastingkrediet ten opsigte van die uitgawes?

Antwoord

Ingevolge artikel 17(2)(a)(ii) word die werkgewer die insetbelastingkrediet ontsê aangesien die werknemer in die

situasie nie verplig is om tyd weg van sy gewone werk (sy nuwe werksplek) en verblyfplek deur te bring nie.

‌28/3/4-24 October 1991

‌49‌

‌Advertising – publishers Advertensies – uitgewers‌

Question

Do publishers bear any responsibility for the manner in which their advertisers display their prices in the

advertisements which they publish?

Answer

In terms of section 65 "the vendor shall in his advertisement or quotation state that the price includes tax . . .," which makes it the responsibility of the advertisers to correctly display the prices in the advertisements that are published. The publishers are therefore not responsible for the manner in which advertisers display their prices in advertisements.

‌28/3/2-24 October 1991

‌50‌

‌Settlement discount – calculation Betalingskorting - berekening‌

Question

Must the settlement discount be deducted from the value of or the consideration for the supply?

Answer

The settlement discount can be deducted from either the value of or the consideration for the supply. If the consideration on the tax invoice has changed due to the allowance of a settlement discount, a credit note must be issued to account for the reduction in tax shown on the tax invoice, unless the conditions of the discount appear on the face of the tax invoice, in which case a credit note is not required in terms of proviso (c) to section 21(3).

‌28/3/2-24 October 1991

‌51‌

‌Foreign advertiser - local advertising Buitelandse adverteerder – plaaslike advertensies‌

Question

A foreign advertiser places an advertisement in a local magazine. Is the supply of this advertising regarded as an

export and therefore a zero-rated supply for VAT purposes?

Answer

If all the conditions of section 11(2)(l ) are met, the supply of the advertising service will be subject to VAT at the

zero rate.

28/3/2-24 October 1991

‌52‌

‌Local package tours - foreign tourists – commission

‌Plaaslike toerpakette – buitelandse toeriste - kommissie

Question

An overseas tour wholesaler requests a South African travel agent to make up a tour package at a price per tourist. The agent assembles the package, adds his mark-up, and sells the package to the overseas wholesaler. The wholesaler contracts overseas with tourists for the sale of the tour. Should the supply by the local travel agent be zero-rated?

Answer

The constituent parts of a package may be considered to be separate supplies. The South African travel agent may accordingly apply the zero rate to international travel, an exemption to local bus transport and the standard rate to goods and services supplied to tourists locally, such as hotel accommodation (see sections 8(15) and 10(22)). It is not necessary for the different elements of the package to be invoiced to the foreign tour operator separately, but the travel agent must keep the necessary records to show what portion of the supply has been properly attributed to each element.

If a South African travel agent arranges a tour as agent for an overseas tour operator, the fee he receives from

the tour operator will be zero-rated (See section 11(2)(l ).)

‌28/3/2-27 September 1991

‌53‌

‌Newspaper competitions – betting Koerantkompetisies - weddenskappe‌

Question

A newspaper conducts competitions in an attempt to increase the circulation of the newspaper. No fee is levied for entering the competition but it is a requirement that the participants acquire the newspaper over a period of time. Prizes include goods, holidays and cash prizes. Will the provisions of section 8(13) apply to the competitions conducted by the newspaper, thus enabling it to claim an input tax credit in terms of section 16(3)(d) in respect of prizes awarded in the competition?

Answer

Section 8(13), provides that where any person bets an amount on the outcome of a race or any other event or occurrence, the person with whom the bet is placed, shall be deemed to supply a service to such first-mentioned person. It is accepted that where a person purchases a newspaper, he has, by so doing, obtained the right to participate in a competition and the provisions of section 8(13) therefore apply.

As the provisions of section 8(13) apply the vendor may apply the provisions of section 16(3)(d) to claim an input credit equal to the tax fraction of the amount paid as a monetary prize or winnings to the participant. Where the prize takes the form of goods or services the VAT paid on the purchase of these prizes will be deductible as input tax in the normal manner, that is, if the vendor is in possession of a valid tax invoice. The exclusions in terms of section 17(2)(a) must, however, be born in mind. (See ruling no. 151.)

‌28/3/8-20 January 1993

‌54‌

‌Agente - belastingfakture - byhou van rekords Agents - tax invoices - record keeping‌

Vraag

’n Belastingfaktuur word aan ’n agent wat namens sy prinsipaal optree uitgereik. Wie moet fisies die faktuur

behou vir rekorddoeleindes?

Antwoord

Die faktuur kan in die agent se besit bly mits voldoende aantekeninge gehou word sodat die besonderhede van

die prinsipaal bepaal kan word ingevolge artikel 54(3).

‌28/3/2-28 September 1991

‌55‌

‌Agent/principal relationship - payment of VAT Agent/prinsipaal verwantskap – oorbetaling van BTW‌

Question

May an agent issue tax invoices on behalf of his principal and pay over VAT collected on behalf of his principal?

Answer

If both the principal and agent are registered vendors the agent may issue tax invoices, credit notes and debit notes on behalf of the principal in terms of section 54(1). The principal may not issue a tax invoice, debit or credit note for the same supply. VAT must be accounted for by the principal and not by the agent.

‌28/3/2-30 December 1991

‌56‌

‌Foreign principal – registration Buitelandse prinsipaal - registrasie‌

Question

A company carrying on business in the United Kingdom sells products in the Republic by way of an arrangement with a local company. This arrangement involves the local manufacturing and distribution of the company’s products. Must the British company register for VAT?

Answer

The British company must register for VAT purposes if its taxable turnover exceeds the annual threshold mentioned in section 23(1). It must appoint a representative vendor in terms of section 46(f) and open a bank account in the Republic.

‌28/3/2-28 November 1991

‌57‌

‌Branches and divisions - input tax credit Takke en afdelings - insetbelastingkrediet‌

Question

Various separately registered branches of a division receive goods from a supplier. The supplier then issues tax invoices to the central branch. These input tax credits are then transferred to the various branches by way of journal entries. This leads to the situation where the separate branches are unable to claim input credits as the central branch is in possession of the tax invoices. Can the separate branches claim input tax credits in respect of journal entries?

Answer

It is important to establish if the central branch is in actual fact only acting as an agent on behalf of his separately registered branches. If so, in terms of section 54(2) where any vendor makes a taxable supply of goods or services to an agent (central branch) who is acting on behalf of another person who is the principal (separately registered branch) for the purposes of that supply, that supply shall be deemed to be made to the principal and not the agent.

If the central branch maintains sufficient records to enable the name, address and registration number of the separate branch to be ascertained, the separate branch may claim an input tax credit based on journal entries in respect of supplies made to it.

However, if the cental branch is held responsible for the payment to the supplier, in which case the central branch is acting as a principal for his own account, then such branch is responsible to issue a tax invoice to each of the separately registered branches. (See section 20.)

‌28/3/2-8 August 1991 and amended on 1 September 2002.

‌58‌

‌Invoices - non-vendors - agent/principal relationship Fakture – nie-ondernemers – agent/prinsipaal verwantskap‌

Question

When a vendor receives invoices from non-vendors in respect of charges, the invoices obviously do not include VAT and the question arises as to whether he must account for VAT when he in turn invoices such charges to clients. Does he act as an agent or principal?

Answer

A vendor is only acting as an agent for purposes of section 54 when the legal obligations attaching to agency are

complied with. Thus if he acts as principal he has to charge VAT.

‌28/3/1-24 April 1992

‌59‌

‌Executors’ remuneration - non-resident Eksekuteursvergoeding – nie-inwoner‌

Question

Where a non-resident dies leaving a South African estate, a trustee may either be instructed by a non-resident executor to administer the estate or may be appointed as executor. Are these fees standard or zero-rated?

Answer

In terms of section 11(2)(l ) the zero rate would be applicable where the services of the trustee are supplied to a person who is not a resident of the Republic and who is outside the Republic at the time of the services are rendered, if not, the services will be taxable at the standard rate. Where the executor is also a non-resident, the services will be zero-rated, provided he is outside the Republic at the time the services are rendered.

‌28/3/1-24 April 1992

‌60‌

‌Foreign exchange - gains and losses Buitelandse valuta – winste en verliese‌

Question

When a vendor invoices a non-resident client there is a small foreign exchange gain or loss because of fluctuations in currency exchange rates. This is set off against a foreign exchange gains and losses account. Occasionally the services will be standard rated and the question arises whether VAT must be charged on the foreign exchange gains and reversed on the foreign exchange losses.

Answer

Foreign exchange gains or losses do not influence the value of the supply and as such it is not necessary to issue debit or credit notes as envisaged in section 21. The nature of such transactions are viewed as the supply of money and therefore has no VAT implications.

‌28/3/1-24 April 1992 and amended on 1 September 2002.

‌61‌

‌Gold loan agreement security Goudleningsooreenkoms sekuriteit‌

Question

Will VAT be levied on gold loan agreement security charges?

Answer

In order to qualify as a financial service in terms of section 2(1)(h), the securities for the repayments obligations must be the provision of a security in respect of the performance of an obligation under a debt security. A debt security means any interest in or right to be paid money which is owing. The definition of money does not include

gold. An obligation to return gold in the future does not constitute a debt security and consequently does not fall

within the ambit of section 2(1)(h). VAT will therefore be levied on the security charges.

‌28/3/1-15 May 1992

‌Note

Section 2(1)(h) has been deleted with effect from 1 October 1996, but does not alter the effect of this ruling.

‌62‌

‌Regional establishment levies - no taxable supplies Streekvestigingsheffings – geen belasbare lewerings‌

Question

Company A deals in mineral rights, and earned no income from dealing in mineral rights for a financial year. Can

company A claim an input tax credit for the regional establishment levies paid during that year?

Answer

The VAT on regional establishment levies payable on income transactions not subject to output VAT must be excluded from the input VAT that can be claimed directly, since it relates to items not used in the course of making taxable supplies, and the input VAT can therefore not be claimed. (See sections 16(2), 16(3), 17(1) and 20.)

‌28/3/1-5 May 1992

‌63‌

‌Input tax credit – apportionment Insetbelastingkrediet - toedeling‌

Question

Ninety percent of a vendor’s supplies are non-taxable. What apportionment of input tax may be made?

Answer

For the apportionment of input tax on transactions in respect of which input tax can be claimed by allocation, the statement that at least 90 percent of such expenditure relates to non-taxable supplies is acceptable and a credit amounting to 10 percent of the input tax on expenses can be claimed by allocation. This is in contrast with the position where 90 percent or more of the input is used for the making of taxable supplies when 100 percent of the input tax may be claimed.

Note

As from 24/11/99 the percentage applied for taxable supplies must now exceed 95% before a 100% can be

claimed (deminimus rule – see section 17(1)).

‌28/3/1-5 May 1992 and amended on 19 April 2002.

‌64‌

‌Input tax credit - prospecting and investigations Insetbelastingkrediet – prospektering en ondersoeke‌

Question

Can VAT incurred on prospecting, research, studies and investigations and related expenditure such as legal

expenses be claimed as input tax?

Answer

The input VAT on the abovementioned expenses can be claimed in full as input tax, if these expenses were

incurred in the course or furtherance of an enterprise. (See sections 16(2), 16(3), 17(1) and 20.)

‌28/3/1-5 May 1992

‌65‌

‌Transport services - local clients - BLNS countries

‌Vervoerdienste – plaaslike kliënte – BLNS-lande

Question

A vendor supplies transport services to local clients. He delivers goods to local destinations and in some instances goods are delivered to an address in one of the BLNS countries. Must VAT be levied at the standard rate on these transport services?

Answer

The services which are rendered to principals, where such services are supplied directly to a person who is a

resident of the Republic are standard rated in terms of section 7(1)(a).

However, in terms of section 11(2)(a)(ii) the transportation of goods from a place in the Republic to a place in an

export country, including Botswana, Lesotho, Namibia and Swaziland, is zero-rated.

‌28/3/2-20 January 1992

‌66‌

‌Input tax credit - development of fixed property Insetbelastingkrediet – ontwikkeling van vaste eiendom‌

Question

Company A, a subsidiary of Company B, incurs development cost on a property which Company B owns. Can Company A claim the input tax in respect of the development of this property which it will use as part of its enterprise?

Answer

Although ownership of the fixed property concerned vests in Company B, the development costs to the may be claimed in terms of sections 16(2), 16(3), 17(1) and 20 by Company A, if the said expenditure (development) are used, in the course of making taxable supplies.

‌28/3/2-24 March 1992 and amended on 1 September 2002.

‌67‌

‌Feeding costs - recovered from principal by agent Voerkoste – verhaal van prinsipaal deur agent‌

Question

A farmer makes use of an agent who is registered for VAT purposes to sell his cattle and sheep. The agent recovers any costs which he incurs in respect of the feeding of the cattle and sheep from the farmer. Must VAT be levied on the recovery of these costs?

Answer

The mere fact that the agent is registered does not alter the nature of the supply. It should be established whether the agent is responsible for the upkeep of the cattle in his own right or whether the principal (farmer) remains responsible. If the agent recovers the cost from the (farmer) principal, as disbursements made on behalf of the principal, the principal remains responsible for the cost of the animal feed and accordingly the recovery of the cost will have no VAT implications. (See section 54.)

‌28/3/2-10 February 1992 and amended on 1 September 2002.

‌68‌

‌Estate agent - commission from financial institution Eiendomsagent – kommissie van finansiële instelling‌

Question

An estate agent earns commission from a financial institution on whose behalf it operates an agency, that is, accepting deposits and paying out monies on savings and other accounts held by members of the public with that institution. Should the estate agent (vendor) charge the financial institution VAT on the commission received?

Answer

The commission received by an estate agent from a financial institution in respect of an agency operated on behalf of such institution will not be subject to VAT as the services rendered by the estate agent constitute financial services in terms of sections 2(1)(b) and (f) which are exempt in terms of section 12(a). However, commission relating to the renewal or variation of a debt security, equity security, participatory security or credit agreement will be subject to VAT at the standard rate in terms of section 7(1)(a) with effect from 1 October 1996.

‌28/3/2-14 February 1992, amended on 19 September 1995 and 1 September 2002.

‌69‌

‌Estate agent - commission for bond application or introductory fee

‌Eiendomsagent – kommissie vir verbandaansoek of bekendstellingsfooi

Question

Financial institutions pay estate agents a commission where the agent, having sold the property, then completes the documentation necessary for the institution to consider and grant a bond to the agent’s client or when the agent merely introduces a client to the institution which grants a bond to him. Should the estate agent in both these circumstances be charging the financial institution VAT?

Answer

As a result of the deletion of the words "or arranging" from section 2(1)(n) with effect from 1 April 1995, the services supplied by an estate agent in arranging bond finance are no longer exempt from VAT as these services do not constitute financial services which are exempt in terms of section 12(a).

‌28/3/2-14 February 1992 and amended on 19 September 1995.

‌Note

Section 2(1)(n) was deleted with effect from 1 October 1996, but does not alter the effect of this ruling.

‌70‌

‌Estate agent - commission for investing funds Eiendomsagent – kommissie vir maak van beleggings‌

Question

An estate agent receives a commission from a financial institution with whom it has invested funds on behalf of a

client. Should the estate agent charge VAT on this commission?

Answer

As a result of the deletion of the words "or arranging" from section 2(1)(n) with effect from 1 April 1995, the services supplied in regard to arranging the investment of funds are no longer exempt from VAT as these services do not constitute financial services which are exempt in terms of section 12(a).

‌28/3/2-14 February 1992 and amended on 19 September 1995.

‌Note

Section 2(1)(n) was deleted with effect from 1 October 1996, but does not alter the effect of this ruling.

‌71‌

‌Disposal of an asset - block of flats - sectional title Verkoop van ‘n bate – blok woonstelle - deeltitel‌

Question

A company developed a block of flats in 1964. Until March 1991 the company let these flats and received rental income in the normal course of its business. During March 1991 the company decided to dispose of the property. To effect the best proceeds on its investment the company had a sectional title register opened and disposed of the flats on that basis. Up to 29 September 1991 the company disposed of approximately 60 percent of the flats. Will the sale of flats sold on or after 30 September 1991 be subject to VAT?

Answer

The disposal of the flats in these circumstances is not considered to be a supply in the course or furtherance of

an "enterprise" as defined in section 1 and consequently the sale of the flats will not be subject to tax.

‌28/3/2-24 February 1992

‌72‌

‌Tax invoices - travel agent - recovery of costs Belastingfrakture – reisagent – verhaling van koste‌

Question

May travel agents who act as agents pass the charge from the principal to the customer without charging VAT as

the charge is merely a disbursement on behalf of the customer?

Answer

Where the travel agent merely passes the charge from principal to customer the travel agent acts as an agent between the two parties, no VAT is leviable on the disbursements and no input tax may be claimed by the travel agent concerned. (See section 54.)

‌28/3/2-7 July 1992

‌73‌

‌Afslaers/prinsipaal - BTW - nommer nie beskikbaar nie Auctioneers/principal - VAT number not available‌

Vraag

’n Boer (ondernemer) se goed word op ’n veiling verkoop. Die boer kon egter nie sy BTW-registrasienommer aan die afslaer verskaf nie. Die afslaer (ondernemer) betaal nie die BTW wat op die verkoop gevorder is aan die boer oor nie. Moet die boer steeds vir die BTW in sy opgawe verantwoord?

Antwoord

Ingevolge artikel 54(5) moet die lewering van goed, waar die prinsipaal (boer) en afslaer so ooreengekom het,

behandel word asof die lewering deur die afslaer en nie deur die prinsipaal gemaak is nie. Die lewering is aan

belasting onderworpe asof dit deur die afslaer in die loop van sy onderneming gedoen is en hy kan die bedrag en koste behou en aftrek uit die geld in sy besit wat aan die prinsipaal betaalbaar is. Die boer sal dus nie vir die BTW in sy opgawe moet verantwoord nie. Sulke lewerings moet deur hom as nie-lewerings in sy opgawe aangedui word.

‌28/3/2-21 Mei 1992

‌74‌

‌Advocates - agents - input tax credit Advokate – agente – insetbelastingkrediet‌

Question

A group of advocates practise as individuals. The group incurs expenses on behalf of all the individual advocates.

Who must claim input tax in respect of the tax on these expenses?

Answer

One of the registered members would have to be appointed as an agent for the group and receive all the tax invoices from suppliers in respect of supplies made to the group. He would then advise the other members of the amount of input tax which they will be able to claim after having apportioned the expenses.

In terms of section 54(3) he will also have to keep sufficient records to enable the name, address and

registration number of each advocate to be ascertained.

‌28/3/2-10 March 1992

‌75‌

‌Agent/principal relationship Agent/prinsipaalverwantskap‌

Question

A vendor acts as an agent and principal to a client. This creates the problem of having to distinguish agency from other transactions for the purpose of claiming input tax. Can the vendor be regarded as the principal in all his dealings with the client for VAT purposes?

Answer

The vendor cannot be regarded as a principal in all his dealings with his client. The actual relationship between the vendor and client will have to be determined each time in order to ascertain who can claim the input tax credit. (See section 54.)

‌28/3/2-24 January 1992

‌76‌

‌Agents - travelling expenses – recovery Agent – reisonkostes - verhaling‌

Question

Company A recovers travelling expenses, based on a rate per kilometer, from company B. These expenses

include petrol costs. Should VAT be levied on the recovery of these expenses?

Answer

The recovery of travelling expenses incurred, although inclusive of petrol costs, constitutes consideration in respect of a taxable supply and will therefore be subject to VAT in terms of section 7(1)(a).

‌28/3/2-27 February 1992

‌77‌

‌Local authority - letting of market space Plaaslike bestuur – verhuring van markspasie‌

Question

A local authority provides facilities to vendors in respect of a produce market and charges them a fee for the use thereof. Is this fee subject to VAT?

Answer

Government Notice No. 2570 of 21 October 1991 stipulates that a local authority conducts an enterprise in as far as its services relate to those of a produce market. VAT will therefore be levied on fees received in respect of the produce market.

Also see the definition of "enterprise" in section 1.

‌28/3/2-21 October 1991

‌78‌

‌Agent - deliveries to BLNS countries Agent – aflewerings aan BLNS-lande‌

Question

A vendor, acting as an agent on behalf of various branches in the BLNS countries, orders a supplier to deliver

goods to the branches. The supplier invoices the vendor. Is the supply subject to VAT at the zero rate?

Answer

Supplies delivered directly to branches in the BLNS countries will by virtue of the definitions of "exported" and "export country" in section 1 be regarded as exports by the supplier and as such will in terms of section 11(1)(a) read in conjunction with Practice Note No. 2 of 1998 be subject to VAT at the zero rate.

‌28/3/2-28 June 1992

‌79‌

‌Agent/principal relationship - input tax credit – invoices Agent/prinsipaalverwantskap – insetbelastingkrediet - fakture‌

Question

A vendor, acting as an agent on behalf of various separately registered branches, orders a supplier to deliver goods to the branches. The supplier invoices the vendor who in turn forwards the invoices to the various branches. Can the various branches claim input tax credits in respect of these invoices that have been issued to the vendor?

Answer

In order to establish whether a person is acting as agent or principal the contractual liability between the parties needs to be established. Should the vendor be contractually liable for the payment to the supplier, the vendor will be regarded as principal. In this regard the branches may not claim input tax on the tax invoices issued by the supplier but must be in possession of tax invoices issued by the principal. (See section 54.)

‌28/3/2-28 June 1992 and amended on 1 September 2002.

‌80‌

‌Performing artists - employer/employee relationship Uitvoerende kunstenaars – werkgewer/werknemerverwantskap‌

Question

Must VAT be levied on remuneration (in respect of which SITE will be deducted) received by a registered artist?

Answer

An artist working on a freelance basis and operating through an agency to procure employment is an independent contractor. A registered artist will therefore have to account for VAT at the standard rate on the remuneration received from his agent in terms of sections 7(1)(a) and 16(4).

The deduction of SITE would ordinarily indicate that remuneration was paid and therefore an employer/employee relationship exists. However, agencies are obliged to deduct SITE to counter schemes that were implemented to avoid payment of PAYE or SITE. (Note: SITE is calculated on the value of the supply and not on the consideration – see Circular 3 of 1999.)

‌28/3/2-24 October 1991

‌81

‌Performing artists - registration requirements Uitvoerende kunstenaars - registrasievereistes‌

Question

Will freelance artists have to register for VAT purposes if the registration threshold is exceeded due to the receipt

of "one off’‘ payments?

Answer

A freelance artist must register for VAT purposes if his income exceeds R300 000 per annum in terms of section

23(1). If the registration threshold is exceeded due to abnormal circumstances it shall be deemed not to have

exceeded R300 000 in terms of section 23(1). Each case will therefore be judged on its own merits.

See VAT 404 VAT Guide for Vendors – April 2000, Page 7 of Chapter 2.

‌28/3/2-24 October 1991

‌82‌

‌Performing artists - voluntary registration Uitvoerende kunstenaars – vrywillige registrasie‌

Question

Will artists earning less than R300 000 per annum have to register for VAT purposes?

Answer

Freelance artists need not register for VAT purposes if their income from freelance work does not exceed R300 000 per annum. They may, however, apply for voluntary registration should the requirements of section 23(3) be met.

‌28/3/2-24 October 1991

‌83‌

‌Sportklub – onthaal Sport club - entertainment‌

Vraag

’n Sportklub gaan uitgawes aan vir:

die voorsiening van maaltydbewysstukke aan spelers as deel van hulle pakket om by enige restaurant te gaan

eet;

die voorsiening van akkommodasie en etes aan leerlinge wat aan sportbyeenkomste deelneem;

die voorsiening van onthaal aan beamptes, spelers, die pers en spesiale genooides;

die voorsiening van maaltye aan die bestuur van die sportklub;

die voorsiening van geskenke aan sekere persone.

Kan die sportklub ’n insetbelastingkrediet eis ten opsigte van die uitgawes wat hy aangegaan het?

Antwoord

Die sportklub se hoofbedryf is die verskaffing van onthaal soos omskryf in artikel 1. Die onthaal wat gelewer word val binne die bestek van paragraaf (i) van die voorbehoudsbepaling by artikel 17(2)(a) en die sportklub sal gevolglik geregtig wees op ’n insetbelastingaftrekking ten opsigte van die uitgawes wat hy aangegaan het.

‌28/3/29-14 Januarie 1993

‌84‌

‌Auctioneers - auction sales - non-vendors Afslaers – verkope op veiling – nie-ondernemers‌

Question

Can a supply of goods which is normally not taxable be treated as a taxable supply made by the auctioneer at an

auction?

Answer

Persons selling goods through auctions in their private capacities (or vendors selling private assets, that is, not in the course or furtherance of their enterprises), need not have any VAT charged thereon. It could, however, be confusing if some goods sold at an auction were taxable and others at the same auction were not. A provision allowing auctioneers to treat all sales as taxable exists in terms of section 54(5), provided that all the sellers of the goods agree. The sales will then be treated as if they were a supply made by the auctioneer in the course or furtherance of his enterprise. If this approach is adopted, the VAT collected on goods sold on behalf of a non- vendor will be paid directly to the SARS by the auctioneer.

‌28/3/2-24 October 1991

‌85‌

‌Unconditional gifts – bursaries Onvoorwaardelike skenkings – studiebeurse‌

Question

A vendor who has received permission to apply the self-invoicing procedure unconditionally donates money to a

university for bursaries. May the vendor recover the VAT on the donations made to a university as input tax?

Answer

The self-invoicing procedure is conditional on the vendor obtaining and retaining authorization from the vendors on whose behalf an invoice was to be issued. Thus the vendor will not be entitled under that dispensation to issue a tax invoice in respect of any person who was not a vendor for the purposes of the Act. Tax invoices may not be issued in respect of unconditional donations. Such unconditional donations will therefore not include VAT. (See definition of "consideration" in section 1.)

‌28/3/1-19 June 1992

‌86‌

‌Auction sales - remitting of VAT Verkope op veiling – betaling van BTW‌

Question

Can an auctioneer selling goods at an auction remit VAT on behalf of a principal?

Answer

In terms of section 54(1) where an agent makes a supply of goods or services for and on behalf of a principal, that supply shall be deemed to be made by the principal and not by the agent. The principal will therefore be liable to account for the VAT.

‌28/3/2-16 September 1991

‌87‌

‌Estate agent commission - time of supply Eiendomsagentkommisie – tyd van lewering‌

Question

When must an estate agent account for VAT collected on his commission?

Answer

In terms of section 9(1) the VAT liability arises when the estate agent receives the commission or when an invoice in respect thereof is issued, whichever is the earlier. The deed of sale between the purchaser and seller of a property will not constitute an invoice issued by the estate agent.

See VAT Practice Note: No 4 and paragraph 8 of VAT 409.

‌28/3/2-23 October 1991

‌88‌

‌Commercial property - rental collection - estate agent Kommersiële eiendom – huurinvordering - eiendomsagent‌

Question

An agent (vendor) collects rental in respect of a commercial property on behalf of a landlord (non-vendor). Must

VAT be levied on the rental?

Answer

A non-registered person may not charge VAT and consequently VAT will not be levied on the rental of the

commercial property. However, VAT must be levied on the collection fee of the agent in terms of section 7(1)(a).

‌28/3/2-24 October 1991

‌89‌

‌Rental collection - remittance of VAT Huurinvordering – betaling van BTW‌

Question

Who is responsible for remitting VAT collected where both the agent and the landlord are vendors?

Answer

An agent may issue tax invoices on behalf of the principal (landlord) but the principal is ultimately responsible for

remitting the VAT collected in terms of section 54(1).

‌28/3/2-24 October 1991

‌90‌

‌Motorvoertuigverkope - motorhandelaar vir nie-ondernemer Motor vehicle sales - motor dealer for non-vendor‌

Vraag

’n Ondernemer (motorhandelaar) verkoop ’n voertuig namens ’n private persoon (nie-ondernemer). Die voertuig

is nie deel van sy handelsvoorraad nie. Moet BTW op die verkoop van die voertuig gehef word?

Antwoord

BTW is slegs hefbaar ingevolge artikel 7(1)(a) op die kommissie wat die motorhandelaar van die persoon vorder, synde die vergoeding ontvang vir die diens wat hy gelewer het. Die verkoop van die motor sal nie onderhewig wees aan BTW nie, aangesien dit nie deel vorm van die motorhandelaar se onderneming nie.

‌28/3/2-30 Desember 1991

‌91‌

‌Arbeidsmakelaars - verhuring van werknemers Labour brokers - hiring out of employees‌

Vraag

’n Arbeidsmakelaar (ondernemer) verhuur werknemers in sy diens aan ’n ondernemer. Moet BTW op die

verhuring van die werknemers gehef word?

Antwoord

Die verhuring van die werknemers is ’n belasbare lewering en is aan BTW ingevolge die bepalings van artikel

7(1)(a) onderhewig.

‌28/3/2-19 Desember 1991.

‌92‌

‌Promotional gifts - taxable and exempt supplies Promosiegeskenke – belasbare en vrygestelde -lewerings‌

Question

A vendor acquires promotional gifts. The distribution of these gifts to clients relates to both taxable and exempt supplies made by the vendor. Can the tax paid in respect of the purchase of these gifts be claimed as an input tax credit?

Answer

As the vendor will be making taxable and exempt supplies, input tax in regard to the purchase of promotional goods can only be claimed in respect of goods acquired for the taxable portion of the business as contemplated in section 17(1). Where promotional goods are given to clients no output tax is leviable because no consideration is charged or received in respect of the supply. (See section 10(23).)

‌28/2/1 - 1 July 1992

‌93‌

‌Stationery and printing - taxable and exempt supplies Skryfbehoeftes en drukwerk – belasbare en vrygestelde -lewerings‌

Question

A vendor making both taxable and exempt supplies acquires stationery and printing in the course of his

enterprise. Can input tax credits be claimed in respect of tax paid on the acquisition of these goods?

Answer

Input tax in regard to the purchase of stationery and printing can only be claimed insofar as the goods have been applied for the making of taxable supplies. Where goods cannot wholly be attributed to the making of taxable supplies in terms of section 17(1), an apportionment must be made to determine the amount of input tax that can be claimed.

‌28/1/1-1 July 1991

‌94‌

‌Fringe benefits – motor vehicle - life insurance company Byvoordele – motorvoertuig - lewensversekeringsmaatskappy‌

Question

A vendor allocates a company motor vehicle to his life insurance manager. Must VAT be charged on the fringe

benefit?

Answer

In terms of the second proviso to section 18(3), no output tax must be levied in respect of the motor vehicle used by the life insurance manager as the input tax in respect of the cost of the vehicle, its insurance, repairs and maintenance will be denied as the vehicle is used in the course of making exempt supplies.

‌28/2/1-1 July 1991 and amended on 1 September 2002.

‌95‌

‌Sectional title - body corporate - management fee Deeltitel – regspersoon - bestuursgelde‌

Question

A building consisting of both commercial and residential units is owned on sectional title or under a share block scheme. The share block company or the body corporate charges the members a management fee for the managing of the units. If the share block company or body corporate elects to register for VAT, must VAT only be levied on management fees charged to members in respect of the commercial units?

Answer

The supply of services in the course of the management of a body corporate or share block company will be exempt in terms of section 12(f) unless the body corporate or share block company elects to register in terms of the proviso to section 12(f) and charge VAT on its supplies. If it elects to register, the supply of services to all its members (whether in respect of residential or commercial units) will be subject to VAT.

‌28/2/1-27 September 1991

‌96‌

‌Parlementêre toekennings - oordragbetaling – nulkoers Parliamentary grants - transfer payment - zero-rated‌

Vraag

’n Ondernemer ontvang Parlementêre toekennings wat hom in staat stel om sy werksaamhede voort te sit. Is

hierdie toekennings aan BTW onderhewig?

Antwoord

Die Parlementêre toekenning word beskou as ’n "oordragbetaling" soos omskryf in artikel 1 en sal derhalwe

ingevolge artikels 8(5) en 11(2)(p) aan die nulkoers onderhewig wees.

‌28/1/1-1 Desember 1991.

‌97‌

‌Health insurance - financial service Gesondheidsversekering – finansiële diens‌

Question

Will permanent health insurance policies attract VAT?

Answer

Permanent health insurance policies are exempt from VAT in terms of section 2(1)(i) read with section 12(a) as

they are treated as "long-term insurance policies" as defined in section 2(2)(v).

‌28/2/1-19 September 1991.

‌98‌

‌Superannuation scheme - pension fund - administration fee Aftreeskema – pensioenfonds - administrasiegeld‌

Question

A vendor (pension fund administrator) pays contributions over to a pension fund and also ensures that benefits are paid over correctly. The vendor then charges the pension fund an administration fee for the rendering of these services. Is this fee subject to VAT?

Answer

The administration fee charged for the rendering of management services to a superannuation scheme is exempt from VAT in terms of section 2(1)(j) and section 2(1)(n) read with section 12(a). As from 1/10/1996 section 2(1)(n) was deleted and, as a result the administration fee charged will be taxable at the standard rate in terms of section 7(1)(a).

‌28/2/1 - 3 September 1991, amended on 19 September 1995 and 1 September 2002.

‌99‌

‌Brandstofheffing en brandstofheffinglose goedere Fuel levy and non-fuel levy goods‌

Vraag

Word BTW op die verkoop van petrol, diesel en paraffien gehef?

Antwoord

Die verkoop van petrol en diesel word ingevolge artikel 11(1)(h) geklassifiseer as nulkoerslewerings aangesien

dit aan ’n brandstofheffing ingevolge die Doeane en Aksynswet onderhewig is. Kragparaffien, vliegtuigbrandstof, bunkerolie, paraffien, olie en ghries is egter aan BTW teen die standaardkoers onderhewig. Vanaf 1 April 2001 sal die verkoop van paraffien vir BTW-doeleindes aan belasting teen die nulkoers onderhewig wees ingevolge artikel 11(1)(l ).

Sien BTW-Nuus No. 16.

‌28/2/1-26 September 1991 en gewysig op 1 September 2002.

‌100

‌Tantième - opvoedkundige inrigting - handelsmerk Royalties - educational institution - trademark‌

Vraag

’n Opvoedkundige inrigting, soos beoog in artikel 12(h)(i)(cc), ontvang tantième vir die reg om sy handelsmerk

en onderwysmateriaal en metodes te gebruik. Is die tantième aan BTW onderhewig?

Antwoord

Die tantième ontvang is vergoeding vir die lewering van ’n belasbare diens en is as sodanig aan BTW onderhewig

ingevolge artikel 7(1)(a).

‌28/2/1-19 Oktober 1991

‌101‌

‌Export agent - purchases for exports Uitvoeragent – aankope vir uitvoere‌

Question

A local resident who is an export agent purchases goods from suppliers in the Republic for the purpose of exporting these goods. Will the purchase of these goods be subject to VAT at the zero rate?

Answer

Where the export agent purchases goods from suppliers for export purposes the transaction will be subject to VAT at the standard rate as the supplier does not export the goods as contemplated in the definition of "exported" in section 1.

‌28/2/1-15 October 1991

‌102‌

‌Bruikhuur/huurkoop - oorname - finansiële instelling Lease/hire purchases - takeover - financial institution‌

Vraag

Is BTW betaalbaar wanneer ’n finansiële instelling ’n huurkoop- of bruikhuurtransaksie van ’n ander finansiële

instelling oorneem?

Antwoord

Die oorname van ’n huurkoop deur een finansiële instelling van ’n ander finansiële instelling word ingevolge artikel 2(1)(f) geag ’n finansiële diens te wees. Die lewering van finansiële dienste word ooreenkomstig artikel 12(a) van die Wet geklassifiseer as ’n vrygestelde lewering. Synde dan nou ’n vrygestelde lewering te wees is daar geen BTW betaalbaar op sodanige transaksie nie.

Die oorname van ’n bruikhuur van een finansiële instelling na ’n ander, sal geag word ’n belasbare lewering te wees. BTW sal ingevolge artikel 7(1)(a) betaalbaar wees op hierdie transaksie aangesien eienaarskap van die relevante bruikhuurbate oorgedra word van een finansiële instelling na ’n ander.

‌28/2/1-26 September 1991

‌103‌

‌Veevoer - nulkoerslewerings Animal feed - zero-rated supplies‌

Vraag

’n Ondernemer verkoop karkasmeel en bloedmeel (geregistreer as veevoer ingevolge die Wet op Veevoedsel, Landbou Chemikalieë en Veemiddels No. 36 van 1947) aan veevoervervaardigers en boere. Die produk is nie geskik om net so suiwer as veevoer gebruik te word nie en vermenging met ander produkte moet eers plaasvind voordat dit as veevoer aangewend kan word. Word die produk ingevolge Bylae 2 as veevoer beskou?

Antwoord

Ingevolge artikel 11(1)(g) en Bylae 2 is slegs veevoer, in sy finale vorm as veevoer, onderhewig aan die nulkoers. Enige bestanddele wat nog vermeng moet word tot ’n veevoer, soos bloedmeel en karkasmeel, sal aan die standaardkoers onderhewig wees.

‌28/2/1-23 Oktober 1991

Bylae 2 is deur die Wysigingswet op Belastingwette, 1992, gewysig. Waar die karkasmeel en bloedmeel aan ’n geregistreerde boer verkoop word, sal dit aan die nulkoers onderhewig wees ingevolge artikel 11(1)(g) saamgelees met items 1(a)(ii) en (iii) van Deel B tot Bylae 2. Waar dit aan ’n ander persoon as ’n geregistreerde boer verkoop word, sal dit aan die standaardkoers onderhewig wees.

‌104‌

‌Opvoedkundige dienste - private instelling - skoolvakke Educational services - private institution - school subjects‌

Vraag

’n Private opvoedkundige instansie, soortgelyk aan ’n Kollege, en geregistreer kragtens die Wet op Suid-

Afrikaanse Skole, 1996 (Wet No. 84 van 1996), bied skoolvakke aan. Moet BTW op die klasgelde gehef word?

Antwoord

Ingevolge die bepalings van artikel 12(h)(i)(aa) sal die opvoedkundige dienste van BTW vrygestel wees. BTW

moet dus nie op die klasgelde gehef word nie en die instansie mag ook nie vir BTW-doeleindes registreer nie.

‌28/2/1-24 Oktober 1991 en gewysig op 1 September 2002.

‌105‌

‌Guarantees - short-term insurance companies Waarborge - korttermynversekeringsmaatskappye‌

Question

Will the supply of a guarantee by a short-term insurance company in respect of a debt security be regarded as a

financial service in terms of section 12(a)?

Answer

As from 1 October 1996, due to the deletion of paragraph (h) of section 2(1), the supply of a guarantee by a

short-term insurance company will be taxable in terms of section 7(1)(a).

‌28/2/1-17 October 1991 and amended on 1 September 2002.

‌106‌

‌Superannuation schemes - portfolio managers Aftreeskemas – portfolio bestuurders‌

Question

Portfolio managers invest and manage the assets of superannuation schemes in terms of the provisions of the regulations to the Stock Exchanges Control Act, 1985. Will the services rendered by portfolio managers be exempt from VAT?

Answer

As a result of the deletion of the words "or arranging" from section 2(1)(n) with effect from 1 April 1995, the service of portfolio management no longer constitutes a financial service and is therefore subject to VAT in terms of section 7(1)(a).

‌28/2/1-22 October 1991 and amended on 19 September 1995.

‌107‌

‌Superannuation schemes - valuation services Aftreeskemas - waardasiedienste‌

Question

Do the services provided by a valuator in terms of the Pension Funds Act, 1956, constitute a financial service

relating to the management of a superannuation scheme?

Answer

The services provided by a valuator to a superannuation scheme do not constitute a financial service relating to

the management thereof and are therefore subject to VAT in terms of section 7(1)(a).

‌28/2/1-22 October 1991

‌108‌

‌Sportklub - verhuring van losies Sports club - rental of suites‌

Vraag

’n Sportklub verhuur losies by ’n sportstadion aan ondernemers en ander persone vir ’n tydperk van tien jaar. Die huurkontrakte is gesluit voor die implementeringsdatum van BTW en die dienste wat gelewer word oorspan die datum. Is die voorbehoudsbepaling by artikel 78(6) van die Wet van toepassing op die huurkontrakte wat tot gevolg sal hê dat BTW nie op die kontrakte gehef sal word nie?

Antwoord

Die huurkontrak word beskou as ’n ooreenkoms vir die eenmalige lewering van dienste. Derhalwe sal die voorbehoudsbepaling by artikel 78(6) van die Wet nie op die kontrakte van toepassing wees nie met die gevolg dat die sportklub vir BTW sal moet verantwoord op die kontrakte vir sover die lewering van die dienste op of na die aanvangsdatum plaasgevind het.

‌28/3/29-14 Januarie 1993

‌109‌

‌Stock exchange - selling of information Effektebeurs – verkoop van inligting‌

Question

The information services division of the Stock Exchange sells information to newspapers and portfolio managers.

Will the selling of this information attract VAT?

Answer

The selling of information to newspapers and portfolio managers does not constitute a supply of goods and services necessary for the supply of financial services to brokers and is not regarded as a financial service. The supply is therefore subject to VAT at the standard rate in terms of section 7(1)(a).

‌28/2/1-25 October 1991

‌110‌

‌Mediese fonds - verwerking van eise vir administrateur Medical aids - processing of claims for administrator‌

Vraag

’n Ondernemer vorder eise van apteke en verwerk dit namens die administrateur van verskeie mediese fondse.

Kan die dienste beskou word as die lewering van finansiële dienste?

Antwoord

As gevolg van die skrapping van artikel 2(1)(m) en die woorde "of die reël" in artikel 2(1)(n) met ingang van 1 April 1995, is die dienste met betrekking tot die verwerking van eise nie meer ’n finansiële diens nie en derhalwe aan BTW teen die standaardkoers ingevolge artikel 7(1)(a) onderhewig.

‌28/2/1-3 Oktober 1991 en gewysig op 19 September 1995.

‌111‌

‌Commissions - investing of funds on behalf of clients Kommissie verdien – belê van fondse namens kliënte‌

Question

A person invests funds on behalf of clients at financial institutions to obtain a higher rate of interest on a bigger investment and receives a commission from either his clients or the financial institutions for the arranging of the investments. Will this commission be exempt from VAT?

Answer

As a result of the deletion of the words "or arranging" from section 2(1)(n) with effect from 1 April 1995, the services of arranging the investment of funds is no longer a financial service and is therefore subject to VAT in terms of section 7(1)(a).

‌28/2/1-26 September 1991 and amended on 19 September 1995.

‌112‌

‌Principal/agent - foreign principal – commission Prinsipaal/agent – buitelandse prinsipaal - kommissie‌

Question

A vendor acts as a buying agent on behalf of a foreign principal. The foreign principal submits payments to local suppliers in respect of orders placed by the buying agent. Is the vendor obliged to levy VAT on the commission charged to the foreign principal for the placing of the orders?

Answer

The services are supplied to a person who is not a resident of the Republic or a specified country and who is outside the Republic at the time when the services are rendered and the commission is therefore zero-rated in terms of section 11(2)(l).

‌28/2/1-24 October 1991

‌113‌

‌Transportkoste - vaste eiendom - banke Transfer fees - fixed property - banks‌

Vraag

’n Bank behartig self die transportering van sy eiendomme wat per veiling verkoop word. In die meeste gevalle word die koper deur die bank by wyse van ’n kustingsbrief gefinansier. Moet BTW op hierdie transportkoste gehef word?

Antwoord

Alhoewel die transporteringsdiens noodsaaklik is om uitvoering te gee aan die lewering, is die transporteringsdiens vanaf 1 Oktober 1996 belasbaar teen die standaardkoers ingevolge artikel 7(1)(a), as gevolg van die wysiging aan artikels 2(1)(n) en 12(a).

‌28/2/1-25 Oktober 1991 en gewysig op 1 September 2002.

‌114‌

‌Verband registrasie - dokumentasiegelde - banke Bond registration - document fees - banks‌

Vraag

’n Bank verhaal sekere koste van sy kliënte ten opsigte van die opstel van dokumentasie vir die registrasie van verbande en bygaande aangeleenthede soos die opstel van borgaktes, toestemmings, afstanddoenings en dies meer. Is die vordering van die gelde onderhewig aan BTW?

Antwoord

Die opstel van dokumentasie wat met kredietverlening te doen het is noodsaaklik vir die lewering van die finansiële diens.

As gevolg van die wysiging van artikels 2(1)(n) en 12(a) sal die dokumentasie fooie wat samehangend is tot die finansiële diens vanaf 1 Oktober 1996 belasbaar wees teen die standaardkoers ingevolge die bepalings van artikel 7(1)(a).

28/2/1-25 Oktober 1991 en gewysig op 1 September 2002.

‌115‌

‌Foreign media space - local agent and clients Buitelandse mediaspasie – koop/verkoop – plaaslike agent en kliënte‌

Question

An agency purchases foreign media space and sells it to local vendors. The agency also receives a commission from the foreign media for the service of having obtained a client. Is the purchase and selling of foreign media space and the commission received thereon subject to VAT at the zero rate?

Answer

The purchase of advertising space from foreign media will in terms of section 14(5)(a) not be subject to VAT as the service has been imported for the purpose of making a taxable supply. VAT will, however, be payable where the overseas advertising is in respect of exempt supplies.

The service of selling advertising space is physically rendered outside the Republic or a specified country and is

therefore zero-rated in terms of section 11(2)(k).

The commission received from the foreign media will be zero-rated in terms of section 11(2)(l).

‌28/3/2-2 March 1992

‌116‌

‌Gold coins - Reserve Bank - remaining in circulation Goudmunte – Reserwebank – bly in sirkulasie‌

Question

Will gold coins issued by the Reserve Bank be subject to VAT at the standard rate?

Answer

Where goods are gold coins supplied as such and issued by the Reserve Bank in the Republic in accordance with the provisions of section 14 of the South African Reserve Bank Act No. 90 of 1989, or which remain in circulation as contemplated in the proviso to subsection (1) of that section, they will be subject to VAT at the zero rate in terms of section 11(1)(k). For example, Kruger Rands.

‌28/2/1-26 September 1991

‌117‌

‌Consignment stock - time of supply - accounting for VAT Besendingsvoorraad – tyd van lewering – rekenskap van BTW‌

Question

When is consignment stock considered to have been supplied?

Answer

As the mere consignment will not constitute a supply of goods, any documentation (with the exception of an invoice or tax invoice) may be used to record the delivery of such stock from the principal to the selling agent.

In order to determine the VAT implications of consignment stock the relationship between the consignor and consignee must be established. Should the consignor and consignee elect that the consignee becomes the principal (owner) of the goods at the time the goods are sold to the purchaser, the consignee will be responsible to account for output tax and claim an input tax on the supply to the purchaser. The general time of supply rules (namely, that the earlier of the time an invoice is issued or the time any consideration is received) will be applicable. The consignee will have to obtain a tax invoice from the consignor in terms of section 16(2) in order to claim an input tax deduction in terms of sections 16(3), 17(1) and 20.

In such cases the consignor makes a supply as principal to the consignee and the consignee makes a supply as

principal to the purchaser and not as agent on behalf of the consignor.

In the event that the consignee only acts as selling agent on behalf of the consignor, the consignor will be the principal and be responsible to account for output tax on the supply to the purchaser at the general time of supply rule made (which has been set out above). The consignor (principal) will therefore have to be timeously informed of any supplies made by the consignee (selling agent) so as to account for them in the tax period in which such supplies were made.

‌28/3/2-21 February 1992 and amended on 1 September 2002.

‌118‌

‌Onthaalkoste - verhaling van koste van kliënte Entertainment costs - recovery of expenses from clients‌

Vraag

’n Ondernemer betaal onthaalkoste namens kliënte en verhaal dit dan van hulle. Kan die ondernemer ’n insetbelastingkrediet eis op die onthaalkoste wat hy aangegaan het?

Antwoord

Indien die onthaalkoste nie apart op die faktuur aangedui word nie sal die kliënt op ’n insetbelastingkrediet ten opsigte van die uitgawes geregtig wees, terwyl die ondernemer ’n insetbelastingkrediet ten opsigte van die uitgawes wat hy aangegaan het ingevolge artikel 17(2)(a), ontsê word.

Waar die onthaalkoste wat van die kliënt verhaal word apart gefaktureer word, sal die kliënt nie op ’n insetbelastingkrediet geregtig wees nie. Die transaksie sal ook nie deur die ondernemer se boeke gaan nie en hy sal dus nie ’n insetbelastingkrediet ten opsigte van die koste kan eis nie.

‌28/3/1-10 Maart 1992

‌119‌

‌Belastingfakture - Poskantoor - doeane- en aksynsgelde Tax invoices - Post office - customs and excise duty‌

Vraag

Die Poskantoor vorder BTW op doeane- en aksynsgeld en betaal dit direk oor aan SAID. Mag doeane- en aksynsgelde ingevorder namens die Kommissaris, kaaigelde ingevorder namens Portnet en die Poskantoor se klaringskoste ook op die belastingfaktuur verskyn wat die Poskantoor uitreik?

Antwoord

Die Poskantoor se belastingfaktuur mag doeane- en aksynsgelde, kaaigelde en klaringskoste aandui. ’n Ondernemer mag insetaftrekkings ten opsigte van die BTW op die invoer en bogenoemde kostes ingevolge artikels 16(2), 16(3), 17(1) en 20 eis.

‌28/3-11 September 1991 en gewysig op 1 September 2002.

‌120‌

‌Huisvesting - personeel - verhaling van koste van kliënt Accommodation of personnel - client pays costs‌

Vraag

’n Ondernemer verskaf huisvesting aan sy eie personeel in ’n woning. Die koste daaraan verbonde word vanaf sy

kliënt verhaal. Is BTW hefbaar op die verhaling van die koste?

Antwoord

Die verhaling van koste vorm deel van die vergoeding wat vanaf die kliënt gevorder word en gevolglik sal BTW

ingevolge artikel 7(1)(a) daarop betaalbaar wees.

‌28/3/1-10 Maart 1992 en gewysig op 1 September 2002.

‌121‌‌

‌Discount or rebates - credit notes - zero-rated supplies Afslag of korting – kreditnotas - nulkoerslewerings‌

Question

A petrol company supplies petrol and diesel to many customers who are part of a group. In terms of the supply agreement the company periodically passed an arrear discount or rebate to the group for volumes purchased by these customers before VAT was introduced. It was their practice to issue a cheque to the group for the rebates concerned, supported by a schedule. No credit notes were issued in these circumstances. Must a tax credit note be issued for VAT purposes?

Answer

In terms of section 21(1) a tax credit note must be issued in relation to the supply of goods or services by any registered vendor where the previously agreed consideration for that supply has been altered by agreement with the recipient, whether due to the offer of a discount or any other reason and the supplier has provided a tax invoice in relation to that supply and the amount shown therein as tax charged on that supply is incorrect in relation to the amount properly chargeable on that supply as result of the occurrence of the abovementioned event.

As the discounts relate only to petrol and diesel which are zero-rated in terms of section 11(1)(h), section 21(1)

does not apply as the tax charged does not change due to the discount allowed.

However, should discounts be allowed for taxable supplies which are standard rated then section 21(1) does apply. In order to avoid issuing credit notes to each vendor in the group, the holding company could be appointed as an agent to the group companies in terms of section 54(2).

‌28/2/1-10 January 1992

‌122‌

‌Huisvesting vir werknemers - onderverhuring Accommodation for employees - subletting‌

Vraag

’n Mynmaatskappy huur wonings by ’n derde party wat hy dan aan sy werknemers verskaf. Wat is die BTW-

implikasies ten opsigte van bogenoemde?

Antwoord

Ingevolge die bepalings van artikel 12(c) is die lewering van ‘n woning ingevolge ‘n ooreenkoms vir die huur en verhuring daarvan vrygestel van BTW. Die woordomskrywing van "woning" in artikel 1 stel dit duidelik dat ‘n woning hoofsaaklik gebruik moet word as ‘n woon- of verblyfplek van ‘n natuurlike persoon.

Omrede die mynmaatskappy die wonings huur en op sy beurt dit weer onderverhuur aan sy personeel, vind daar twee lewerings plaas, naamlik: die lewering deur die derde party aan die mynmaatskappy en die lewering deur die mynmaatskappy aan sy personeel. Aangesien die lewering aan die mynmaatskappy gemaak word wat nie die wonings as woon- of verblyfplek kan aanwend nie, weens die feit dat die mynmaatskappy nie ‘n natuurlike persoon is nie, sal die lewering deur die derde party (indien hy sou kwalifiseer om ingevolge artikel 23 as ondernemer te registreer) ‘n belasbare lewering daarstel. Die lewering deur die betrokke mynmaatskappy aan sy personeel is egter ingevolge die bepalings van artikel 12(c) vrygestel van BTW.

‌28/2/1-24 Januarie 1992 en gewysig op 1 September 2002.

‌123‌

‌Multilaterale Motorvoertuigongelukkefonds Multilateral Motor Vehicle Accident Fund‌

Vraag

Ingevolge die bepalings van artikel 37(a)(i) van die Bylae by die Multilaterale Motorvoertuigongelukkefondswet No. 92 van 1989, is die MMF, sy bates, eiendom, inkomste, werking en transaksies van belasting vrygestel. Geld hierdie vrystelling ook ten opsigte van BTW?

Antwoord

Ingevolge artikel 86 word geen bepaling vervat in ’n ander wet, wat voorsiening maak vir ’n vrystelling van

belasting, uitgelê asof dit van toepassing is op BTW nie, tensy BTW uitdruklik in bedoelde bepaling vermeld word.

Aangesien artikel 37(a)(i) van die Bylae by Wet 93 van 1989 geen melding van BTW maak nie, geniet die BTW-

wet voorrang en is die MMF en sy agente nie van die werking van die BTW-wet vrygestel nie.

‌28/2/1-22 Januarie 1992

‌124‌

‌Okkupasiereg - aftreeoord - herverkoop Right of occupation - retirement village - re-sale‌

Vraag

Is die herverkoop van ’n okkupasiereg in ’n behuisingsontwikkelingskema soos omskryf in die Wet op

Behuisingsontwikkelingskemas vir Afgetrede Persone No. 65 van 1988 aan BTW onderhewig?

Antwoord

Die herverkoop van okkupasiereg in ’n aftreeoord is kragtens artikel 12(c) van BTW vrygestel.

28/2/1-30 Desember 1991 en gewysig op 1 September 2002.

‌125‌

‌Okkupasiereg - aftreeoord - verkoop - vrystelling Right of occupation - retirement village - sale - exemption‌

Vraag

Is die koop van ’n okkupasiereg en die maandelikse heffing in ’n behuisingsontwikkelingskema soos in die Wet op

Behuisingsontwikkelingskemas vir Afgetrede Persone No. 65 van 1988 omskryf, aan BTW onderhewig?

Antwoord

Die koop van ’n okkupasiereg verteenwoordig ’n betaling vir die lewering van ’n woning ingevolge ’n ooreenkoms

vir die huur en verhuring daarvan en is derhalwe ingevolge artikel 12(c) van BTW vrygestel.

Ingevolge die bepalings van artikel 12(f)(iii) is die maandelikse heffing van BTW vrygestel.

‌28/2/1-30 Desember 1991 en gewysig op 1 September 2002.

‌126‌

‌Stockfeed - zero-rated supply Veevoer - nulkoerslewering‌

Question

Will feed vitamins sold to stockfeed manufacturers for blending with other products to make stockfeed also be

zero-rated?

Answer

The supply of intermediate products for the making of stockfeed is not in itself a zero-rated supply in terms of section 11(1)(g) read in conjunction with Part A of Schedule 2. Only the final product sold to the farmer qualifies for the zero rating.

‌28/2/1-23 January 1992

‌Note

The zero-rating applies only where the farmer is a registered vendor who produces his VAT registration certificate containing the endorsement entitling him to purchase certain farming inputs at the zero rate as laid down in Part A of Schedule 2.

‌19 September 1995

‌127‌

‌Export agents commission - South African agent-foreign principal

‌Uitvoeragente kommissie – Suid-Afrikaanse agent – buitelandse prinsipaal

Question

A South African export agent in South Africa acts as the agent for a principal in an export country. The agent’s function is to participate in weekly maize export tenders on behalf of the foreign principal. The agent buys the maize on behalf of the foreign principal and arranges the necessary formalities to have the maize exported. For these and a number of other administrative functions, the export agent is paid a commission by the foreign principal. Is the commission earned from the foreign principal subject to VAT at the zero rate or the standard rate?

Answer

It is accepted that the agent’s services are not supplied directly in connection with movable property situated in the Republic at the time the services are rendered and are accordingly subject to VAT at the zero rate in terms of section 11(2)(l ).

‌28/2/1-20 February 1992 and amended on 1 September 2002.

‌128‌

‌Sale of furnished flats – letting

‌Verkoop van gemeubileerde woonstelle - verhuring

Question

Will the sale of fully furnished and serviced flats, previously used for letting purposes, be subject to VAT?

Answer

The letting of fully furnished and services flats will be subject to VAT at the standard rate provided the lessor (owner) is registered for VAT purposes and complies with the definitions of "commercial accommodation" and "domestic goods and services" in section 1. Consequently the sale of the fully furnished flats is also subject to VAT at the standard rate in terms of section 7(1)(a).

‌28/2/1-14 February 1992 and amended on 1 September 2002.

‌129‌

‌Collection fees - insurance - state and semi-state Invorderingsgelde – versekering – staat- en semi-staat‌

Question

Central Government, provincial administrations and semi-state institutions collect short-term insurance premiums by means of salary stop orders on behalf of an insurance company. For this service a commission/fee of 2,5 per cent of the short-term premium is deducted from premiums collected by the institutions. Is the commission/fee subject to VAT or is it treated as a financial service?

Answer

As from 1 April 1995 the collection fees earned on the deduction of short-term premiums by employers who are registered as vendors for VAT purposes will be subject to VAT at the standard rate in terms of section 7(1)(a), due to the deletion of section 2(1)(m). It should, however, be borne in mind that only some activities of certain government departments are, in terms of the Media Statement dated 27 September 1991, regarded as the carrying on of an enterprise. Only departments who are registered for VAT purposes in terms of the media statement in respect of its listed activities will be required to account for output tax on collection commission earned with regards to its listed activities.

‌28/2/1-21 January 1992 and amended on 1 September 2002.

‌130‌

‌Kommissie aan koöperasies - oesversekering Commission to co-operatives - crop insurance‌

Vraag

Koöperasies finansier sekere van hul lede se oesversekeringspremies deur die lede se produksierekening te debiteer (dus die lid se produksieleningsrekening te verhoog) en dan die versekeringspremie direk aan die versekeringsmaatskappy oor te betaal.Die koöperasie ontvang ’n kommissie vir die finansieringsdienste namens die lede gelewer. Is die kommissie aan BTW onderhewig of sal dit as ’n finansiële diens beskou word?

Antwoord

As gevolg van die skrapping van artikel 2(1)(m) met ingang van 1 April 1995 word die dienste met betrekking tot die betaling van premies nie meer as ’n finansiële diens beskou nie en is derhalwe aan BTW ingevolge artikel 7(1)(a) onderhewig.

28/2/1-10 Januarie 1992 en gewysig op 19 September 1995.

‌131‌

‌Share block levies - application to tax levies Aandeleblokheffings – aansoek om heffings te belas‌

Question

Can a share block company which only renders management services to its members apply to have the levies

subjected to VAT and therefore charge VAT on such levies collected?

Answer

In terms of the proviso to section 12(f) the Commissioner may on application from the share block company direct that the exemption under section 12(f) does not apply and therefore the share block company will have to charge VAT at the standard rate on the levies collected. This power has been delegated to Branch Offices of SARS.

‌28/2/1-26 February 1992

‌132‌

‌Private music school - not established by law Private musiekskool – nie volgens wet gestig nie‌

Question

Will a private music school that offers courses and lectures in music, similar to those of technikons, universities

and colleges, have to charge VAT on their fees collected from music students?

Answer

In terms of section 12(h)(i)(bb) the supply of any educational services in any educational institution established as a public higher education institution under the Higher Education Act, 1997 (Act No. 101 of 1997), or is declared as a public higher education institution under that Act, or is registered or conditionally registered as a private higher education institution under that Act will be exempt from VAT.

If the music school is not established by or under the aforementioned Act, it will not comply with the provisions of section 12(h)(i)(bb) and as a result the fees are subject to VAT at the standard rate in terms of section 7(1)(a). In this regard only laws relating to educational matters should be taken into account.

‌28/2/1-3 March 1992 and amended on 1 September 2002.

‌133‌

‌Management services - life insurance company Bestuursdienste - lewensversekeringsmaatskappy‌

Question

A business provides management and administration services relating to investments on behalf of a life insurance

company, and does all things that are necessary in fulfilment of this appointment in respect of listed securities.

Will these services be subject to VAT or will they be treated as an exempt supply?

Answer

As a result of the deletion of the words "or arranging" from section 2(1)(n) with effect from 1 April 1995 the services of merely investing funds on behalf of a client no longer constitutes a financial service and is therefore subject to VAT at the standard rate in terms of section 7(1)(a).

‌28/2/1-28 February 1992 and amended on 19 September 1995.

‌134‌

‌School fees/donations - unconditional gifts Skoolgende/donasies – onvoorwaardelike skenkings‌

Question

Will school fees which are paid into a trust as well as donations made by parents, which in terms of the stated objects of such trust promotes, fosters and advances the interest of the school, be regarded as an exempt supply in terms of section 12(h)?

Answer

Donations by parents and sponsors to school trust funds (such as those funds to which the provisions of section 30 of the Income Tax Act apply) are subject to VAT at the standard rate in terms of section 7(1)(a), due to the fact that such donations do not qualify as "unconditional gifts" as defined in section 1. As a direct benefit accrues to the child of the parent making the donation to the trust fund, the donation does not constitute an unconditional gift. The portion of the school fees received which is subsequently paid into the trust fund to promote the interest of the school, loses its identity as school fees and accordingly will be taxable in the hands of the trust in respect of services rendered to the school. Should the income out of the aforementioned activities exceed the R300 000 threshold per annum the trust fund will be required to register for VAT purposes in terms of section 23(1).

‌28/2/1-26 February 1992 and amended on 1 September 2002.

‌135‌

‌Occupational interest/rent - commercial fixed property Okkupasierente/huur – kommersiële vaste eiendom‌

Question

Will occupational interest/rent payable on the sale of a commercial property be subject to VAT?

Answer

Irrespective of whether the occupational interest takes the form of interest, or where it represents rent, it will be subject to VAT at the standard rate in terms of section 7(1)(a). It should be noted that occupational interest became subject to VAT as from 1 April 1995 due to the deletion of section 2(1)(m).

‌28/2/1-5 February 1992 and amended on 1 September 2002.

‌136‌

‌Church contributions - unconditional gifts Kerkbydraes – onvoorwaardelike skenkings‌

Question

Will contributions billed or collected from members of a church or synagogue be subject to VAT?

Answer

Contributions billed or collected from members of a church or synagogue are regarded as unconditional gifts to an association not for gain and as such do not constitute "consideration" as defined in section 1. An association not for gain is defined as, inter alia, any religious institution of a public character. It follows that such contributions are therefore not subject to VAT.

‌28/2/1-14 February 1992

‌137‌

‌Educational services - supplied by a private institution Opvoedkundige dienste – gelewer deur ‘n private instelling‌

Question

Which of the following courses (provided by a private institution) will be regarded as being the supply of

educational services in terms of section 12(h)?

Language courses for adults

Literacy courses for adults

Programmes to prepare school students for matric

Bridging programmes for the underprivileged

Answer

The supply of language and literacy courses for adults, as well as the programmes to prepare school students for matric, is exempt from VAT in terms of paragraph (A) of section 12(h)(i)(cc) on the condition that the institution is exempt from income tax in terms of section 30 of the Income Tax Act which has been formed for the promotion of adult basic education and training including literary and numeracy education, registered under the Adult Basic Education and Training Act, 2000 (Act No 52 of 2000).

The supply of bridging programmes for the underprivileged is also exempt but in terms of paragraph (E) of

section 12(h)(i)(cc).

‌28/2/1-25 February 1992 and amended on 1 September 2002.

‌138‌

‌Sale of green mealies - standard rated supplies Verkoop van groen mielies - standaardkoerslewerings‌

Question

Will the sale of green mealies be subject to VAT at the standard or zero rate?

Answer

Green mealies are regarded as a vegetable and may therefore be supplied at the zero rate in terms of section

11(1)(j) read with item 14 of Part B of the Second Schedule with effect from 1 April 1992.

28/2/1-28 February 1992 and amended on 19 September 1995.

‌139‌

‌Employee organizations - industrial councils Werknemersorganisasies – industriële rade‌

Question

Will industrial council contributions be subject to VAT?

Answer

Contributions paid to industrial councils will be exempt from VAT in terms of section 12(i) to the extent that the

consideration consists of membership contributions.

‌28/2/1-6 December 1991

‌140‌

‌Borgakteversekering - belasbare lewering Bond of security insurance - taxable supply‌

Vraag

Is borgakteversekering onderhewig aan BTW?

Antwoord

As gevolg van die skrapping van arikel 2(1)(h) met ingang van 1 Oktober 1996 sal borgakteversekering

belasbaar wees teen die standaardkoers ingevolge artikel 7(1)(a).

‌28/2/1-29 November 1991 en gewysig op 1 September 2002.

‌141‌

‌Soya bean products - zero and standard rated supplies Sojaboonprodukte – nul- en standaardkoerslewerings‌

Question

A vendor sells the following soya bean products: full fat flour, defatted flour, textured vegetable protein (TVP)

and textured soya concentrate (TSC). Will these products be subject to VAT at the zero rate?

Answer

Only untoasted beans (full fat flour) with their hulls or dehulled will be subject to VAT at the rate of zero percent in terms of item 6 of Part B to Schedule 2 read with section 11(1)(j). Defatted flour, textured vegetable protein (TVP) and textured soya concentrate (TSC) will be subject to VAT at the standard rate.

‌28/2/1-6 December 1991

‌142‌

‌Sale of donated goods - association not for gain Geskenkte goedere – vereniging sonder winsoogmerk‌

Question

Red noses and gonks are donated to a welfare association (association not for gain). These goods are then sold

for the purpose of generating funds for the council. Is the sale of the red noses and gonks subject to VAT?

Answer

The supply by an association not for gain of donated goods will be exempt from VAT in terms of section 12(b).

The sale of red noses and gonks will therefore be exempt from VAT.

‌28/2/1-25 November 1991

‌143‌

‌Management fees - medical aid scheme Bestuursgelde – mediese skema‌

Question

A company registered in the Republic manages a medical aid scheme, established for employer groups registered within the Republic. Will the management fee charged be subject to VAT or will it be treated as an exempt supply?

Answer

Although a medical aid scheme qualifies as a benefit fund for the purposes of the Income Tax Act and is regarded as a superannuation scheme in terms of section 2(1)(j) of the VAT Act, the management, however, of such scheme is subject to VAT at the standard rate in terms of section 7(1)(a).

‌28/2/1-19 February 1992 and amended on 1 September 2002.

‌144‌

‌Seminaargelde - opvoedkundige inrigting Seminar fees - educational institution‌

Vraag

’n Universiteit bied seminare aan wat deur enige persoon bygewoon kan word. Kursusgangers betaal

seminaargelde om die seminare te kan bywoon. Is die seminaargelde aan BTW onderhewig?

Antwoord

Die seminaargelde is vergoeding vir die lewering van opvoedkundige dienste en is ingevolge artikel 12(h) van

BTW vrygestel.

‌28/2/1-29 November 1991

‌145‌

‌Transport services and ancillary transport services – exports Vervoerdienste en aanvullende vervoerdienste - uitvoere‌

Question

Will transport services and ancillary transport services performed in respect of the exporting of goods be zero-

rated or standard rated?

Answer

In terms of section 11(2)(a)(ii), the supply of the services of transporting goods is zero-rated provided the goods are transported from a place in the Republic to a place in an export country from a place in an export country to a place in the Republic or between export countries.

The above provisions apply only to the service which comprises the transportation of goods. Any other services rendered in connection with the transportation of goods such as packing, loading, stevedoring, container handling, cargo inspection, preparation of documents etc, are incidental or subsidiary to the service of transportation and therefore addressed separately.

In terms of section 11(2)(c) the services (including any "ancillary transport services") comprise the transport of goods from a place in the republic to another place in the Republic to the extent that those services are supplied by the same supplier as part of the supply of services to which section 11(2)(a) applies, qualifies as a zero-rated supply.

The ancillary transport service must furthermore be provided by the supplier of the international transport service in the contractual sense. The supplier of the ancillary transport service in the contractual sense is not necessarily the person who physically performs the service although this may be the case.

Section 11(2)(e) further provides that the transport of goods or any ancillary transport services supplied directly in connection with the exportation from or the importation into the Republic of goods or the movement of goods through the Republic from one export country to another export country, where such services are supplied directly to a person who is not a resident of the Republic and is not a vendor, otherwise than through an agent or other person are subject to VAT at the zero rate.

‌28/2/1-5 February 1992 and amended on 1 September 2002.

‌146‌

‌Koshuisgelde - opvoedkundige inrigting Boarding school fees - educational institution‌

Vraag

Is koshuisgelde wat studente aan ’n technikon betaal vir losies en inwoning onderhewig aan BTW?

Antwoord

Losies en inwoning wat aan studente deur ’n technikon voorsien word is ingevolge artikel 12(h)(ii) van BTW

vrygestel.

‌28/2/1-12 Desember 1991

‌147‌

‌Onthaal - maaltye - opvoedkundige inrigting Entertainment - meals - educational institution‌

Vraag

Is maaltye wat aan studente en personeel van ’n opvoedkundige inrigting voorsien word aan BTW onderhewig?

Antwoord

Enige etes wat aan ingeskrewe studente van ’n opvoedkundige inrigting voorsien word is van BTW vrygestel. Indien die prys van etes wat aan personeel verskaf word nie die koste daarvan dek nie, is die lewering van die etes ingevolge artikel 10(21) saamgelees met artikel 17(2)(a)(i) nie aan BTW onderhewig nie en die opvoedkundige inrigting kan nie insetbelasting in die opsig aftrek nie.

‌28/2/1-12 Desember 1991

‌148‌

‌Verhuring van sale - opvoedkundige inrigting Renting out of halls - educational institution‌

Vraag

Sal die verhuring van lokale deur ’n opvoedkundige inrigting aan BTW onderhewig wees?

Antwoord

Die verhuring van sale en lesinglokale is aan BTW teen die standaardkoers ingevolge artikel 7(1)(a) onderhewig.

‌28/1/1-12 Desember 1991

‌149‌

‌Studenteledegelde - opvoedkundige inrigting Student membership fees - educational institution‌

Vraag

Studente aan ’n technikon betaal ledegeld ten opsigte van die bedryfskostes van sport- en kultuurgeriewe wat deur die technikon voorsien word. Die sport en kultuuraktiwiteite vorm deel van die studente se kursus. Is sodanige ledegelde aan BTW onderworpe?

Antwoord

Ledegeld wat verpligtend deel uitmaak van ’n spesifieke kursus sal kragtens artikel 12(h)(ii) vrygestel wees van

BTW.

‌28/2/1-12 Desember 1991

‌150‌

‌Leestoetsingdienste - opvoedkundige inrigting Reading test services - educational institution‌

Vraag

Sal leestoetsingdienste wat aan studente van ’n technikon gelewer word, belasbaar wees?

Antwoord

Leestoetsingdienste wat aan studente gelewer word sal ingevolge artikel 12(h)(ii) van BTW vrygestel wees indien

dit aanvullende opvoedkundige dienste uitmaak.

‌28/2/1-12 Desember 1991

‌151‌

‌Kompetisies - vereniging sonder winsoogmerk Competition - association not for gain‌

Vraag

’n Vereniging sonder winsoogmerk skryf ’n kompetisie uit. Slegs 3 000 persone word toegelaat om deel te neem aan die kompetisie en inskrywingsgeld per deelname is R100. ’n Vraag moet beantwoord word ten einde in aanmerking te kom vir ’n prys. Elke deelnemer moet op die inskrywingsvorm aantoon of hy as prys:

’n ligte afleweringsvoertuig; of

R100 000 kontant, wil wen.

Moet daar BTW gehef word op die R100 inskrywingsgeld vir hierdie kompetisie, of word die inskrywingsgeld as ’n

onvoorwaardelike skenking beskou?

Antwoord

Enige lewering, hetsy dit wettig of onwettig is, kan in beginsel aan BTW onderhewig wees. Artikel 8(13) geld in gevalle waar kompetisies met pryse in die vorm van geld en goedere ter sprake is en dus word die inskrywingsgeld geag om BTW in te sluit.

Die betaling word nie as ’n onvoorwaardelike skenking beskou nie aangesien daar vir die persoon wat die bedrag betaal ’n identifiseerbare regstreekse waardevolle voordeel ontstaan of mag ontstaan. Die bedrag ontvang deur die vereniging sonder winsoogmerk word ook beskou as "vergoeding" soos omskryf in artikel 1.

’n Insetbelastingaftrekking kan egter geëis word ten opsigte van die BTW betaal op die aankoop van die voertuig.

Indien ’n kontantprys betaal word, kan ’n insetbelastingaftrekking ingevolge artikel 16(3)(d) geëis word.

Sien beslissing no. 53.

‌28/3/21-13 Augustus 1992

‌152‌

‌Verhuringskommissie - toedeling - eiendomsagente Commission on letting - apportionment - estate agents‌

Vraag

Is BTW betaalbaar op verhuringskommissie wat deur eiendomsagente gehef word, of word sodanige kommissie

as ’n finansiële diens beskou, ingevolge die bepalings van artikel 2(1)(m) saamgelees met artikel 12(a)?

Antwoord

As gevolg van die skrapping van artikel 2(1)(m) met ingang van 1 April 1995 is die invorderingsdienste ook aan BTW teen die standaardkoers ingevolge artikel 7(1)(a) onderhewig aangesien sodanige dienste nie meer finansiële dienste uitmaak nie.

28/2/1-Augustus 1992 en gewysig op 19 September 1995.

‌153‌

‌Auctioneers - bidding exclusive of VAT Afslaers – bieëry uitsluitend van BTW‌

Question

An auctioneer has not reached an agreement with the principal on a supply as contemplated in section 54(5) of

the Act. Can the bidding at the auction be exclusive of VAT whilst the final price will include VAT?

Answer

If the auctioneer displays signs declaring the method of bidding to be tax exclusive and announces such condition of bidding at the start of the auction, bidding may be tax-exclusive for the duration of the auction. VAT, where applicable, must however be added to the selling price of goods sold at the auction on behalf of vendors. (See section 54.)

‌28/3/2-16 September 1992

‌154‌

‌Letting of accommodation - local authority Verhuring van akkommodasie – plaaslike owerheid‌

Question

Can the supply of accommodation in a dwelling by the electricity department of a municipality, under an

agreement for the letting or hiring of such accommodation be treated as a taxable supply?

Answer

In terms of section 12(c)(i) the supply of any accommodation in a dwelling under an agreement for the letting or hiring of the accommodation is an exempt supply even if it is done by the electricity department of a local authority.

‌28/2/1-13 August 1992

‌155‌

‌Sales on the high seas - vendor to third party Verkope op die oop see – ondernemer aan derde party‌

Question

A registered vendor contracts with a foreign supplier for goods to be imported in the vendor’s name into South Africa. Before the cargo reaches its destination the vendor sells it to a third party, who may or may not be a vendor, and invoices him accordingly. Will the sale of the cargo on the high seas by the vendor be subject to VAT?

Answer

Where the vendor sells goods at a time when such goods are not situated in the Republic or a specified country, and the goods are delivered by the vendor to the purchaser (third party) at an address in an export country the supply of those goods may be made at the rate of zero per cent in terms of section 11(1)(a). The expression export country in section 1 means—

any country other than the Republic and any specified country and includes any place which is not situated in the Republic nor in any specified country.

The importer will be required to pay VAT due upon importation. (See section 13.)

Definition of export country amended by Act No. 136 of 1992.

‌28/2/1-May 1992

‌156‌

‌Local supplier - foreign manufacturer Plaaslike verskaffer – buitelandse vervaardiger‌

Question

A vendor contracts with a local supplier (vendor) for the supply and installation of a machine. The latter contracts with his foreign associate company for the supply of the machine. The client takes delivery of the machine ex- works in the foreign country and is invoiced by the local supplier who is a vendor. Will the local supplier (vendor) have to charge his client VAT on the sale of the machine, and who will be responsible for the VAT on importation?

Answer

The local supplier will levy VAT on the sale of the machine at the rate of zero per cent as the machine was supplied by way of a sale in an export country. The client will be responsible to pay VAT on the importation (See sections 11(1)(a) and 13).

‌28/2/1-May 1992

‌157‌

‌Medical expenses - foreign visitor Mediese onkoste – buitelandse besoeker‌

Question

Can the VAT paid on medical expenses by a foreign visitor in the Republic be claimed back under the Export

Incentive Scheme?

Answer

The Export Incentive Scheme makes provision for the refund of VAT paid on goods purchased in South Africa if the foreign visitor takes the goods with him on departure from South Africa. The refund mechanism does not apply to services, as services are regarded as being consumed in the RSA and therefore no VAT refund can be made in respect of VAT paid on medical services (See Regulation 2761 of 1998 and section 44(9).)

‌28/8/3-21 August 1992

‌158‌

‌Share block company - catering service levy - members Aandeleblokmaatskappy – verversingsdiensteheffings - lede‌

Question

A share block company provides its members with meals in a diningroom facility and charges a monthly catering levy, based on a fixed amount per person. If a member is away for a lengthy period the catering levy may be reduced accordingly. Will the catering levy be subject to VAT or be treated as an exempt supply?

Answer

The supply of service by a share block company to its shareholders in the course of the activity of managing the share block company is an exempt supply in terms of section 12(f), if the cost of supplying such service is met from shareholders’ levies. It should be noted that the purpose of the levy fund is to meet the expenses and losses incurred in relation to the fixed property. In view of the above, the catering levy does not fall within the provisions of section 12(f). However, in order for the levy to be subject to VAT in terms of section 7(1)(a), the share block company must be a vendor or be required to be registered as a vendor and must levy a charge which will cover all direct and indirect costs of such meals provided.

See ruling No. 159.

‌28/2/1-11 June 1992 and amended on 19 April 2002.

‌159‌

‌Share block company - catering charges Aandeleblokmaatskapy - ververwinskoste‌

Question

If a separate charge (other than a levy) is made in respect of meals supplied by a share block company and the

company is, or is required to be registered as a vendor, would the abovementioned charges be subject to VAT?

Answer

Where a separate charge is made for meals supplied, such charge is subject to VAT if the share block company is

or is required to be registered as a vendor.

‌28/2/1-11 June 1992 and withdrawn as from 1 September 2002.

‌Note

This ruling is incorporated into ruling No.158.

‌160‌

‌Royalties and commission - local and foreign sales Tantieme en kommissie – plaaslike en buitelandse verkope‌

Question

A record promotion company acts as agent/promoter for local groups and their function is to raise funds and promote the records. The record promotion company places the finished product with record companies both local and abroad. Royalties are then earned from the foreign record company as well as from the local record company, and is split between the groups and investors. The record promotion company earns a commission based on a percentage of the total royalties received. Will the royalties received from the foreign record company be subject to VAT at the zero rate or the standard rate, and will the commission earned on such royalties be taxable?

Answer

In terms of section 11(2)(m) royalties received from the foreign record companies, in respect of the distribution

and sales of the records in the foreign country will be subject to VAT at the zero rate.

However, the commission earned for work done in the Republic of South Africa for the local band (groups) and investors will be subject to VAT at the standard rate in terms of section 7(1)(a), although it is based on a percentage of the royalties earned from the foreign company.

‌28/2/1-13 May 1992

‌161

‌Verhuring van advertensiespasie aan buitelanders Letting of advertising space to foreigners‌

Vraag

Die reg om advertensies te plaas by ’n rugbystadion in Suid-Afrika word toegestaan aan buitelandse

maatskappye. Is BTW hefbaar op die bedrae betaalbaar om die regte te bekom?

Antwoord

Die reg om advertensies te plaas by ’n rugbystadion in Suid-Afrika wat toegeken word aan persone wat nie inwoners van die Republiek is nie, en wat buite die Republiek is op die tydstip waarop die advertensiespasie deur die rugbystadion aan hulle verhuur word, sal ingevolge die bepalings van artikel 11(2)(l ) teen die nulkoers belas word. Dit word aanvaar dat die huur nie regstreeks in verband met roerende eiendom is nie.

‌28/2/1-18 Mei 1992 en gewysig op 1 September 2002.

‌162‌

‌Motor car - Land Rover - input tax credit Motor – Land Rover - insetbelastingkrediet‌

Question

Can a vendor who runs a game farm claim an input tax credit in respect of the purchase of a Land Rover to be

used for game viewing?

Answer

Motor car is defined in section 1 to include "any motor vehicle of a kind normally used on public roads which has three or more wheels and is constructed or adapted wholly or mainly for the carriage of passengers". A Land Rover falls within this definition and therefore no input tax may be claimed in terms of section 17(2)(c). The purpose for which the Land Rover in question is used is not relevant in determining whether it constitutes a motor car.

‌28/2/1-18 August 1992

‌163‌

‌Re-insurance fees - on and off-shore Herversekeringsgelde – aan wat en van die kus af‌

Question

A re-insurance broker acts mainly on behalf of a foreign holding company. The premium income is in respect of re-insurance which it places, both on and off-shore. Consequently the brokerage fees earned are earned from the insurer with whom it places the re-insurance. The brokerage fee is calculated as a percentage of the premium income. Will this brokerage fee be subject to VAT at the standard rate or zero rate?

Answer

Any fee or brokerage earned by an insurance broker for services rendered to a South African re-insurer (ie on- shore) will be subject to VAT at the standard rate in terms of section 7(1)(a). Any brokerage or other fee earned by an insurance broker for services rendered to a foreign (off-shore) re-insurer (ie a re-insurer not carrying on an enterprise in the Republic) will be subject to VAT at the rate of zero percent in terms of section 11(2)(l ).

‌28/2/1-11 March 1992 and amended on 1 September 2002.

‌164‌

‌Eiendomswaardasiegelde - toestaan van verbandlening Property valuation fees - granting of bond‌

Vraag

’n Ondernemer bedryf ’n huiseienaarskapskema waarvolgens ’n verbandlening aan sy werknemers verskaf word. Waardeerders wat in diens van die ondernemer is waardeer die eiendom alvorens ’n verbandlening toegestaan word. Vir hierdie diens word daar waardasiegelde gehef by die aansoek om ’n verband. Is BTW op die waardasiegelde hefbaar?

Antwoord

Waar die leweraar van ’n finansiële diens ander goed of dienste lewer wat noodsaaklik is vir die lewering van die finansiële diens sal die lewering van die ander goed of dienste ingevolge artikel 12(a) van BTW vrygestel wees. Die waardasiegelde is dus vrygestel van BTW. As gevolg van die wysiging aan artikel 12(a) sal die waardasiegelde egter vanaf 3 Junie 1996 aan die standaardkoers van BTW ingevolge artikel 7(1)(a) onderhewig wees.

‌28/2/1-5 Maart 1992 en gewysig op 1 September 2002.

‌165‌

‌Taxidermist - export of trophies Taksidermis – uitvoer van trofeë‌

Question

Tourists from export countries come to South Africa to hunt game. The trophy (ie the head and horns) is then exported to the tourist at his address in the export country. Will the charge for the trophy and taxidermy work performed in respect of the trophy be zero-rated?

Answer

The charge for the taxidermy work will be apportioned on a 70/30 basis. The manufacture of the trophy shall be deemed to constitute 70% of the total amount charged and is subject to VAT at the zero rate. Services supplied in connection with the raw preparation shall be deemed to constitute 30% of the total amount charged by the taxidermist and is subject to VAT at the standard rate. However, as a result of the amendment to section 11(2)(l

)(ii)(aa) the raw preparation services supplied by the taxidermist will as from 4 July 1997 also be subject to VAT

at the zero rate. (Act 27 of 1997) [Also see VAT Practice Note: No. 13 for more details].

‌28/2/1-25 March 1992, amended on 19 September 1995 and 1 September 2002.

‌166‌

‌Excise duty Aksynsbelasting‌

Question

Is excise duty subject to VAT?

Answer

Even though Customs and Excise is responsible for the collection of excise duties, such charges are duties levied

by the State and therefore, no VAT is payable on such duties.

‌28/2/1-25 March 1992 and amended on 1 September 2002.

‌167‌

‌Intellectual property rights Intellektuele eiendomsregte‌

Question

Does the term movable property as contemplated in section 11(2)(l) of the Act include intellectual property

rights?

Answer

The term movable property used in section 11(2)(l) does not include intellectual property as contemplated in section 11(2)(m) of the Act. If the services rendered are those contemplated in section 11(2)(m) they will be subject to VAT at the zero rate.

‌28/3/18-31 July 1991

‌168‌

‌Verkoop van vaste eiendom aan werknemers Sale of fixed property to employees‌

Vraag

’n Ondernemer besit eiendomme wat hy oor ’n lang termyn gebruik word om huurhuisvesting aan sy werknemers te verskaf. Om ’n oorskot huisvesting te bekamp en ter voorsiening in die behoeftes van werknemers om ’n eie woning te besit, word die eiendomme nou aan die werknemers verkoop. Moet BTW op die verkope van die eiendomme gehef word?

Antwoord

Artikel 12(c) bepaal dat die lewering van huisvesting in ’n woning ’n vrygestelde lewering is. Vir sover ’n ondernemer vrygestelde lewerings maak, bedryf hy nie ’n onderneming soos omskryf in paragraaf (v) van die voorbehoudsbepaling by die omskrywing van "onderneming" in artikel 1 nie.

Die verkoop van eiendomme wat vir doeleindes van huisvesting verkry is sal dus nie aan BTW onderhewig wees

nie aangesien dit geag word nie die bedryf van ’n onderneming te wees nie.

‌28/2/1-7 Oktober 1991

‌169‌

‌Belastingverligtingsertifikate - diplomate Tax relief certificates - diplomats‌

Vraag

Aan wie word diplomatieke belastingverligtingsertifikate uitgereik?

Antwoord

Die diplomatieke belastingvrystellingsertifikate is met ingang van 1 Junie 1993 ingetrek en belastingverligting word in beperkte omstandighede by wyse van ’n terugbetaling deur die Kommissaris aan buitelandse missies gemaak. Dit volg dat alle lewerings aan diplomate teen die standaarkoers ingevolge artikel 7(1)(a) moet plaasvind. Artikel 69, wat die uitreiking van sodanige sertifikate gemagtig het, is deur Wet 20 van 1994 geskrap.

‌28/2/1-4 Maart 1992 en gewysig op 19 September 1995

‌170‌

‌Lopende saak - koop van aandele in maatskappy Going concern - purchase of shares in company‌

Vraag

Kan ’n maatskappy (geregistreerde ondernemer) as ’n lopende saak verkoop word (dus teen die nulkoers) aan ’n

ander geregistreerde ondernemer, indien die koper 100 persent van die aandele koop?

Antwoord

Die nulkoers is nie van toepassing waar ’n besigheid verkoop word by wyse van die verkoop van aandele in ’n maatskappy nie, aangesien die oordrag van aandele ’n finansiële diens is ingevolge artikel 2(1)(d) wat ingevolge artikel 12(a) van BTW vrygestel is. Geen insetbelastingaftrekkings kan derhalwe teruggeëis word nie, aangesien daar geen verandering in die onderneming plaasgevind het nie behalwe vir die aandeelhouding.

Waar ’n ondernemer egter bates van ’n ongeregistreerde onderneming (maatskappy) koop, kan denkbeeldige insetbelasting geëis word ten opsigte van slegs daardie goedere wat "tweedehandse goed" soos omskryf in artikel 1 uitmaak, maar nie ten opsigte van handelsvoorraad, lewende hawe en klandisiewaarde nie.

‌28/2/1-10 Maart 1992 en gewysig op 1 September 2002.

‌171‌

‌Uitvoere - produktemarkte Exports - produce markets‌

Vraag

Verskeie markagente koop produkte namens ondernemers in die BLNS-lande by plaaslike produktemarkte aan. Hoe word die nulkoers, waar ondernemers van die BLNS-lande produkte van markagente van plaaslike produktemarkte aankoop, toegepas?

Antwoord

Aangesien markmeesters BTW namens verskillende markagente vorder en op hul beurt BTW aan produsente oorbetaal, sal dit onprakties wees om die nulkoers of die terugbetalingsmetodes op die normale manier toe te pas. Omdat BLNS-ondernemers nie in Suid-Afrika handel dryf nie, kan hulle nie onder die BTW-stelsel geregistreer word nie. Daar is dus gereël dat markmeesters na die einde van elke belastingtydperk (dws elke maand), terugbetalings aan die BLNS-ondernemers doen ten opsigte van alle aankope in die vorige belastingtydperk waarvan dokumentêre bewys ontvang is dat die goedere uitgevoer is. Toestemming is verleen dat die BTW wat aan BLNS-ondernemers terugbetaal word as insetbelasting beskou mag word en verreken mag word teen die uitsetbelasting op lewerings (bv markgelde) deur die mark (sien artikel 54(6)).

‌28/2/1-11 Desember 1991 en gewysig op 1 September 2002.

‌172‌

‌Residential accommodation supplied to employees Voorsiening van huisvesting aan werknemers‌

Question

A vendor supplies accommodation to his employees. The employees are obliged, in terms of their conditions of service, to reside in the accommodation provided for them. Part of the residence provided is also used in the making of taxable supplies. Will the supply of the accommodation be exempt in terms of section 12(c)(ii) of the Act?

Answer

The supply of accommodation in a dwelling provided by an employer to an employee falls within the ambit of

section 12(c)(ii) of the Act, and is therefore an exempt supply.

If the vendor can establish that any part of such dwelling is not used as a place of residence or abode, a basis could be determined for allowing input tax in respect of expenditure relating to such identified part. In effect, a specific room or rooms would have to be identified as being used predominantly for the making of taxable supplies. The square meterage of the identified area as a percentage of the dwelling as a whole could then be used as a basis for determining the apportionment between exempt and taxable supplies. (See section 17(1).)

‌28/3/7-30 October 1992

‌173‌

‌Foreign-going ship - services by subcontractors

Question

Will the provisions of section 11(2)(g)(iv) be applicable to subcontractors who supply services directly to foreign-

going ships?

Answer

In terms of section 11(2)(g)(iv), services supplied directly in respect of the repair, maintenance, cleaning or

reconditioning of a foreign-going ship or foreign-going aircraft are subject to VAT at the rate of zero percent.

In order to qualify for zero rating:

the service must be supplied directly in connection with the repair, maintenance, cleaning or reconditioning;

the craft in respect of which the services are rendered must qualify as a foreign-going ship or foreign-going

aircraft.

The zero rating will therefore apply whether the services are rendered directly to the master or owner of a

foreign-going ship or a foreign-going aircraft or whether they are supplied via an agent or other intermediary.

‌28/2/1-12 December 1991

‌174‌

‌Security association Veiligheidsvereniging‌

Question

An association not for gain, administers the security services of a cluster housing complex. The operation is similar to that of a sectional title body corporate, in that the association collects a monthly levy from all the owners to cover the expenses of the association. Is the association exempt from VAT in terms of section 12(f)?

Answer

The monthly levy collected from all owners to cover the expenses of the association does not fall within the ambit

of section 12(f). The levies will therefore be subject to VAT at the standard rate in terms of section 7(1)(a).

‌28/2/1-18 November 1991 and amended on 1 September 2002.

‌175‌

‌Joolkomitee - motorvoertuie - insetbelasting ontsê Rag committee - motor vehicles - input tax denied‌

Vraag

’n Joolkomitee is as ’n ondernemer vir BTW-doeleindes geregistreer. Die aktiwiteite van die komitee behels die insameling van fondse wat aangewend word om motorvoertuie aan te koop. Die motorvoertuie word dan aan liefdadigheidsorganisasies gelewer teen geen vergoeding. Is die komitee op ’n insetbelastingkrediet geregtig ten opsigte van die aankoop van die voertuie?

Antwoord

Die Joolkomitee is nie geregtig om ’n insetbelastingaftrekking te maak ten opsigte van die motors wat aangekoop is nie.

Die voorbehoudsbepaling by artikel 17(2)(c) van die Wet laat ’n insetbelastingaftrekking toe waar ’n motor deur ’n ondernemer verkry is met die uitsluitlike doel om ’n belasbare lewering van sodanige motor te maak in die gewone loop van ’n onderneming wat voortdurend of gereeld motors lewer. Aangesien die Joolkomitee nie voortdurend of gereeld motors lewer nie, is die bepalings van die voorbehoudsbepaling nie van toepassing nie.

‌28/3/13-28 Januarie 1993

‌176‌

‌Short-term insurance - commission from overseas Korttermynversekering – kommissie vanaf die buiteland‌

Question

A local insurer cedes short-term risks on South African land and buildings to a foreign re-insurer. He receives a commission from the foreign re-insurer in respect of the risks that he has ceded to him. Will this commission be subject to VAT at the zero rate?

Answer

As the services which the local insurer supplies to the foreign re-insurer are not directly in connection with land or any improvement thereto situated in the Republic or movable property situated inside the Republic at the time the services are rendered, these services will fall within the ambit of section 11(2)(l ) and would therefore be zero-rated.

‌28/2/1-28 November 1991 and amended on 1 September 2002.

‌177‌

‌Verkoop van eiendom vir opvoedkundige doeleindes gebruik Sale of property used for educational purposes‌

Vraag

’n Universiteit verkoop ’n perseel wat uitsluitlik vir opvoedkundige doeleindes aangewend is. Sal die transaksie

aan BTW onderhewig wees?

Antwoord

Aangesien die perseel vir opvoedkundige doeleindes aangewend en dus vir die maak van vrygestelde lewerings gebruik is, verteenwoordig die verkoop daarvan nie ’n lewering in die loop of ter bevordering van ’n onderneming ooreenkomstig artikel 7(1)(a) nie. Die transaksie is dus vrygestel van BTW maar hereregte sal wel daarop betaalbaar wees.

‌28/2/1-10 Maart 1992

‌178‌

‌Disability policies Ongeskiktheidspolisse‌

Question

Will a disability policy fall within the definition of a "lont-term insurance policy" as defined in section 2(2)(v) and

therefore treated as a financial service in terms of section 2(l)(i)?

Answer

All life insurance business which falls within the ambit of the definition of "long-term insurance policy" in section

2(2)(v) is treated as a financial service in terms of section 2(1)(i)and exempt from VAT in terms of section 12(a).

A disability policy is in terms of the definition of "long-term policy" in section 1(1) of the Long Term Insurance Act, 1998 (Act No. 52 of 1998), regarded as a long-term insurance policy and as such exempt from VAT in terms of section 12(a) read with section 2(1)(i).

‌28/2/1-16 March 1992 and amended on 1 September 2002.

‌179‌

‌Prokureursdienste oorspan implementeringsdatum Attorneys - services span implementation date‌

Vraag

’n Prokureursfirma vorder kansellasiekoste van sy kliënte ten opsigte van die kansellasie van verbande. Van die koste word voor die implementeringsdatum aan die kliënt gefaktureer alhoewel die kansellasie van die verband eers na die implementeringsdatum sal plaasvind. Moet BTW op die kansellasiekoste gehef word?

Antwoord

Ingevolge artikel 78(6) van die Wet moet daar onderskei word tussen dienste wat gelewer word voor die aanvangsdatum en die wat na die aanvangsdatum gelewer word. Daar moet dus ’n redelike verdeling plaasvind tussen die dienste verrig voor en na die aanvangsdatum.

Die wyse waarop die dienste ontleed moet word, is die verdeling van dienste voor die aanvangsdatum wat nie onderhewig sal wees aan BTW nie, en dienste na die aanvangsdatum wat onderhewig sal wees aan BTW teen die standaardkoers ingevolge artikel 7(1)(a).

‌28/3/18-24 Oktober 1991 en geskrap vanaf 1 September 2002.

‌180‌

‌Staatsondersteunde skole - aanvullende fondse State aided schools - supplementary funds‌

Vraag

Moet staatsondersteunde skole (Model C-skole) vir BTW registreer indien die skole die volgende genoemde

aktiwiteite ten bate van die skool bedryf en hul omset die R300 000 perk per jaar sal oorskry?

Snoepwinkel

Tweedehandse klerewinkel

Boek- of skryfbehoeftewinkel Verhuring van sale of sportgronde Parkering Fondsinsamelingskompetisies Antwoord

Onderhewig aan die goedkeuring van die Suid-Afrikaanse Inkomste Diens kan ’n skool wat die bogenoemde aktiwiteite afsonderlik van mekaar bedryf elkeen as ’n afsonderlike entiteit behandel word ingevolge artikel 23(5) indien afsonderlike rekenkundige stelsels vir elkeen bygehou word. As die omset van elke aktiwiteit minder as R300 000 per jaar is, sal die skool geensins verplig wees om te registreer vir BTW-doeleindes nie. Slegs die aktiwiteit waarvan die omset die perk van R300 000 per jaar oorskry hoef vir BTW-doeleindes geregistreer te word ingevolge artikel 23(1).

‌28/2/1-30 Junie 1992 en gewysig op 1 September 2002.

‌VAT Rulings

‌Rulings 181 - 200

‌181‌

‌Sale of houses to foreigners

Question

Residential property developers operate on the basis of acquiring raw land, installing services, marketing houses, organising construction of same and handover of completed houses to end purchasers. Some of the houses are sold directly to foreign residents and others are sold by a foreign based firm of consultants. Are the sales of houses to foreign residents subject to VAT at the standard rate or the zero rate?

Answer

The sale of houses situated in the Republic through a foreign based firm of consultants, or directly to foreign residents is subject to VAT at the standard rate in terms of section 7(1)(a).

‌28/3/3-3 August 1992

‌182‌

‌Fixed property - purchased from a non-vendor

Question

A registered vendor whose business is that of developing fixed property, purchased property from a non-vendor for the purpose of developing it. Can the vendor claim a notional input tax credit in respect of the purchase thereof?

Answer

The supply of fixed property is subject to VAT only where the supply is made by a vendor in the course or furtherance of his enterprise. Where second-hand fixed property is sold by way of a non-taxable supply to a registered vendor who will, for example, develop it and sell off units, that vendor is, in principle, entitled to claim a credit for notional input tax in terms of section 16(3)(a)(ii) or (b)(i), read with paragraph (b) of the definition of input tax in section 1 of the Act. Such input tax deductions can, however, be claimed only to the extent that payment has been made by the vendor in respect of the acquisition of the secondhand fixed property.

‌28/3/3-29 October 1992

‌183‌

‌Food and beverages to crew - input tax

Question

A vendor supplies food and beverages to crews aboard fishing trawlers. These crews spend an average eight days at sea per fishing trip. Is the vendor entitled to an input tax credit in respect of the supply thereof?

Answer

As the crews aboard the fishing trawlers are spending nights away from their usual place of residence and usual workingplace (i.e. place where crew are stationed) the vendor will be entitled to an input tax deduction in respect of these supplies in terms of section 17(2)(a)(ii).

‌28/3/7-29 December 1992 and amended on 1 September 2002.

‌184‌

‌Omgewingsentrum - opvoedkundige dienste Environment centre - educational services‌

Vraag

’n Omgewingsentrum van ’n openbare aard bied sekere opvoedkundige dienste aan wat voldoen aan die leerplanne van provinsiale skole. Sal die omgewingsentrum se lewering van dienste vrygestel wees van BTW ten opsigte van dienste gelewer aan skoolgroepe asook aan die publiek?

Antwoord

Ingevolge artikel 12(h)(ii) is die omgewingsentrum se lewerings vrygestel, maar net ten opsigte van gevalle waar die dienste aan skoolgroepe gelewer word. Die lewering aan persone anders as skoliere, wat nie as primêre of sekondêre opvoeding kwalifiseer nie, is nie ingevolge artikel 12(h)(i)(aa) vrygestel nie.

‌28/2/1-24 Julie 1992

‌185‌

‌Betalingsbasis - paaiementkredietooreenkomste - uitsetbelasting

‌Payments basis - installment credit agreements - output tax

Vraag

’n Ondernemer is op die betalingsbasis vir BTW-doeleindes geregistreer en lewer goed by wyse van paaiementkredietooreenkomste. Moet hy vir uitsetbelasting op die ooreenkomste verantwoord vir sover hy betaling ten opsigte daarvan ontvang het?

Antwoord

Artikel 16(4)(b)(ii) is van toepassing op verskeie lewerings van goed of dienste ten opsigte waarvan spesiale tyd-van-leweringreëls geld, byvoorbeeld die lewering van goed ingevolge ’n paaiementkredietooreenkoms. Alhoewel die ondernemer op ’n betalingsbasis rekenskap gee van belasting betaalbaar, moet hy ten opsigte van die paaiementkredietooreenkoms op dieselfde wyse as ondernemers op die faktuurbasis rekenskap gee van belasting betaalbaar.

Die lewering word geag plaas te vind op die tydstip waarop die goed afgelewer word of die tydstip waarop enige betaling van vergoeding deur die leweraar ten opsigte van daardie lewering ontvang word, watter tydstip ookal die vroegste is.

‌28/3/22-28 Januarie 1993

‌186‌

‌Church - association not for gain - sub-departments

Question

Will a church that operates four sub-departments as an association not for gain, be required to register for VAT in terms of section 23(1) if the collective turnover from the four departments exceeds the R300 000 threshold per annum?

Answer

As the four departments of the Church, being an association not for gain, carry on separately identifiable activities and maintain independent accounting systems, each department may, for the purposes of section 23(5) be deemed to be a separate person for purposes of the registration requirements of the Act, subject to the approval of the Receiver of Revenue.

‌28/3/29-4 June 1992

‌187‌

‌Marketing services for overseas companies

Question

A South African vendor assists a group of brand owning companies (which are located overseas) in marketing their products to the South African importers and in preparing strategies to assist the importers in marketing the products in South Africa. In return for his services the South African vendor is paid a fee by the overseas companies. Will the marketing fees be subject to VAT at the standard or the zero rate in terms of section 11(2)(l)?

Answer

The supply of services by the South African vendor to the overseas brand owning companies is subject to VAT at the rate of zero percent in terms of section 11(2)(l), as the services are not supplied directly in connection with any movable property situated in the Republic or TBVC States at the time the services are rendered.

‌28/2/1-21 April 1992

‌188‌

‌Fund-raising events - association not for gain

Question

An association not for gain receives 96 percent of its income from the public and corporate sector as well as from fund-raising events. Many of the fund-raising events are initiated by public dance companies, musicians, clubs, etc and these people organise and co-ordinate the event and donate their skills and talents. The association’s function is to sell tickets and to co-ordinate and administer the event and the funds thereof.

Each separate function brings in small amounts and would never exceed the R300 000 threshold per function. Can each fundraising activity or event be regarded as a separate person in terms of section 23(5) and therefore the ticket sales not be subject to VAT?

Answer

Each individual fund-raising activity or event cannot qualify for such treatment in terms of section 23(5). The ticket sales will therefore be subject to VAT if the total turnover from all the events exceeds the R300 000 threshold in terms of section 23(1).

‌28/3/21-13 August 1992

‌189‌

‌Congress fees - overseas delegates

Question

A conference planner organises an international congress to be held in South Africa. The majority of the conference registration fees will be paid by overseas delegates to attend the congress. Will the conference registration fees be subject to VAT at the standard rate or zero rate?

Answer

In terms of section 11(2)(l) services are only zero-rated when supplied to a person who is not a resident of the Republic or a specified country and who is outside the Republic or the specified countries at the time the services are rendered. The services supplied by the conference planners will therefore be subject to VAT at the standard rate.

‌28/2/1-16 July 1992

‌190‌

‌Hearing aids - school - fund-raising organisation

Question

A school is registered as a fund-raising organisation and caters for the education, welfare and vocational training of hearing impaired children. Can the input tax paid on the hearing aid equipment bought, that is necessary for the supply of educational services, be claimed as an input tax credit?

Answer

As the school makes exempt supplies, no input tax may be claimed in respect of supplies made to the school. The hearing aid equipment constitutes goods necessary for and subordinate and incidental to the supply of educational services and no input tax may therefore be claimed in respect thereof.

‌28/2/1-June 1992

‌191‌‌‌‌‌‌

‌Crossword puzzles/competitions - charity fund Blokkiesraaisel/kompetisies - liefdadigheidsfonds‌

Question

A newspaper prints a series of questions and crossword puzzles as a competition every week. For the reader to participate in the competition he has to pay one rand for each completed crossword puzzle submitted. The newspaper pays 75 cents of every rand collected from the participants into a charity fund and uses the other 25 cents to cover the cost of the competition. The winner of the competition receives an amount of prize money. Will the one rand charged to participants to enter the competition be subject to VAT or will only 25 cents be subject

to VAT and the 75 cents treated as an unconditional gift?

Answer

The definitions of "consideration" and "services" in section 1 are wide enough to bring the amount paid by a reader to enter the crossword puzzle/competition within the ambit section 8(13). Although 75 cents of every rand received by the newspaper is paid over to the charity fund, the newspaper receives that 75 cents as principal and not as agent. Since the reader has to pay one rand for each completed puzzle submitted in order to participate in the competition, it cannot be argued that 75 cents thereof is "a payment voluntarily made to any association not for gain" as contemplated in the definition of "unconditional gift" in section 1. The full amount received is therefore subject to VAT in terms of section 8(13).

‌28/3/21-17 August 1992 and amended on 1 September 2002.

‌192‌

‌Invoer van bone Importation of beans‌

Vraag

’n Persoon voer bone in. Is die invoer van bone van BTW vrygestel?

Antwoord

Die invoer van bone is ingevolge paragraaf 7 van Bylae 1, saamgelees met artikel 13(3) en Deel B van Bylae 2

vrygestel van BTW, behoudens die voorwaardes genoem in Deel B van Bylae 2.

‌28/8/2-28 Januarie 1993 en gewysig op 1 September 2002.

‌193‌

‌Ondernemer - skuldvergelyking - tyd van lewering Vendor - set-off of debts - time of supply‌

Vraag

’n Ondernemer pas skuldvergelyking op kliënte se rekenings toe om hulle rekenings te vereffen. Wat is die tyd

van lewering vir BTW- doeleindes ten opsigte van skuldvergelyking?

Antwoord

Die algemene tyd van lewering reël soos vervat in artikel 9(1) lui dat ’n lewering geag word plaas te vind op die tydstip waarop ’n faktuur deur die leweraar of die ontvanger ten opsigte van daardie lewering uitgereik word of die tydstip waarop enige betaling van vergoeding deur die leweraar ontvang word ten opsigte van daardie lewering, watter tydstip ook al die vroegste is. ’n "Faktuur" word vir hierdie doeleindes in artikel 1 omskryf as ’n dokument wat kennis gee van ’n verpligting om ’n betaling te doen.

Waar betaling deur skuldvergelyking gedoen word op enige tydstip voordat ’n faktuur uitgereik word, sal die tydstip waarop skuldvergelyking plaasvind (en betaling dus gedoen word) ingevolge artikel 9(1) geag word die tyd van lewering te wees.

‌28/3/27-10 November 1992 en gewysig op 19 April 2002.

‌194‌

‌Renting of hostel to a vendor Verhuring van koshuis aan ‘n ondernemer‌

Question

A vendor has scaled down its operations and because of this, a hostel and training centre that it owns is not fully utilized. The vendor enters into an agreement with the State to lease a section of the hostel and training centre to the latter. Will the lease agreement be subject to VAT?

Answer

The rental agreement between the vendor and the State in respect of the hostel and training centre is subject to

VAT at the standard rate in terms of section 7(1)(a).

‌28/3/3-5 August 1992 and amended on 1 September 2002.

‌195‌

‌Insetbelastingkrediet - mynbou Input tax credit - mining‌

Vraag

’n Onderneming in mynwese het materiaal voorhande soos bedoel in artikel 78(10)(a). Is die ondernemer op ’n insetbelastingkrediet geregtig ten opsigte van die verkoopbelasting wat op die materiaal betaal is?

Antwoord

Die mynbedryf sal vir doeleindes van artikel 78(10)(a) as ’n soortgelyke onderneming beskou word. Indien daar

aan al die vereistes van dié artikel voldoen word, kan die betrokke insetbelastingkrediet toegestaan word.

‌28/9/1-30 Oktober 1992 en geskrap vanaf 1 September 2002.

‌196‌

‌Anti-knock compounds - zero-rated on resale Klopweerpreparate – nulkoers op herverkoop‌

Question

Anti-knock compounds are imported solely for blending into petrol and thus form an integral component of all petrols produced in South Africa. Can the anti-knock compound be exempt from VAT on importation in the same manner as crude oil in terms of Schedule 1 and will the resale be zero-rated?

Answer

The importation of anti-knock preparations (based on lead compounds) under Sub-Heading No 38.11.11. of Schedule 1 will be exempt from VAT. The sale of anti-knock compounds will be zero-rated in terms of section 11(1)(hB).

‌28/2/1-24 July 1992 and amended on 1 September 2002.

‌197‌

‌Kommissie op salarisaftrekkings Commission on salary deductions‌

Vraag

’n Ondernemer doen maandeliks aftrekkings en oorbetalings in opdrag van sy werknemers en hef ’n kommissie

vir die lewering van die diens. Die bedrae wat afgetrek en oorbetaal word het onder meer betrekking op:

vakuniebydraes

besoldigingsbeslagleggingsbevele van ’n landdroshof

donasies

Word bogenoemde diens as ’n finansiële diens beskou en is die kommissie sodoende verdien dus

vrygestel van BTW?

Antwoord

‌28/2/1-7 Julie 1992 en gewysig op 19 September 1995.

‌198‌

‌Services supplied to a non-resident Dienste gelewer aan ‘n nie-inwoner‌

Question

A vendor collects rental income on behalf of a non-resident client. The vendor also manages the client’s financial affairs such as: share portfolio, making bank deposits, filling in tax returns etc. Are these services subject to VAT at the zero rate or are they to be treated as financial services?

Answer

The management of a share portfolio as well as the collecting of rental income on behalf of a non-resident client

is subject to VAT at the rate of zero percent in terms of section 11(2)(l ).

‌28/2/1-9 March 1992

‌Note

While section 2(1)(m) has been deleted and the words "or the arranging of" have been deleted from section 2(1)(n) with effect from 1 April 1995 the services of portfolio management on behalf of a non-resident are still zero-rated in terms of section 11(2)(l ).

‌19 September 1995 and amended on 1 September 2002.

‌199‌

‌Verkoop en verhuur van huurpaggrond - plaaslike owerhede Sale and letting of leasehold land - local authorities‌

Vraag

’n Plaaslike owerheid ontwikkel ’n dorpsgebied (huurpaggrond) en verkoop en/of verhuur die persele dan aan voornemende kopers wat dit dan verder ontwikkel en/of gebruik as huisvesting. Is die verkoop en/of verhuring van die persele aan BTW onderhewig?

Antwoord

In die geval van ’n plaaslike owerheid wat ’n dorpsgebied ontwikkel waar die inkomste vir eie voordeel verkry, tesame met enige toelae of subsidie, genoeg is vir die befondsing van die uitgawes daaraan verbonde sal daardie verkope aan BTW ingevolge artikel 7(1)(a) onderhewig wees. Enige huur ontvang vir die lewering van huurpaggrond by wyse van verhuring vir die hoofdoel van huisvesting is kragtens artikel 12(d) vrygestel van BTW.

‌28/3/9-10 Augustus 1992

‌200

‌State-aided hospitals and clinics Staatsondersteunde hospitale en klinieke‌

Question

State and provincial hospitals including state and local authority clinics are not required to register for VAT purposes. It follows that these institutions do not levy VAT on the medical services and medicines which they supply. Does this concession also apply to state-aided hospitals and clinics?

Answer

State and provincial hospitals are not included in media statement dated 27 September 1991 as Government

departments which carries on an "enterprise" as defined in section 1. Also refer to media statement dated

21 August 1991 which specifically mentions that state and provincial hospitals including state and local authority

clinics will not be required to register for VAT.

State-aided hospitals or clinics must however, register and collect VAT on services provided to needy patients in terms of section 7(1)(a), as they do not fall within the ambit of state and provincial hospitals or state and local authority clinics.

‌28/2/1-10 May 1992 and amended on 1 September 2002.

‌201‌

‌Plaaslike besture - erwe en meentgrond Local authorities - plots and commonage‌

Vraag

’n Plaaslike bestuur verhuur erwe en meentgrond ingevolge ’n notariële huurkontrak aan ’n ondernemer. Is BTW

op die verhuring van die grond hefbaar?

Antwoord

Die bedrywighede van plaaslike besture wat as die bedryf van ’n onderneming beskou word vir doeleindes van belasting op toegevoegde waarde word uiteengesit in paragraaf (c) van die omskrywing van "onderneming" in artikel 1. Aangesien die verhuur van grond ingevolge ’n notariële huurkontrak nie ooreenkomstig paragraaf (c)(iv)(cc)(A) van die omskrywing deur die Minister, by kennisgewing in ’n Staatskoerant, as die bedryf van ’n onderneming bepaal is nie en dit ook nie ooreenkomstig paragraaf (c)(iv)(cc)(B) as sodanig bepaal is nie, val dit buite die omskrywing van onderneming.

Aangesien die huurinkomste nie deur die plaaslike bestuur in die loop van ’n onderneming ontvang word nie is

BTW nie ingevolge artikel 7(1)(a) daarop betaalbaar nie.

‌28/3/9-20 Augustus 1992

‌202‌

‌Double cab light delivery vehicles

‌Dubbelkajuit-ligte-afleweringsvoertuig

Question

A vendor purchased a double cab light delivery vehicle for use on his farm. Can he claim an input tax credit in

respect of the purchase thereof?

Answer

The expression "motor car" is defined in section 1 of the Act, as including "… a motor car, station wagon, minibus, double cab light delivery vehicle and any other motor vehicle of a kind normally used on public roads, which has three or more wheels and is constructed or adapted wholly or mainly for the carriage of passengers, ... ".

It is on the above basis that double cab light delivery vehicles have been regarded as motor cars. It is important to note that the nature of the vehicle and not the use to which the vehicle is put will determine whether or not an input tax credit may be claimed. An input tax deduction in respect of the purchase of these vehicles will therefore not be allowed in terms of section 17(2)(c).

‌28/3/5-20 November 1992 and amended on 1 September 2002

‌203‌

‌Accommodation - educational institution – conferences Huisvesting – opvoedkundige inrigting - konferensies‌

Question

An educational institution provides accommodation for participants in conferences and workshops of an academic

nature. Must VAT be levied on the supply of accommodation to the participants?

Answer

Where educational services are presented by way of a conference or workshop under the auspices of an

educational institution the amount charged in respect thereof is in terms of section 12(h)(i) exempt from VAT.

Where accommodation is provided to participants in such conferences or workshops, such supply of

accommodation is exempt from VAT in terms of section 12(h)(ii).

If the conference is not presented by the educational institution, any charge made in respect of accommodation is subject to VAT in terms of section 7(1)(a). An educational institution is obliged to register for VAT if it’s income from activities other than that of educational services envisaged in section 12(h) exceed the R300 000 threshold per annum. Where, however, the educational institution provides accommodation to delegates of such conference at a price which does not cover the cost of such accommodation, the educational institution is, in terms of section 17(2)(a), not entitled to claim any input tax credits in respect of any goods or services acquired for the purpose of supplying such accommodation and will not levy VAT on any amounts charged in respect thereof. (Refer to section 10(21)).

‌28/2/1-20 August 1992 and amended on 1 September 2002

‌204‌

‌Accommodation - educational institution - sporting events Huisvesting – opvoedkundige inrigting - sportbyeenkomste‌

Question

An educational institution provides accommodation for and makes its sporting facilities available to participants in sporting events. Must VAT be levied on the supply of the accommodation to the participants in these events and on the provision of the sporting facilities?

Answer

Where accommodation is provided to students of the educational institution attending the sports meeting or workshop, any charges made in the form of school fees, tuition fees or board and lodging are exempt from VAT in terms of section 12(h)(ii).

The supply of accommodation to other people is subject to VAT at the standard rate in terms of section 7(1)(a), if the requirements of section 23(1) are met. However, if the charge made for the supply of accommodation does not cover the cost thereof VAT is not payable in terms of section 8(14) and an input tax deduction cannot be claimed in terms of section 17(2)(a).

The provision of the educational institution’s sporting facilities to sports bodies or organizers is subject to VAT at

the standard rate in terms of section 7(1)(a).

‌28/2/1-20 August 1992 and amended on 1 September 2002

‌205‌

‌Trust or curatorship - lodging of income tax returns

‌Trust of kuratorskap – indiening van inkomstebelastingopgawes

Question

A fee is charged for completing and lodging an income tax return for a trust or person under curatorship. Will this

fee be subject to VAT?

Answer

The service of completing and lodging an income tax return is taxable in terms of section 7(1)(a), where the curator is registered or is required to be registered as a vendor in terms of section 23(1).

‌28/2/1-6 July 1992 and amended on 1 September 2002.

‌206‌

‌Mortgage bond - courier services Verbandakte - bodedienste‌

Question

Expenses in respect of courier services may be incurred where documents required for the registration of a mortgage bond have to be signed urgently. These expenses are then recovered from the borrower as principal. Will these expenses attract VAT?

Answer

Even though the expenses are incurred in respect of a financial service in terms of section 2(1)(f), the proviso to section 2(1) deems the activities relating to section 2(1)(f) not to be a financial service to the extent that the consideration payable in respect thereof is any fee, commission or similar charge. The mortgagor may claim input tax on such expenses and must levy VAT at the standard rate on the recovery of such expenses in terms of sections 7(1)(a) and 16(4).

‌28/2/1-6 July 1992 and amended on 1 September 2002.

‌207‌

‌Mortgage bonds – guarantees Verbandaktes - waarborge‌

Question

Guarantees are issued on behalf of a borrower under a mortgage bond to a financial institution. Will the issue of

the guarantees be subject to VAT?

Answer

Up until 30 September 1996 the provision of guarantees in respect of the performance of obligations under a debt security constituted a financial service in terms of section 2(1)(h) and was exempt from VAT in terms of section 12(a). With effect from 1 October 1996 the provision of guarantees is subject to VAT at the standard rate in terms of section 7(1)(a) as a result of the deletion of section 2(1)(h).

‌28/2/1-6 July 1992 and amended on 1 September 2002.

‌208‌

‌Trust or curatorship - administration fees Trust of kuratorskap - administrasiefooie‌

Question

An annual administration fee is charged for the administration of a trust or curatorship. The administration involves making secure investments, varying investments, realising and controlling investments, paying beneficiaries and all other management functions. The fee is based on a percentage of the capital value of the assets as well as of income collected. Is the administration fee subject to VAT?

Answer

The administration and management of estates is a supply which is subject to VAT in terms of section 7(1)(a). Where a portion of the administration and management fee relates to the collection of monies in respect of debt securities, an apportionment of the fee has to be made as the latter, where separately charged, is an exempt supply in terms of section 12(a) read with section 2(1)(m).

‌28/2/1-6 July 1992

‌Note

As a result of the deletion of section 2(1)(m) and the words "or arranging" from section 2(1)(n) with effect from 1 April 1995 the services referred to above no longer constitute financial services and are subject to VAT at the standard rate in terms of section 7(1)(a).

‌19 September 1995

‌209‌

‌Credit notes - information - original transaction Kreditnotas – inligting – oorspronklike transaksie‌

Question

A vendor issues credit notes when goods are returned. Due to the nature of the goods (ie they have no serial or registration numbers) it is impossible to relate the return of the goods to the original invoice. The credit notes do, however, refer to a period in time in which the original invoice was issued as well as to the volume of goods that were returned. Will this information on the credit notes be sufficient to identify the transactions to which they relate?

Answer

There is no obligation on a vendor to state the original invoice number where a supply is cancelled or altered. Information sufficient to identify the transaction or transactions to which the credit note refers must, however, be furnished on such credit note. It is accepted that as regards the return of goods, where it is impossible to identify the original transaction, an endorsement on the credit note to the effect that "This credit note refers to sales made between x date and x date", together with the volume of the goods returned, will constitute sufficient information to identify the transaction for purposes of section 21(3)(a)(vii) of the Act.

‌28/3/23-30 June 1992

‌210‌

‌Mortgage bonds - valuation fees Verbandakte - waardasiegelde‌

Question

A financial institution charges clients who have applied for mortgage bonds a valuation fee. Will the valuation fee

be subject to VAT?

Answer

Even though the granting of a mortgage bond is a financial service in terms of section 2(1)(f) and exempt from VAT in terms of section 12(a), the valuation fee is subject to VAT at the standard rate in terms of section 7(1)(a), as a result of the amendment to the proviso to section 2(1) with effect from 1 October 1996.

‌28/2/1-6 July 1992 and amended on 1 September 2002.

‌211‌

‌Valuation of property - travelling and accommodation expenses Waardering van eiendomme – reis- en verblyfkoste‌

Question

A financial institution incurs travelling and accommodation expenses while a property is being valued. These

expenses are recovered from the client as principal. Will these expenses attract VAT?

Answer

As these expenses form an intergral part of the valuation service, and the valuation service is necessary for the supply of a financial service by such institution, the recovery of these expenses will not attract VAT in terms of section 12(a) read with section 2(1)(f).

As from 1 October 1996 the travelling and accommodation expenses recovered from the client as principal, relating to the valuation service, is subject to VAT at the standard rate in terms of section 7(1)(a) due to the amendment to the proviso to section 2(1) and the amendment to section 12(a).

‌28/2/1-6 July 1992 and amended on 1 September 2002.

‌212‌

‌Kommissie/gelde/diensgeld - verdiskontering van debiteure Commission/fees/service fee - discounting of debtors‌

Vraag

Sal die gelde/kommissie of diensgeld wat as ’n vasgestelde persentasie van die faktuurbedrag gehef word op die verdiskontering van debiteure aan BTW onderhewig wees of as ’n vrygestelde lewering beskou word?

Antwoord

Ingevolge artikel 2(1)(c) saamgelees met artikel 12(a) sal die kommissie/diensgeld of gelde wat gehef word op die verdiskontering van debiteure as ’n vrygestelde lewering beskou word en dus nie aan BTW onderhewig wees nie.

‌28/2/1-18 Mei 1992

Ingevolge artikel 2(4)(a), ’n wetswysiging wat op 15 Julie 1992 in werking getree het, is die verdiskontering van debiteure aan BTW onderhewig teen die standaardkoers ingevolge artikel 7(1)(a), indien dit ten opsigte van ’n belasbare lewering was en die uitsetbelasting met betrekking tot daardie belasbare lewering nie aan ’n belastingtydperk toeskryfbaar sou wees of word nie.

‌28/2/1-13 September 1992

‌213‌

‌Mortgage bonds - cancellation fees Verbandaktes - kansellasiegelde‌

Question

When a mortgage bond is cancelled a cancellation fee is charged to the borrower. Is the cancellation fee subject

to VAT?

Answer

Up until 30 September 1996 the release of a bond in respect of the performance of obligations under inter alia a

credit agreement is a financial service in terms of section 2(1)(h) and is exempt from VAT in terms of section

12(a). However, with effect from 1 October 1996, the cancellation fee is subject to VAT at the standard rate in terms of section 7(1)(a) due to the deletion of section 2(1)(h) read with the amendment to the proviso to section 2(1) and the amendment to section 12(a).

‌28/2/1-6 July 1992 and amended on 1 September 2002.

‌214‌

‌Share block company - sale of bare dominium of property Aandeleblokmaatskappy – verkoop van blote eiendomsreg‌

Question

A share block company which has registered the services of its body corporate as a vendor for VAT purposes under the proviso to section 12(f), sells one of the properties, the bare dominium of which is held by the company, for a consideration. Is VAT leviable on the sale of the property?

Answer

The sale will not constitute a supply in the course or furtherance of the enterprise of the share block company where it is registered as a vendor under the proviso to section 12(f). Once the provision of paragraph (b)(iii) of the definition of "enterprise" in section 1 comes into force (i.e. 9 July 1993), such disposals will be subject to VAT in terms of section 7(1)(a) where the company has applied for registration as a vendor and registered as such under section 23(3).

‌28/2/1-29 October 1992 and amended on 1 September 2002.

‌215‌

‌Claims in respect of vehicle accidents Eise ten opsigte van voertuigongelukke‌

Question

A vendor receives a claim in respect of damage caused by one of his vehicles. The claim received is either directly from the third party or from an insurance company. These claims are settled in cash by the vendor. May the vendor claim an input tax deduction in respect of such claims?

Answer

Where any amounts are paid by the vendor in respect of claims from third parties, such payments are taxable in the hands of the third parties, as those payments constitute the surrendering of a right which falls within the ambit of "services" as defined in section 1. The vendor is entitled to claim an input tax deduction in terms of sections 16(2), 16(3), 17(1) and 20. If the vendor subsequently claims such amounts from his own insurance company, VAT is payable in terms of section 8(8).

‌28/3/19-30 July 1992 and amended on 1 September 2002.

‌216‌

‌Airlines - passenger claims Lugdienste - passasierseise‌

Question

Passenger claims are submitted to airlines in respect of injuries suffered by the passengers. The ticket price includes an amount for insurance paid by the passenger to reimburse the passenger for any injuries which he may suffer. The claims paid are in respect of medical fees incurred by the passengers. The airlines are covered in respect of these claims by an insurance contract with an insurance company. The insurance company reimburses the airlines with the amount that has been paid out to the passengers. Are the insurance payments subject to VAT?

Answer

The insurance charge levied forms part of the ticket price and is subject to VAT in terms of section 7(1)(a). This creates a contract of insurance between the airlines and the passenger whereby any insurance payments made in respect of such claims by passengers are subject to VAT in terms of section 8(8). Where the passenger is a vendor or is an employee of a vendor on official business, the vendor needs to account for output tax in terms of section 16(4) read with section 8(8). The airlines are entitled to input tax deductions in respect of such reimbursal payments in terms of section 16(3)(c). The airlines must account for output tax in terms of section 16(4) read with section 8(8) on the amount they receive from their insurance company.

‌28/3/19 – 30 July 1992 and amended on 1 September 2002.

‌217‌

‌Airlines - baggage claims Lugdienste – bagasie eise‌

Question

Airlines undertakes to reimburse passengers for lost or damaged baggage. Included in the ticket price is a

component for this kind of loss. What is the VAT implication of baggage claims that are lodged with the airlines?

Answer

As the airlines provides for baggage claims in the price of the ticket, this creates a contract of insurance between the airlines and the passengers. Where the passenger is a vendor or is an employee of a vendor on official business, the vendor must account for output tax in terms of section 16(4) read with section 8(8). The airlines is entitled to input tax deductions in terms of section 16(3)(c), irrespective whether the passengers are vendors or not.

‌28/3/19-30 July 1992 and amended on 1 September 2002.

‌218‌

‌Share block company - transitional measures Aandeleblokmaatskappy - oorgangsmaatreëls‌

Question

A person purchased a share in a share block company prior to the implementation of VAT. The share block company was then converted into a sectional title scheme and the unit was occupied before the end of December 1991. Must VAT be levied on any of these transactions?

Answer

Where a share in a share block company has been disposed of under an agreement for the sale of such share

concluded prior to 30 September 1991, such disposal is, in terms of section 78(9)(a), not subject to VAT.

When a share in a share block company is converted into a sectional title unit, no VAT is payable. Transfer duty

is, however, payable on such a conversion.

‌28/3/3-1 April 1992 and withdrawn from 1 September 2002.

‌219‌

‌The Upgrading of Land Tenure Rights Act – fees

‌Die Wet op die Opgradering van Grondbesitregte - gelde

Question

Sections 2(2)(b), 3(3) and 13(3) of the Upgrading of Land Tenure Rights Act No.112 of 1991 provide that no transfer duty, stamp duty or other fees are payable in respect of the conversion of certain land tenure rights into ownership. Will the references to transfer duty, stamp duty or other fees include VAT?

Answer

In terms of section 86 of the Act, no provision contained in any other law that provides for an exemption of any tax or duty can be construed as applying or referring, as the case may be, to value-added tax under the Act unless such tax (value-added tax) is specifically mentioned in such provision.

The Upgrading of Land Tenure Rights Act merely refers to other fees which means that value-added tax is not specifically mentioned. The relevant transactions are therefore subject to VAT at the standard rate in terms of section 7(1)(a).

‌28/3/3-29 January 1992

‌220‌

‌Promissory notes – discounting Promesses - verdiskontering‌

Question

Is the discounting of promissory notes subject to VAT?

Answer

The discounting of promissory notes constitutes the transfer of any interest in or a right to be paid money that is, or is to be, owing by any person, but does not fall within the provisions of section 2(4) and is accordingly exempt from VAT in terms of section 12(a), read with section 2(1)(c).

‌28/2/1-15 September 1992 and amended on 1 September 2002.

‌221

‌Pyramid selling organisation Piramide verkoopsorganisasies‌

Question

A vendor makes use of a pyramid structured selling organisation comprising distributors, managers and consultants to sell its products. Each person in the selling structure is remunerated by way of a discount on the retail selling price. In effect this will alter the retail selling price of the products as it passes from the vendor to the distributors and further down the structure till it reaches the consumer. Can the vendor account for VAT on the normal retail price of the products, thereby making it unnecessary for the distributors, managers and consultants to account for VAT on their sales or should they be registered for VAT purposes?

Answer

Permission has been given to the vendor to apply VAT (output tax) to the full retail price of the goods sold despite the fact that the subsequent trade discounts granted to distributors, managers and consultants reduce the actual selling price of the goods sold in the hands of the vendor.

This authority is, however, given on condition that the distributors, managers and consultants in the pyramid selling organisation will not be registered for VAT purposes and thus the vendor will not issue tax invoices in respect of supplies to such non-registered persons in the organisation. The retail price which must include VAT must furthermore be fixed by the vendor and consultants may not sell for more than such fixed retail price. The vendor will also be obliged to calculate the VAT by applying the tax fraction to the fixed retail price (inclusive of VAT). The discount percentages are, however, applied to the fixed selling price exclusive of VAT (Ruling issued in terms of section 72).

‌28/1/1-28 October 1992

‌222‌

‌Diplomats - refunding of VAT Diplomate – terugbetaling van BTW‌

Question

Is the zero rating of supplies in respect of purchases by diplomats inflexible or can a vendor charge VAT at the

standard rate and refund the VAT immediately?

Answer

If it is impractical to charge VAT at the zero rate in respect of supplies made to diplomats, VAT may be charged at the standard rate and refunded immediately thereafter, provided the invoice issued to the diplomat contains a statement, eg "VAT refunded’‘, in order to prevent any possible abuse of the VAT inclusive invoice.

‌28/3/29-24 September 1992

‌Note

The certificates issued to diplomatic missions and staff were withdrawn with effect from 1 June 1993 and all such supplies are therefore subject to VAT at the standard rate in terms of section 7(1)(a). In terms of section 68 certain procedures must be followed for the granting of relief by way of a refund, in respect of value-added tax paid or borne by certain diplomats and diplomatic and consular missions.

‌19 September 1995 and amended on 1 September 2002.

‌223‌

‌Insurance claims - transitional measures Versekeringseise - oorgangsmaatreëls‌

Question

An insurance claim was lodged with an insurance company prior to the commencement date of VAT and the proceeds thereof accrued to the policy holder after the commencement date. Will the proceeds of the claim be deemed a supply in the course or furtherance of an enterprise in terms of section 8(8) of the Act?

Answer

The provisions of section 8(8) of the Act will apply to the proceeds of an insurance claim, whether that claim was made prior to the commencement date or not as section 73 does not provide for deemed supplies.

(Also see ruling No. 291.)

‌28/3/19-12 August 1992

‌224‌

‌Insurance company - payment of claims or supply of goods Versekeringsmaatskappy – betaling van eise of lewering van goed‌

Question

An insurance company makes payments to the insured to indemnify him against any losses insured in terms of an insurance contract. Goods may also be supplied to the insured to indemnify him against any losses incurred. In terms of which sections of the Act is the insurer entitled to an input tax credit in respect of payments made or goods supplied to the insured, to indemnify them against any losses incurred?

Answer

The provisions of section 16(3)(c) of the Act allow the deduction of an amount equal to the tax fraction in respect

of any payment made under an insurance policy by the insurer where that payment is made in cash.

Where goods are supplied to the insured under an insurance policy by the insurer, the latter is entitled to an

input tax credit in terms of section 16(3)(a) of the Act.

‌28/3/19-12 August 1992

‌225‌

‌BTW-terugbetaling - inkomstebelasting verskuldig VAT refund – income tax due – setting off a debt‌

Vraag

’n Ondernemer skuld die Kommissaris ’n bedrag aan inkomstebelasting. Terselfdertyd moet ’n terugbetaling van BTW aan die ondernemer gedoen word. Kan die Kommissaris die BTW wat aan die ondernemer verskuldig is teen die uitstaande inkomstebelasting verreken?

Antwoord

Ingevolge artikel 44(6) kan die Kommissaris BTW wat aan ’n ondernemer terugbetaalbaar is teen enige bedrag belasting, addisionele belasting, reg, heffing, tarief, rente of boete wat ingevolge die BTW Wet of enige ander wet wat deur die Kommissaris uitgevoer word, verreken.

‌28/3/22-16 Maart 1992 en gewysig op 1 September 2002.

‌226‌

‌Exports - local agent - zero-rated supplies Uitvoere – plaaslike agent - nulkoerslewerings‌

Question

A local agent purchases goods on behalf of a person in an export country. Can the goods be purchased at the

zero rate and what requirements must be complied with by the local agent?

Answer

These goods can only be purchased at the zero rate by the agent if:

there is no transfer of ownership of the goods between the vendor and the local agent; and

the goods are delivered to the purchaser at an address in an export country by the vendor in terms of section 11(1)(a)(i) read with paragraph (a) of the definition of "exported" (refer to VAT Practice Note No. 2 – dated 13 November 1998) or the vendor ensures that the movable goods are delivered to any of the harbours or airports envisaged in Part Two of the VAT Export Incentive Scheme – dated 13 November 1998 read with paragraph (d) of the definition of "exported", and

the vendor invoices the purchaser in the export country, or may invoice the local agent in terms of section

54(2).

‌28/8/3-17 September 1992 and amended on 1 September 2002.

‌227‌

‌Boerdery - privaatgebruik van lewende hawe Farming - value of livestock used for own consumption‌

Vraag

Watter waarde moet vir BTW-doeleindes gebruik word waar ’n boer lewende hawe vir eie gebruik aangewend het?

Antwoord

Lewende hawe wat deur ’n boer vir doeleindes van privaatgebruik aangewend word, word ingevolge die bepalings van artikel 18(1) geag ’n belasbare lewering deur hom in die loop van sy onderneming te wees. As sulks word die lewering, ingevolge artikel 10(7), geag gemaak te wees vir ’n vergoeding in geld gelyk aan die ope markwaarde van daardie lewering.

Die ope markwaarde van die vergoeding vir die lewering van goed of dienste op enige datum is die vergoeding in geld wat die lewering van goed en dienste gewoonlik sou haal indien dit in soortgelyke omstandighede op daardie datum in die Republiek gelewer sou wees, synde ’n lewering wat vrylik aangebied en gemaak word tussen persone wat nie verbonde persone is nie.

Waar die ope markwaarde soos hierbo uiteengesit, nie vasgestel kan word nie, is die ope markwaarde die vergoeding in geld wat ’n soortgelyke lewering sal oplewer indien gelewer in soortgelyke omstandighede in die Republiek op daardie datum.

Waar die ope markwaarde van die vergoeding vir die lewering van goed of dienste nog steeds nie vasgestel kan word nie, word die ope markwaarde volgens ’n metode goedgekeur deur die Suid-Afrikaanse Inkomste Diens vasgestel, wat ’n genoegsame objektiewe benadering van die vergoeding in geld wat verkry kan word vir daardie lewering van bedoelde goed of dienste voorsien.

‌28/3/5-4 Mei 1992 en gewysig op 1 September 2002.

‌228‌

‌Animal feed - importation - zero rating Dierevoedsel – invoer - nulkoers‌

Question

Animal feed (which when distributed locally qualifies for the zero rating in terms of section 11(1)(g) read with paragraph 1 of Part A to Schedule 2) is imported into the Republic. Will the importation of the animal feed be subject to VAT at the zero rate?

Answer

The zero rate does not apply to any import. Since an exemption in respect of animal feed is not available in terms

of Schedule 1 read with sections 7(1)(b) and 13(3), VAT will be levied on the importation thereof.

‌28/3/6-5 February 1992 and amended on 1 September 2002.

‌229‌

‌Welfare organisation - free distribution – religious literature Welsynsorganisasie – gratis verspreiding – goedsdienstige leesstof‌

Question

A welfare organisation (vendor) receives monetary donations which enable it to print and distribute religious material free of charge to the public. Is the welfare organisation entitled to an input tax credit in respect of VAT paid on the material and printing costs of the literature?

Answer

The distribution of religious material free of charge by a welfare organisation to the public does not fall within the definition of "welfare organisation" in section 1 as respects the activities listed in the definition. Therefore, an input tax deduction cannot be claimed in respect of the expenses incurred for the printing of the literature.

‌28/3/21-28 February 1992 and amended on 1 September 2002.

‌230‌

‌Fixed property - transfer duty - notional input tax credit Vaste eiendom – hereregte - insetbelastingkrediet‌

Question

Can the transfer duty paid be included in the consideration when calculating an input tax credit in terms of

paragraph (b) of the definition of input tax?

Answer

For the purposes of calculating the amount of input tax in terms of paragraph (b) of the definition of "input tax" in section 1, transfer duty paid on the acquisition of fixed property must be excluded from the consideration since the transfer duty paid is not an amount in respect of any consideration in money paid by the vendor for the supply of second-hand goods.

‌28/3/3-16 September 1991 and amended on 1 September 2002.

‌231‌

‌Fixed property - second-hand goods - input tax Vaste eiendom – tweedehandse goed - insetbelasting‌

Question

A company purchased houses from private sellers prior to the implementation of VAT and held these properties as stock for resale. These properties are sold after the implementation of VAT in the course or furtherance of it’s enterprise. Can an input tax credit be claimed in respect of the purchase of these properties?

Answer

Section 18(4)(a) does not provide for an input tax deduction to be claimed in respect of making supplies in the course of an activity that was an "enterprise" as defined in section 1 or would have been an enterprise had the VAT Act been applicable prior to the promulgation date. It follows that an input tax deduction cannot be claimed.

‌28/3/3-23 October 1991 and amended on 1 September 2002.

‌232‌

‌Going concern - retrospective registration Lopende saak – terugwerkende registrasie‌

Question

A trustee acts on behalf of a company to be formed in the purchase of a business as a going concern. Can the company, when formed, be registered for VAT with retrospective effect to the time of the supply of the going concern in order to ensure that the sale is zero-rated?

Answer

Where a trustee acts for a company to be formed in the purchase of a business as a going concern, the company,

when formed, can be registered with retrospective effect to the time of the supply of the going concern in order

to ensure that the supply is zero-rated in terms of sections 8(7) and 11(1)(e) of the Act (see VAT Practice Note

No. 14 dated 20 January 1995).

‌28/2/1-15 September 1992 and amended on 1 September 2002.

‌233‌

‌Share block company - time-sharing - loan obligation Aandeleblokmaatskappy - tyddeling - leningsverpligting‌

Question

Must the developers of share block schemes levy VAT on the loan obligation portion of their sales?

Answer

Prior to 9 July 1993 - The supply of the shares by a share block company and the delegation of the loan obligation would not attract VAT. The supply of the shares by a developer would attract VAT. The issue of shares would only attract stamp duty and the loan obligation, which is allocated to the shares will not be subject to stamp duty or transfer duty.

Supplies made from 9 July 1993 up to 24 November 1994 - The issue of shares and the consideration attributable to the loan obligation are now subject to VAT. (Section 2(4)(c) was inserted). Stamp duty will also be payable on the original issue of shares in a Share Block Company.

Supplies made on or after 25 November 1994 - The issue of shares and the consideration attributable to the loan obligation are subject to VAT in terms of section 8(17), but stamp duty will no longer be payable on the original issue of shares if the supply is a taxable supply.

‌28/3/3-29 March 1991 and amended on 19 September 1995

‌234‌

‌Leasehold land - sale of Huurpaggrond - verkoop van‌

Question

Must VAT be levied on the sale of leasehold land?

Answer

The supply of leasehold land by way of letting is exempt in terms of section 12(d). The sale thereof, however, is

a taxable supply in terms of section 7(1)(a).

‌28/3/9-20 February 1992

‌235‌

‌Ondernemer - verskillende afsluitingsdatums Vendor - divisions with different closing dates‌

Vraag

’n Ondernemer het verskeie afdelings onder een BTW registrasie geregistreer. Kan die afdeling se

afsluitingsdatums vir dieselfde belastingtydperk van mekaar verskil?

Antwoord

Ingevolge die bepalings van artikel 27(6) mag die afsluitingsdatums vir dieselfde belastingtydperk ten opsigte van die verskillende afdelings, geregistreerd onder een BTW registrasie, nie van mekaar verskil nie. Die rede hiervoor is dat daar slegs een ondernemer is wat vir BTW geregistreer is, en ‘n belastingtydperk op ‘n ondernemer van toepassing is.

‌28/3/22-16 Oktober 1991 en gewysig op 1 September 2002.

‌236‌

‌Plaaslike owerheid - verkoop van erwe Local authority - selling of stands‌

Vraag

’n Plaaslike owerheid het in 1984 ’n aantal erwe ontwikkel met die doel om hulle later weer teen ’n wins te verkoop. Die erwe word eers na die implementeringsdatum van BTW verkoop. Moet BTW op die verkoop van die erwe gehef word?

Antwoord

Aangesien die erwe ontwikkel is met die bedoeling om hulle weer teen ’n wins te verkoop en nie om dit uit te verhuur nie is die verkoop van erwe na die implementeringsdatum aan BTW ingevolge artikel 7(1)(a) onderhewig.

‌28/3/9-3 Oktober 1991

‌237‌

‌Byvoordele - beurs- of studieverpligtinge Fringe benefits - bursary or study obligations‌

Vraag

’n Ondernemer betaal ’n bedrag aan ’n werknemer se vorige werkgewer ter aflossing van ’n beurs- of studieverpligting wat die werknemer gehad het. Die betalings is ingevolge paragraaf (i) van die omskrywing van bruto inkomste in artikel 1 van die Inkomstebelastingwet No. 58 van 1962, saamgelees met Bylae 7 tot daardie Wet ’n belasbare byvoordeel. Sal die voordeel ingevolge artikel 18(3) aan BTW onderhewig wees?

Antwoord

Bedrae wat namens werknemers aan hulle voormalige werkgewers betaal word ten opsigte van beurs- of

studieverpligtinge is ingevolge artikel 2(1)(c) ’n finansiële diens en is ingevolge artikel 12(a) van BTW vrygestel.

‌28/3/9-20 September 1991 en gewysig op 1 September 2002.

‌238‌

‌Local authority - launching fees Plaaslike owerheid - tewaterlatingsgelde‌

Question

A local authority charges commercial and ski-boat fishermen a fee to launch their boats from its ski-boat base.

Must VAT be levied on such launching fees?

Answer

The local authority is not conducting an enterprise as contemplated under item (cc)(A) of paragraph (c)(iv) of the definition of "enterprise" in section 1 of the Act, as the activity of launching boats is not included in the list of business categories specified in Government Notice No. 2570 of 21 October 1991. The local authority may therefore not levy any VAT on the launching fees.

‌28/3/9-29 October 1991 and amended on 1 September 2002.

‌239‌

‌Dreaded disease insurance policies Gevreesde siekte versekeringspolisse‌

Question

Will a "dreaded disease" type policy which is regarded by the Life Offices Association as falling within the ambit of

life insurance policies and the administration pertaining thereto be classified as an exempt supply?

Answer

By virtue of the fact that "dreaded disease" policies are issued by long-term life insurance companies they fall

within the definition of "long-term policy" in section 2(2)(v), and will be treated as an exempt supply. Confirmation should, however, be obtained that the policy is treated by the insurer as life assurance. The administration pertaining thereto will likewise be classified as a financial service in terms of section 2(1)(i) and exempted in terms of section 12(a) to the extent that the administrative service relates to the provision, or transfer of ownership, or a long-term insurance policy.

‌28/3/19-1 March 1992 and amended on 1 September 2002.

‌240‌

‌Medical aid fund contributions Mediese fonds bydraes‌

Question

Are medical aid fund contributions exempt from VAT in terms of section 12(a) read with section 2(1)?

Answer

Medical aid fund contributions are exempt supplies in terms of section 12(a) read with section 2(1)(j) as such

funds fall within the definition of "superannuation scheme" in section 2(2)(vii).

‌28/3/19-1 March 1992 and amended on 1 September 2002.

‌241

‌Second-hand goods - fixed property - previously owned and used Tweedehandse goed – vaste eiendom – voorheen besit en gebruik‌

Question

Will fixed property which has stood vacant qualify as second-hand goods?

Answer

It is accepted that vacant land constitutes "second-hand goods" as defined in section 1 and a notional input tax deduction may be claimed where a vendor acquires such land from a non-vendor in terms of sections 16(2), 16(3) and 17(1).

‌28/3/8-2 July 1992 and amended on 1 September 2002

‌242‌

‌Share block company - input tax - section 8(18) Aandeleblokmaatskappy – Insetbelasting – artikel 8(18)‌

Question

May a share block company claim an input tax deduction in respect of supplies deemed to have been made by it

in terms of section 8(18) even if the company is not registered as a vendor for VAT purposes?

Answer

The share block company can claim the input tax deduction only if registered as a vendor. The definition of "enterprise" in section 1 has been amended to allow a share block company to apply for voluntary registration, even though it is not carrying on an enterprise continuously or regularly.

‌28/3/3-8 September 1992 and amended on 1 September 2002.

‌243‌

‌Share block scheme - conversion of a share Aandeleblokmaatskappy – omskakeling van ‘n aandeel‌

Question

A shareholder did not pay VAT on the purchase of a share in a share block company. The share is in the process

of being converted into a sectional title unit. Must the shareholder pay VAT on the conversion?

Answer

The conversion of a share in a share block scheme into a sectional title unit does not constitute a "taxable supply"

as defined in section 1 for VAT purposes. No VAT will therefore be levied, but transfer duty is payable.

‌28/3/3-8 September 1992 and amended on 1 September 2002.

‌244

‌Universiteit - verskaffing van losies aan technikonstudente University - supply of board to technikon students‌

Vraag

’n Universiteit verskaf losies aan technikonstudente aangesien die technikon as gevolg van ’n gebrek aan voldoende fasiliteite nie self al sy studente kan huisves nie. Moet die universiteit BTW verantwoord op die losies wat hy aan die technikonstudente verskaf?

Antwoord

Die bepalings van artikel 12(h)(ii) bepaal dat "die lewering deur ‘n skool, universiteit, technikon of kollege geheel en al of hoofsaaklik vir die voordeel van leerlinge of studente van goed of dienste (met inbegrip van huishoudelike goed of dienste) nodig vir en ondergeskik aan en samehangend met die lewering van enige dienste beoog in subparagraaf (i) van hierdie paragraaf, waar goed of dienste gelewer word teen ’n vergoeding in die vorm van skoolgelde, onderriggelde of losies of inwoning, vrygestelde lewerings is. Die gebruik van die woord "hoofsaaklik" in die betrokke artikel bring mee dat die vrystelling steeds van krag bly in omstandighede waar losies en inwoning ook aan ander studente teen vergoeding gelewer word solank die lewering van losies en inwoning deur die universiteit in geheel hoofsaaklik aan eie studente gelewer word.

Die universiteit hoef in hierdie omstandighede nie BTW te vorder op die losiesgelde wat die technikon studente

aan die universiteit betaal nie.

‌28/2/1-29 Oktober 1992 en gewysig op 1 September 2002.

‌245‌

‌Car rental - input tax - running costs Motorverhuring – insetbelasting - loopkoste‌

Question

May a vendor who rents a car from a rental industry for business purposes claim the VAT levied in respect of repairs, maintenance and insurance (running costs) which are included in the total composite charge, as an input tax credit?

Answer

As the rental industry charges a rental and kilometre rate to cover all costs and does not separate a clearly defined portion of the charge which is actually applicable to each element (in relation to repairs and maintenance), the VAT paid on such charges will not qualify for deduction as input tax. The VAT paid on the kilometre charge may therefore not be claimed as an input tax credit in terms of section 17(2)(c).

‌28/3/13-8 August 1992

‌246‌

‌Plaaslike bestuur – uitloting van grond Local authority - raffle of land‌

Vraag

’n Plaaslike bestuur laat ’n spesifieke erf (parkerf) hersoneer met die doel om die erf uit te loot deur middel van ’n plakwedstryd ter bemarking van die plaaslike bestuur se munisipale gebied. Daar was geen inskrywingsgeld betaalbaar nie. Die wenner moes twee vrae korrek beantwoord asook ’n bedrag van R10 vir die erf betaal. Is die verkoop van die erf aan BTW onderhewig en indien wel teen watter waarde?

Antwoord

Ingevolge die BTW-riglyne vir plaaslike owerhede, is slegs die verkoop van grond of geboue, of grond en geboue wat gebruik word of aangeskaf is met die doel om belasbare lewerings te voorsien, aan BTW onderworpe. Waar grond nie in verband met die voorsiening van ’n belasbare lewering gebruik word nie en die oorspronklik bedoelde gebruik waarvoor die grond aangeskaf is, onbekend is, is die verkoop van sodanige grond nie aan BTW onderhewig nie. Die verkoop van die erf ingevolge die plakwedstryd aan die wenner vir R10 is dus ooreenkomstig bogenoemde riglyne nie aan BTW onderhewig nie.

Indien die plaaslike bestuur ook enige oorbodige uitvalgrond, parke en deurlope verkoop, sal dit ook

ooreenkomstig die riglyne nie aan BTW onderhewig wees nie.

‌28/3/9-14 Augustus 1992

‌247‌

‌Plaaslike bestuur – ontwikkelingstrust - informele vestigingsgebied Local authority - informal settlement area‌

Vraag

’n Plaaslike bestuur stig ‘n ontwikkelingstrust wat kwalifiseer as ‘n "vereniging sonder winsoogmerk" soos omskryf in artikel 1. Die ontwikkelingstrust ontvang onvoorwaardelike skenkings van R7 500 per standplaas vanaf ‘n ander Onafhanklike Ontwikkelingstrust vir die ontwikkeling van ’n informele vestigingsgebied.

Deelnemers betaal geen vergoeding vir die verkryging van eiendomsreg en dienste nie maar moet egter ’n bedrag van R300 aan die ontwikkelingstrust betaal, wat bestaan uit R135 ter bestryding van administratiewe kostes en R165 ten opsigte van oordragkoste. Is die betaling van die R300 onderhewig aan BTW?

Antwoord

Indien die ontwikkelingstrust se omset nie die perk van R300 000 in ‘n periode van 12 maande oorskry nie, is die trust nie verplig om ingevolge artikel 23(1) vir BTW-doeleindes te registreer nie. Derhalwe sal geen BTW gehef word op die R300 bydrae ten opsigte van die administratiese- en oordragkoste wat die ontwikkelingstrust ontvang nie.

Sou die trust egter vir BTW-doeleindes geregistreer wees, sal die trust verplig wees om uitsetbelasting op die volle R300 te verklaar ingevolge die bepalings van artikels 7(1)(a) en 16(4). Die R7 500 wat die trust per stand plaas ontvang moet nie deel vorm van die berekening van die omset syfer nie.

‌28/3/9-29 Junie 1992 en gewysig op 1 September 2002.

‌248‌

‌Local authority - property swop transaction Plaaslike bestuur - eiendomsruiltransaksie‌

Question

The electricity department of a local authority swops a site (with the same value) with another registered vendor.

Is this exchange subject to VAT and what is the value to be placed on the supply?

Answer

As both parties are vendors, the exchange transaction would be subject to VAT. The value to be placed upon the transaction is determined in accordance with the provisions of section 10(3)(b) of the Act. Where both parties have agreed upon the value, that value is accepted as being the open market value of the supply.

‌28/3/9-28 September 1992

‌249‌

‌Local authority - sale of wood - natural forest Plaaslike bestuur – verkoop van hour – natuurlike woud‌

Question

A local authority owns a number of forests and from time to time it is necessary to thin out the trees which are then sold at a profit. Could this activity be deemed to be carried on in the course or furtherance of an enterprise carried on by the local authority?

Answer

Since the forests arise from natural resources and the local authority merely permits further growth to occur as would normally arise in natural circumstances, it is not considered that the goods supplied are similar to taxable supplies which are or may be made by any person (other than the local authority) in the course or furtherance of any enterprise. The activity, therefore, does not fall within paragraph (c) of the definition of "enterprise" in section 1, read in conjunction with Regulation No. 2570 dated 21 October 1991 and neither could it be urged that it could fall within paragraph (c)(iv)(cc)(B).

‌28/3/9-14 May 1992 and amended on 1 September 2002.

‌250‌

‌Invoere van voertuie - TBVC-lande Importation of motor vehicles - TBVC countries‌

Vraag

Moet BTW gehef word op die invoer van voertuie vanaf die TBVC-lande wat nou in die Republiek geregistreer

gaan word, indien die voertuie voor die aanvangsdatum in Bophuthatswana geregistreer was?

Antwoord

BTW moet nie op die invoer van voertuie wat voor die aanvangsdatum in Bophuthatswana aangekoop is en nou in die Republiek geregistreer word, gehef word nie. Die betrokke vrystelling word verleen ingevolge klousule 5(4) van die Multilaterale Ooreenkoms tussen die Regerings van die Republiek, Transkei, Bophuthatswana, Venda en Ciskei, vir die voorkoming van dubbelbelasting.

‌28/3/9-30 Junie 1992 en teruggetrek vanaf 1 September 2002.

‌251‌

‌Registrasieverpligting - swak boekhoudingstelsel Registration requirements - deficient accounting system‌

Vraag

Moet ’n persoon wat ’n besigheid bedryf (waarvan die omset bo die R300 000-perk per jaar is) wat baie swak of feitlik geen boekhoustelsel het, vir BTW registreer, of kan die bepalings van artikel 23(7)(b) op die persoon toegepas word sodat hy nie hoef te registreer nie?

Antwoord

Die bepalings ingevolge artikel 23(7) is slegs van toepassing op persone wat vrywillig aansoek doen vir registrasie ingevolge artikel 23(3) (dws indien die persoon se omset onder die R300 000 perk per jaar is). Die bepalings van artikel 23(7) kan nie op ’n verpligte registrasie ingevolge artikel 23(1) toegepas word nie.

‌28/3/9-7 November 1991

‌252‌

‌Streekdiensterade - belastingfakture Regional services council - issue of tax invoices‌

Vraag

Kan die afskrif van die streekdiensterade se opgawes wat deur die heffingpligtige voltooi en behou word, as ’n

belastingfaktuur dien indien die streekdiensterade nie enige ander belastingfakture uitreik nie?

Antwoord

Die afskrif van die opgawe wat deur die heffingpligtige voltooi en behou word, mag as belastingfaktuur dien indien sodanige opgawe aan al die vereistes van artikel 20 voldoen en dit vergesel gaan van ’n bewys van betaling asook ’n endossement wat tot dien effekte op die opgawe aangebring is.

‌28/3/9-13 Desember 1991

‌253‌

‌Beslote korporasie - goed verkry voor inlywing Close corporation - goods acquired before incorporation‌

Vraag

Goed of dienste is deur ’n persoon verkry ten einde hom in staat te stel om ’n onderneming te bedryf. Dit was te

alle tye die bedoeling om die onderneming as ’n beslote korporasie te bedryf, maar die persoon het eers later die

beslote korporasie geregistreer. Die bates aangekoop is in die boeke van die beslote korporasie gedebiteer en die persoon se leenkapitaalrekening is gekrediteer. Kan die beslote korporasie geag word die ontvanger van die goed te wees ingevolge die bepalings van artikel 19 en mag die beslote korporasie die insetbelasting sodoende terugeis?

Antwoord

Die kreditering van ’n lid se leenkapitaalrekening in die boeke van ’n beslote korporasie erken bloot die bestaan van die skuld en stel nie ’n terugbetaling van die hele bedrag van die vergoeding daar, soos vereis ingevolge artikel 19(a) nie. Die beslote korporasie kan dus nie die insetbelasting terugeis nie totdat terugbetaling van die leningsrekening plaasvind.

‌28/3/29-2 Oktober 1992

‌254‌

‌International carriage - in-flight insurance Internasionale vervoer – in-vlug vesekering‌

Question

Will both legs of a flight from, for example, Cape Town to Johannesburg to London be classified as international

carriage for VAT purposes and will the in-flight insurance on such flights be subject to VAT?

Answer

Both legs of a flight from Cape Town to Johannesburg to London will be classified as international carriage as the flight constitutes international carriage as defined in article 1 of the Convention set out in the Schedule to the Carriage by Air Act No.17 of 1946. The in-flight insurance on such flights will be subject to VAT at the zero rate in terms of section 11(2)(d).

‌28/3/9-2 December 1991

‌255

‌Local authorities - services spanning the implementation date Plaaslike besture – dienste oorspan die implementeringsdatum‌

Question

Municipal services such as rubbish removal may be charged by a local authority on an annual basis for services still to be provided. Will the proviso to section 78(6) apply in such cases where the charges are customarily invoiced and paid for in July of each year?

Answer

Where the charges are customarily invoiced and paid for in the month of July of each year the proviso to section 78(6) will apply. Accordingly amounts invoiced and paid for prior to 30 September 1991 will not be subject to VAT.

‌28/3/9-2 December 1991 and withdrawn from 1 September 2002.

‌256‌

‌Accessories on leased motor cars Bybehore op motors op bruikhuur‌

Question

A motor vehicle leasing vendor supplies motor vehicles on lease and rents out as extras/accessories items such as towbars, airconditioners and radio’s etc which are affixed to such vehicles. Can the rental customer claim an input tax on such items where the extras/accessories are specified separately?

Answer

Where a vendor supplies vehicles on lease with items which are permanently affixed such as towbars, airconditioners and radio’s, it is considered that such provision constitutes the supply of a "motor car" as defined in section 1. A rental customer may in those circumstances not claim an input credit for VAT paid on the rental of any portion of the motor car whether the extras are specified separately or not. (See section 17(2)(c).)

‌28/3/13-8 August 1992.

‌257‌

‌Cession of rental agreements Sessie van huurooreenkomste‌

Question

Will the cession of a right to receive rentals under a rental agreement to a financial institution be subject to VAT

and can the financial institution claim the input tax in respect of such transactions?

Answer

Where the right to receive rentals under a "rental agreement" as defined in section 1 is ceded to a bank, such cession, being the transfer of a debt security, will in terms of section 2(4)(b) constitute a taxable supply. This supply is regarded as the supply of a service and subject to VAT in terms of section 7(1)(a). The cedent will be required to levy VAT on the consideration payable for the right ceded while the bank will be entitled to claim input tax in respect of the VAT levied in respect of the acquisition of the rights under the contract, provided such rights have been acquired for the purpose of making taxable supplies, for example, where the bank accounts for output tax on rentals. It follows that it is not necessary for the underlying rented asset to have been acquired by the bank.

‌28/3/29-7 October 1992.

‌258‌

‌Expiry of lease - residual value - value of supply Verskryking van bruikhuur – reswaarde – waarde van lewering‌

Question

What would the value of a lease be for VAT purposes at the expiry thereof?

Answer

If a lease qualifies in terms of section 1 as an "installment credit agreement" the value of the supply will be the cash value of that supply. At the end of the term of an installment credit agreement the taxable amount will be the cash value of the residual value as stipulated in section 10(6).

‌28/3/9-20 September 1991.

‌259‌

‌Disposal of a building - used partially for entertainment Verkoop van ‘n gebou – gedeelelik gebruik vir onthaal‌

Question

A vendor disposes of a building which was used partly for the making of taxable supplies and partly for entertainment purposes for which an input tax credit was denied in terms of section 17(2)(a). Must the vendor account for VAT on the selling price of the building?

Answer

Section 8(16)(a) deems the supply of the building to be made wholly in the course or furtherance of the enterprise. The vendor will therefore have to account for VAT on the selling price of the building. The vendor is, however, entitled to an input tax credit in respect of the portion of the building which was used for entertainment purposes in terms of section 16(3)(h).

‌28/3/4-3 September 1992

‌260‌

‌Debentures Skuldobligasies‌

Question

A vendor issues debentures to raise capital to finance a project. Is the issue of debentures subject to VAT?

Answer

Any amount paid or payable in respect of debentures issued, constitutes consideration in respect of the issue of a

debt security. The supply is, therefore, exempt from VAT in terms of section 12(a), read with section 2(1)(c).

‌28/2/1-19 November 1992

‌261‌

‌Tax invoices - agent/principal relationship Belastingfakture – agent/prinsipaal verhouding‌

Question

Can an agent issue tax invoices and account for VAT on behalf of a principal?

Answer

An agent can, provided he is a vendor, issue tax invoices on behalf of a principal in terms of section 54(1). The invoices may be issued in the agent’s name and may bear his VAT registration number. Where an agent issues an invoice on behalf of his principal, the principal may not issue an invoice in respect of such supply. The principal must, however, account for the VAT on the transactions in respect of which the agent issued tax invoices on his behalf.

‌28/3/23-18 June 1992.

‌262‌

‌Verkoop van ’n onderneming as ‘n lopende saak tesame met boekskulde

‌Selling of an enterprise as a going concern together with book debts

Vraag

’n Ondernemer koop ’n onderneming van ’n ander ondernemer as ‘n lopende saak wat aan die bepalings van artikels 8(7) en 11(1)(e) voldoen. Albei ondernemers is op die betalingsbasis vir BTW-doeleindes geregistreer. Die verkoopprys van die onderneming sluit boekskulde (debiteure) in. Wie is verantwoordelik vir die betaling van die BTW op die uitstaande boekskulde?

Antwoord

Ingevolge artikel 7(1)(a) is BTW betaalbaar op die lewering deur ’n ondernemer van goed of dienste in die loop of ter bevordering van ’n onderneming deur hom bedryf. Verder is daardie belasting ingevolge artikel 7(2) deur die ondernemer bedoel in paragraaf (a) van artikel 7(1) betaalbaar, welke ondernemer in die onderhawige geval die verkoper is.

Die woordomskrywing van "vergoeding" ingevolge artikel 1 sluit enige betaling in ten opsigte van die lewering

van enige goed of dienste, hetsy deur daardie persoon of ’n ander persoon.

Die betaling vir die boekskulde deur die koper word dus geag vergoeding te wees vir dienste gelewer en derhalwe moet uitsetbelasting teen die nulkoers ingevolge artikels 11(1)(e) en 16(4) deur die verkoper aan die SAID verklaar word. Die koper is egter ingevolge artikel 18A verplig om ‘n verrekening te maak ten opsigte van die boekskulde wat hy teen die nulkoers bekom het. Die rede hiervoor is dat die koper nie rekenskap van belasting sal gee op die invordering van die boekskulde nie, aangesien dit ingevolge artikel 2(1)(c) ‘n finansiële diens is en gevolglik ingevolge artikel 12(a) vrygestel is van BTW.

‌28/3/22-7 September 1992 en gewysig op 1 September 2002.

‌263‌

‌Cancellation of a pre-emptive right Kansellasie van ‘n voorkoopsreg‌

Question

Does the cancellation of a pre-emptive right constitute the rendering of a service in terms of the Act?

Answer

"Services" is defined in section 1 and reads as follows:

"Services means anything done or to be done, including the granting, assignment, cession or surrender of any

right or the making available of any facility or advantage ..."

The cancellation of a pre-emptive right therefore falls within the ambit of the definition of "services" in section 1 and is subject to VAT in terms of section 7(1)(a). However, where such right is cancelled by a non-vendor, or by a vendor where the property was used for the purposes of making exempt supplies eg. employees’ housing, the supply will not be subject to VAT since the supply of that service is not made by a vendor in the course or furtherance of his enterprise.

‌28/3/3-22 October 1992.

‌264‌

‌Time-sharing interest - time of supply Tyddeelbelant – tyd van lewering‌

Question

A vendor purchases time-sharing interests in various time-sharing developments. Each time-sharing interest is evaluated and allocated a certain number of points. When the vendor sells these points to an investor, the investor is entitled to apply these points to enjoy a holiday at any one of the developments. Is the selling of the points a supply of goods other than fixed property and is the time of supply determined by section 9(3)(b)(i) as the investor pays off the purchase price over a period of years?

Answer

The sale of points constitutes the supply of fixed property and the relevant time of supply will therefore be

determined in accordance with section 9(3)(d).

Adverting to the contention that, by virtue of the provisions of section 8(11), the sale of points be deemed to be a supply of goods other than fixed property, and that the time of supply will take place as contemplated in section 9(3)(b)(i). It must be pointed out that even if the sale of points could be deemed to be a supply of goods, the time of supply would then be governed by section 9(1) and not section 9(3)(b)(i).

Although the consideration for the supply is paid in instalments, it cannot be said that such instalments are in

relation to the progressive or periodic supply of any goods.

‌28/3/27-2 November 1992

‌265‌

‌Insurance premiums paid after commencement date Versekeringspremies betaal na aanvangsdatum‌

Question

A furniture group offers its customers short-term all risks cover on the merchandise it sells. Payment in respect of transactions concluded during the month of September 1991 will be submitted to the insurance brokers after the implementation date. Will the payment of the premiums be subject to VAT?

Answer

The payment of these premiums will not be subject to VAT in terms of the proviso to section 78(6).

‌28/3/19-1 October 1991 and withdrawn from 1 September 2002.

‌266‌

‌Customs and excise - duties payable Doeane en aksyns – heffings betaalbaar‌

Question

Will VAT be levied on duties payable to the Department of Customs and Excise in respect of the provisions of

phase VI of the Motor Vehicle Local Content Program?

Answer

Value-added tax will not be levied on duties payable to Customs and Excise in respect of the provisions of phase

VI. As such duties can only be levied by Customs and Excise and not by any other person, Customs and Excise will, in terms of the definition of "enterprise" in section 1, not be registered as a vendor for VAT purposes and will therefore not be able to levy VAT on these duties.

‌Note

Phase VI of the Motor Vehicle Local Content Program has expired with effect from 30 August 1995.

‌28/3/16-13 August 1991 and withdrawn from 1 September 2002.

‌267‌

‌Export incentives - transfer payments Uitvoeraansporings - oordragbetalings‌

Question

Will VAT be payable on incentives received by vehicle and component manufacturers in terms of the Motor Industry Development Program or will the incentives be treated as transfer payments in terms of section 11(2)(p) and be zero-rated?

Answer

The incentives paid to vehicle and component manufacturers in terms of the Motor Industry Development Program constitute "transfer payments" as defined in section 1 which are subject to VAT at the zero rate in terms of section 11(2)(p).

Where a vehicle manufacturer receives any amount under this program as agent on behalf of a component manufacturer such payments retain their character and the latter, being the principal, will account for the VAT at the zero rate on such payment (See section 54).

Where the vehicle manufacturer does not act as agent and amounts received are passed on to component manufacturers the latter must levy output tax in terms of section 7(1)(a) and the vehicle manufacturer may claim input tax on the VAT so paid in terms of sections 16(2), 16(3), 17(1) and 20.

‌28/3/16-13 August 1991

‌268‌

‌Tweedehandse goed - insetbelasting op bedrag betaal Second-hand goods - input on amount actually paid‌

Vraag

’n Geregistreerde ondernemer koop ’n vaste eiendom van ’n nie-ondernemer waarop ’n deposito betaal word. In terme van die koopooreenkoms is die balans van die aankoopprys betaalbaar in twee paaiemente. Een paaiement binne 12 maande na oordrag van die eiendom en die oorblywende paaiement tien jaar later. Alhoewel ’n verband wat sal dien as sekuriteit vir die betaling van die uitstaande koopsom oor die eiendom geregistreer word, sal die transportakte in terme van die aktebesorgerspraktyk lui dat die volle koopsom vereffen is. Mag die geagte insetbelasting op die volle koopsom geëis word soos dit die geval sou gewees het as ’n ander party bv ’n bank die geld aan die koper sou leen en as sekuriteit ’n verband oor die eiendom registreer?

Antwoord

Paragraaf (b) van die woordomskrywing van "insetbelasting" in artikel 1 saamgelees met die bepalings van artikel 16(3)(b)(i) bepaal dat die insetbelastingaftrekking slegs geëis kan word in die mate wat betalings van enige vergoeding wat die uitwerking het om ‘n verpligting wat op die koopprys betrekking het, te verminder of te vervul, gedurende die belastingtydperk gedoen is. In die onderhawige geval dien die verband slegs as sekuriteit vir betalings wat nog moet plaasvind en sal ‘n insetbelastingaftrekking eers wanneer daardie betaling plaasvind, geëis mag word.

28/3/18-10 Julie 1992 en gewysig op 1 September 2002.

‌269

‌Cattle semen - not a zero-rated supply Bulsemen – nie ‘n nulkoerslewering nie‌

Question

Does cattle semen constitute an animal remedy as contemplated under item 2 of paragraph 1 of Part A of

Schedule 2 and is the supply thereof subject to VAT at the zero rate?

Answer

Cattle semen does not constitute an animal remedy as contemplated under item 2 of paragraph 1 of Part A of

Schedule 2 and any supply thereof is, therefore, subject to VAT at the standard rate in terms of section 7(1)(a).

The words ". . . or for the maintenance or improvement of health, growth, production or working capacity" relate to measures taken by a farmer to increase the quality of say, the milk or meat of his existing cattle and are not intended to mean anything done to produce more cattle or sheep as the case may be.

‌28/2/1-22 October 1992

‌270‌

‌Tolgelde - glyskaalafslag - belastingfakture Toll fees - sliding scale discount - tax invoice‌

Vraag

Gereelde gebruikers van tolpaaie betaal die tolgelde per kredietkaart. Aan die einde van ’n maand word ’n afslag op die tolgelde bereken gegrond op die aantal kere wat tolpaaie gebruik is. Dit is dus nie moontlik om die totale vergoeding voor die einde van ’n maand vir ’n bepaalde tolpadgebruiker te bepaal nie. Daar is voldoende rekords beskikbaar om die besonderhede van enige lewering vas te stel en dit sou onprakties wees om ’n belastingfaktuur vir die tipe transaksies uit te reik. Kan daar in dié geval met die uitreiking van belastingfakture weggedoen word?

Antwoord

Dit word ingevolge artikel 20(7) goedgekeur dat waar ’n glyskaal van toepassing is op ’n krediet- of

debietkaarttransaksie, dit nie nodig sal wees om ’n belastingfaktuur uit te reik nie.

Verder moet die netto bedrag na die afslag op die kredietkaart-transaksiestaat aangetoon word en dit sal as

bewys van betaling dien.

‌28/3/16-20 November 1991

‌271‌

‌Kommissie - lewensversekering Commission - life insurance‌

Vraag

Is die kommissie wat deur ’n werknemer van ’n langtermynversekeringsmaatskappy en/of ’n makelaar wat sy eie besigheid bedryf, verkry word ten opsigte van langtermynversekeringskontrakte vrygestel van BTW?

Antwoord

Die kommissie verkry ten opsigte van langtermynversekeringskontrakte is ’n vrygestelde lewering ingevolge artikel 12(a) saamgelees met artikel 2(1)(n) aangesien die dienste verrig deel uitmaak van die reëling en uitvoering van langtermynversekeringskontrakte waarvan die premies betaal ook ’n vrygestelde lewering is ingevolge artikel 12(a) saamgelees met artikel 2(1)(i).

Die dienste gelewer deur die werknemer aan sy werkgewer word nie geag die bedryf van ’n onderneming vir sover die dienste besoldiging is ingevolge die voorbehoudsbepaling (iii)(aa) van paragraaf (b) van die woordomskrywing van onderneming in artikel 1, te wees nie.

’n Persoon wat ’n onafhanklike onderneming bedryf waarvan die belasbare lewerings in 12 agtereenvolgende maande R300 000 oorskry, is verplig om vir BTW-doeleindes te registreer ingevolge artikel 23(1). Die ondernemer is egter nie verplig om te registreer nie, indien slegs vrygestelde lewerings wat nie aan BTW onderhewig is nie, gemaak word.

‌Nota:

As gevolg van die skrapping van die woorde "of te reël" van artikel 2(1)(n) met effek van 1 April 1995, is die reëling van langtermynversekering nie meer ‘n finansiële diens nie. Kommissie verdien vir die reëling van langtermynversekering is gevolglik vanaf 1 April 1995 belasbaar teen die standaardkoers ingevolge artikel 7(1)(a). Artikel 2(1)(n) is egter vanaf 3 Junie 1996 geskrap met effek van 1 Oktober 1996, maar het in die onderhawige geval nie enige uitwerking op die beslissing nie, aangesien die werknemer die kommissie vanaf sy werkgewer verdien het.

‌28/3/25-24 Oktober 1991 en gewysig op 1 September 2002.

‌272‌

‌Ad valorem charges Ad valorem gelde‌

Question

Is VAT payable on ad valorem charges?

Answer

Even though Customs and Excise is responsible for the collection of ad valorem charges, such charges are duties

levied by the State and therefore, no VAT is payable on such duties.

‌28/3/23-6 November 1991 and amended on 1 September 2002.

‌273‌

‌Insurance - Lloyd’s of London Versekering – Lloyd’s of London‌

Question

Will the activity of underwriting insurance business by underwriting members of Lloyd’s of London be subject to VAT and will a local agent who underwrites insurance business on behalf of Lloyd’s of London also have to levy VAT on his services rendered to them?

Answer

The activity of underwriting insurance business by underwriting members of Lloyd’s of London is not deemed to be the carrying on of an enterprise in the Republic and the premiums paid in respect of policies are therefore not subject to VAT.

The activities of a local agent who underwrites the abovementioned business as agent for overseas principals are not affected by the fact that the activities of the Lloyd’s principals do not constitute an enterprise and the activities of his enterprise are not exempt.

The services supplied by his enterprise to foreign principals are zero-rated in terms of section 11(2)(l) of the Act.

‌Note

Due to the amendment to proviso (vi) of the definition of "enterprise" in section 1 on 24 November 1999 which comes into effect on 1 January 2001, the Underwriting Members of Lloyd’s of London is in terms of section 23(1) required to register as a vendor in the Republic from the last-mentioned date, in respect of its insurance contracts concluded in the Republic. The commission that the local insurance agents earn from Lloyds of London are as from 1 January 2001 subject to VAT at the standard rate in terms of section 7(1)(a), as section 11(2)(l ) is no longer applicable. The reason being that Lloyd’s of London is now carrying on an enterprise in the Republic and as such is deemed to be a "resident of the Republic" as defined in section 1.

(Also see ruling No. 290.)

‌28/3/19-5 November 1991 and amended on 1 September 2002.

‌274‌

‌Acknowledgement of financial support - no benefit to donor Erkenning van finansiële steun – skenker kry nie voordeel nie‌

Question

An "assocaition not for gain" as defined in section 1 involved in various research projects receives donations from various donors enabling it to continue with its research. The financial support from the various donors is acknowledged in the report published by the council. Will the acknowledgement of financial support in publications constitute a benefit accruing to the donors?

Answer

Where it is traditional to acknowledge financial support of donors, it will not be deemed that the donor is receiving an identifiable direct valuable benefit. The donations received from the various donors will therefore not be subject to VAT as the council is not supplying a service to them for which a consideration is received. It is accepted that the financial support in these circumstances constitutes an "unconditional gift" as defined in section 1 which is specifically excluded from the definition of "consideration" in section 1.

‌28/3/21-30 December 1991 and amended on 1 September 2002.

‌275‌

‌Scratch cards - deemed to be the supply of a service Krapkaarte – geag die lewering van ‘n diens te wees‌

Question

An "association not for gain" as defined in section 1 receives the proceeds from the selling of scratch cards. Does the sale of scratch cards fall outside the ambit of the Act because it constitutes a donation to an association not for gain?

Answer

The amounts received in respect of scratch card sales are subject to tax in terms of section 8(13). VAT paid on expenditure to produce and sell the scratch cards is claimable as input tax in terms of sections 16(2), 16(3), 17(1) and 20 and an input tax deduction is also allowable in respect of monetary prizes paid out in terms of the provisions of section 16(3)(d).

‌28/3/21-3 October 1991 and amended on 1 September 2002.

‌276‌

‌Grants to universities - research project Skenkins aan universiteite - navorsingsprojek‌

Question

A university research project constitutes an enterprise as envisaged in the Act. Must the university account for

VAT on grants received in respect of the project?

Answer

Where a university research project constitutes an "enterprise" as defined in section 1 and such enterprise is registered as a vendor, the grant will constitute consideration for goods or services supplied and VAT will be leviable in respect of such consideration in terms of section 7(1)(a).

‌28/3/21-25 September 1991 and amended on 1 September 2002.

‌277‌

‌Fringe benefits - supply of water and electricity Byvoordele – lewering van water en elektrisiteit‌

Question

Electricity is supplied to employees who reside in company houses, hostels or boarding establishments either on the site itself or in town. Can the vendor claim an input tax deduction in respect of water and electricity supplied to its employees for which the vendor pays?

Answer

Notwithstanding the fact that the supply of residential accommodation together with the supply of water and electricity by an employer to its employees is regarded for Income Tax purposes as a fringe benefit and as a single supply in terms of paragraph 2(d) of the Seventh Schedule to the Income Tax Act, the supplies will for VAT purposes be regarded as separate supplies. The reason being that only the supply of a dwelling by an employer to its employees as envisaged in sections 12(c)(ii) and 12(c)(iii) is exempt from VAT and not the supply of water or electricity.

Where the employer supplies his employees with water and electricity at either no charge or at a consideration which is lower than the open market value, the supply shall for VAT purposes be regarded as a fringe benefit in terms of section 18(3) read in conjunction with paragraph 2(e) of the Seventh Schedule to the Income Tax Act. However, where the employer recovers the cost of supplying the water and electricity from its employers, such recovery is taxable at the standard rate in terms of section 7(1)(a).

In terms of the first proviso to section 18(3) of the Value-Added Tax Act, the supply of the dwelling, due to its exempt nature, is not regarded as a fringe benefit for VAT purposes and as a result no output tax is payable on such supply.

From the above, it is clear that the supply of water and electricity are separate supplies which are separately identifiable are used for the purposes of making taxable supplies. Accordingly, an input tax deduction may be claimed in terms of sections 16(2), 16(3), 17(1) and 20.

‌28/3/24-18 November 1991

‌28/3/7-19 November 1991

‌278‌

‌Welfare organisations - fund-raising appeals Welsynorganisasies - fondsinsamelingsveldtogte‌

Question

Can a welfare organisation claim input tax in respect of VAT paid on expenses incurred in fund-raising through

appeals?

Answer

The VAT paid on expenses incurred on fund-raising appeals can be claimed as an input tax credit in terms of sections 16(2), 16(3), 17(1) and 20. Where the organisation makes both taxable and exempt supplies, an apportionment of the input tax must in terms of section 17(1) be made.

‌28/3/21-6 February 1992

‌279‌

‌Administrasie: Volksraad - bedryf van ’n onderneming Administration: House of Assembly - enterprise‌

Vraag

Watter afdelings van die Administrasie: Volksraad moet vir BTW-doeleindes registreer?

Antwoord

Ingevolge die mediaverklaring van 27 September 1991 het slegs die afdeling "Entstofproduksie" van die Administrasie: Volksraad opdrag ontvang om te registreer. Dit beteken dat die ander departemente van die Administrasie: Volksraad ongeregistreer sal bly en nie BTW sal hef nie, maar wel BTW sal betaal op goedere en dienste verbruik.

‌28/3/16-13 November 1991

‌280‌

‌Kommissie vir administrasie - rekenaardienste Commission for administration - computer services‌

Vraag

Die Hoofdirektoraat: Sentrale Rekenaardiens van die kantoor van die Kommissie vir Administrasie lewer rekenaardienste waarvoor vergoeding geëis word aan ander staatsdepartemente en in ’n mindere mate ook aan plaaslike besture en statutêre rade. Word die dienste beskou as ’n lewering in die loop of ter bevordering van ’n onderneming en is die dienste aan BTW onderhewig?

Antwoord

Ingevolge die mediaverklaring van 27 September 1991 is die voorsiening van rekenaardienste ’n bedryf wat onder paragraaf (b) van die woordomskrywing van "onderneming" in artikel 1 ingelees moet word. Derhalwe bedryf die kantoor van die Kommissie vir Administrasie ’n onderneming vir soverre dit rekenaardienste lewer en sodanige dienste sal dus belasbare lewerings uitmaak waarop BTW ingevolge artikel 7(1)(a) gehef moet word.

‌28/3/16-7 November 1991 and amended on 1 September 2002.

‌281‌

‌Emergency vehicles - denial of input tax credit Noodvoertuie – ontsegging an insetbelastingkrediet‌

Question

Will a vendor be allowed to claim an input tax credit in respect of the acquisition of an emergency vehicle?

Answer

Section 17(2)(c) will be applicable to emergency vehicles. The term "motor car" is defined in section 1 as any motor vehicle normally used on public roads, which has three or more wheels and is constructed or adapted wholly or mainly for the carriage of passengers. Emergency vehicles fall within this definition and therefore an input tax credit will not be allowed in terms of section 17(2)(c).

‌28/3/16-16 September 1991

‌282‌

‌Contractual penalty raised - debit/credit notes Kontraktuele boete gehef – debet/kreditnotas‌

Question

A dispute has arisen between two vendors about the one’s contractual right to raise penalties in respect of the other party’s failure to order a minimum amount of goods as agreed upon. The vendor supplying the goods issued an invoice to raise the penalty plus VAT thereon. The other party agreed to pay half of the penalty plus VAT without prejudice to his rights. The dispute will only be settled at a later date. May the vendor who issued the invoice issue a credit note for the outstanding half of the penalty plus VAT and can he do a reconciliation and adjustments for amounts owing by either party to the other once the dispute has been settled?

Answer

A credit note may be issued for half of the invoiced amount plus VAT. Once the issue is resolved between the two parties and a final reconciliation is done a debit or credit note may be issued for the final adjustment. When an invoice is issued for goods delivered the view is held that a supply has been made and the time of that supply is the date on which the invoice is issued by the supplier of the goods. Any variation at a later date regarding the price applicable should be done by way of debit or credit notes (See section 21).

‌28/3/12-1 June 1992

‌283‌

‌Oil rigs - on tow or self-propelled Oliebore – op sleep of selfaangedrewe‌

Question

Is an oil rig regarded as a ship or other vessel for purposes of paragraph (b) of the definition of "foreign-going"

ship in section 1?

Answer

An oil rig, whether self-propelled or towed, is regarded as a ship or other vessel for purposes of paragraph (b) of

the definition of "foreign-going ship" in section 1.

‌28/2/1-14 October 1992

‌284‌

‌Supply of electricity to employees - private dwellings Lewering van elektrisiteit aan werknemers – Privaat wonings‌

Question

Can a vendor claim an input tax deduction in respect of electricity bills paid by employees who reside in their own

private houses for which the vendor re-imburses the employees?

Answer

Where an employee incurs expenditure in respect of electricity at his private home and his employer reimburses the expense such supply is made to the employee and the vendor may not claim VAT as input tax in respect of such imbursement in terms of section 17(1).

‌28/3/24-18 November 1991

‌285‌

‌Car rental - refuelling charges Motorverhuring - hervullingsheffings‌

Question

A car rental company refuels a vehicle after the client has returned it. The refuelling charge is specified separately on the invoice. Will the refuelling charge be subject to VAT at the standard rate?

Answer

When the lessor sells the fuel from his own pumps VAT will be chargeable at the zero rate in terms of section 11(1)(h). As the charge for fuel is specified separately on the invoice furnished to the lessee, the provisions of section 8(15) are applicable.

In the situation where the rental enterprise does not supply the fuel, the rental contract will usually provide that the lessee shall refuel the vehicle, or that the lessor will refuel the vehicle on the lessee’s behalf. The charge is merely a disbursement on behalf of the lessee and the zero rating still applies.

‌28/3/14-8 June 1992

‌286‌

‌Egalisasiefonds - oliemaatskappye Equalization fund - oil companies‌

Vraag

Die bedrywighede van die egalisasiefonds ingevolge die Wet op die Sentrale Energiefonds No. 8 van 1977 behels onder andere die oordrag van fondse vanaf die egalisasiefonds na verskeie oliemaatskappye. Is die oordrag van die fondse aan BTW onderhewig?

Antwoord

Die fondse wat van die egalisasiefonds na die oliemaatskappye oorgedra word is nie ten opsigte van die lewering van "goed" of "dienste" soos omskryf in artikel 1 deur die maatskappye nie. Gevolglik sal die oordrag van fondse nie aan BTW onderhewig wees nie.

‌28/3/14-24 Oktober 1991 en geskrap vanaf 1 September 2002

‌287‌

‌Poelooreenkoms - onderdele Pool agreement - spare parts‌

Vraag

Die ondernemers bedryf ’n poel gesamentlik vir sover dit onderdele vir hulle toerusting aangaan. Elke party tot die ooreenkoms plaas ’n aantal vooraf geïdentifiseerde onderdele in die poel wat deur enige van die partye onttrek kan word. Die party wat ’n onderdeel uit die poel onttrek moet dan binne ’n sekere tydperk ’n soortgelyke onderdeel weer in die poel terugplaas. Daar vind geen betaling in geld plaas vir enige van die transaksies nie.

Moet BTW op die ope markwaarde van die lewerings oorbetaal word?

Antwoord

Aangesien die lewering van onderdele ingevolge die poelooreenkoms teen geen vergoeding plaasvind nie, is die

waarde van die lewerings ingevolge artikel 10(23) nul en is geen BTW daarop betaalbaar nie.

‌28/3/12-24 Maart 1992 en geskrap vanaf 1 September 2002

‌288‌

‌Ongevallekommissaris - publikasie van mediese tariewe Workmen’s compensation commissioner - medical tariffs‌

Vraag

Die Ongevallekommissaris bepaal mediese tariewe betaalbaar uit die ongevallefonds ten opsigte van mediese behandeling vir werkmense wat aan diens beseer word ingevolge artikel 79 van die Ongevallewet No. 30 van 1941. Die tariewe word vir kennisname in die Staatskoerant gepubliseer. Dit is onbekend of die verskaffer van die mediese diens BTW gaan hef al dan nie. Moet die tariewe wat gepubliseer word BTW insluit?

Antwoord

Mediese tariewe wat deur die Ongevallekommissaris in die Staatskoerant bepaal word, word nie deur die bepalings van artikel 65 wat bepaal dat pryse inklusief van BTW geadverteer of gekwoteer moet word, gedek nie. Die betrokke tariewe kan gevolglik sonder insluiting van BTW gepubliseer word.

‌28/3/11-22 November 1991

‌289‌

‌Oil rig on the continental shelf Boortoring of vastelandsplant‌

Question

A person who does not have an office in the Republic and is not a resident of the Republic renders technical services on the continental shelf. His technical employees and equipment are stationed on the rig. Will his services be treated as "imported services" as defined in section 1, or will the services be regarded as the carrying on of an enterprise in the Republic?

Answer

In terms of section 23(1) read with the definition of "enterprise" in section 1, the person will be carrying on an

enterprise in the Republic and therefore his services will be taxable in terms of section 7(1)(a).

‌28/3/11-21 January 1992

‌290‌

‌Aircraft repairs and insurance - Lloyd’s of London Vliegtuigherstelwerk en –versekering – Lloyd’s of London‌

Question

A vendor provides insurance for aircraft through Lloyd’s of London. The vendor assesses aircraft losses and damages to aircraft and supervises repairs in the Republic to both local and overseas registered aircraft insured by Lloyd’s.

Are repairs to aircraft registered in the RSA and in foreign countries subject to VAT at the standard rate or the zero rate?

Are the insurance premiums paid to Lloyd’s of London subject to VAT?

Commission charges and fees which arise from services performed in the Republic are charged by the vendor on behalf of Lloyd’s of London. Are these charges subject to VAT?

Aircraft repair claims are settled by funds received from Lloyd’s of London- should these funds be subject to VAT?

Answer

Repairs in the Republic to aircraft are subject to VAT at the standard rate unless the aircraft is a foreign-going aircraft and section 11(2)(g)(iv) is applicable.

Insurance premiums paid to Lloyd’s of London will up until 31 December 2000 not be subject to Vat as the activity of underwriting insurance business by underwriting members of Lloyd’s of London was deemed not to be the carrying on of an enterprise. However, due to the amendment to proviso (vi) of the definition of "enterprise" in section 1 on 24 November 1999, which comes into effect on 1 January 2001, the underwriting members of Lloyd’s of London are in terms of section 23(1) required to register as vendors in the Republic from 1 January 2001, in respect of insurance contracts concluded in the Republic. Furthermore, it is important to note that insurance services supplied by underwriting members of Lloyd’s of London to non-vendors in the Republic or to vendors who were to utilise the insurance services otherwise than in the course or furtherance of an enterprise who makes taxable supplies (i.e. non-supplies or exempt supplies), will up until 31 December 2000 be regarded as "imported

services" as defined in section 1 and accordingly taxable at the standard rate in terms of section 7(1)(c) read with section 14.

Commission earned by local insurance agents from underwriting members of Lloyd’s of London in respect of insurance contracts concluded in the Republic, are up until 31 December 2000 subject to VAT at the zero rate in terms of section 11(2)(l ). As from 1 January 2001 the commission is subject to VAT at the standard rate in terms of section 7(1)(a), as section 11(2)(l ) is no longer applicable. The reason being that the underwriting members of Lloyd’s of London are now carrying on enterprises in the Republic and as such are deemed to be "residents of the Republic" as defined in section 1.

Indemnity payments received from underwriting members of Lloyd’s of London by local vendors in respect of insurance contracts concluded in the Republic, are up until 31 December 2000 not subject to VAT due to the proviso to section 8(8). However, as from 1 January 2001 such indemnity payments received by local vendors from Lloyd’s of London will be subject to VAT at the standard rate in terms of section 8(8), as the contracts of insurance are now subject to VAT in terms of section 7(1)(a).

(Also see ruling No. 273)

‌28/3/19-18 March 1992 and amended on 1 September 2002.

‌291‌

‌Insurance - premium paid before commencement date Versekering – premie betaal voor aanvangsdatum‌

Question

An insurance premium paid in January 1991 covers risk both pre and post VAT. As the proviso to section 78(6) excludes such premiums from VAT, will any indemnity payments received on or after 30 September 1991 be subject to VAT in terms of section 8(8) of the Act?

Answer

Where the supply of services contemplated by the contract is of a type subject to VAT in terms of section 7(1)(a), any indemnity payment received on or after 30 September 1991 is subject to VAT in terms of section 8(8) of the Act.

(Also see ruling No. 223.)

‌28/3/19-12 May 1992

‌292‌

‌Insurance - claims against third parties

Versekering – eise teen derde partye

Question

In terms of his contract of insurance a vendor is liable for the payment of a fixed amount, whilst the balance is paid by the insurer. The vendor attempts to recover the fixed amount paid from a third party. Will the recovery thereof be subject to VAT?

Answer

As recoveries from third parties are not payments received under a contract of insurance, the provisions of section 8(8) are not applicable. However, the vendor will be obliged to account for output tax in terms of section 16(4) as the supply to the third party constitutes a "service" as defined in section 1. The supply is accordingly subject to VAT at the standard rate in terms of section 7(1)(a).

‌28/3/19-12 May 1992 and amended on 1 September 2002.

‌293‌

‌Till slip - tax invoice Kasregisterstrokie - belastingfaktuur‌

Question

A till slip contains a description of goods sold and the price thereof. This till slip is attached to a tax invoice. Does

this tax invoice comply with the requirements of the Act?

Answer

Subject to the following conditions the tax invoice to which the till slip is attached will be acceptable if—

the tax invoices comply with the requirements of section 20(4) and 20(5) of the Act; and

a cross reference is made between the till slip and the tax invoice.

‌28/3/26-25 November 1991 and amended on 1 September 2002.

‌294‌

‌Exchange rate adjustments - adjustment of consideration Verandering van wisselkoers – aanpassing van vergoeding‌

Question

An exchange rate adjustment pertaining to a certain transaction results in the original consideration for a supply being increased or decreased, depending on the adjustment that has to be made. Must an adjustment be made on the vendor’s return as the VAT on the supply has already been accounted for on the original consideration in a previous tax period?

Answer

In terms of section 21(1)(c), read with section 21(2), an adjustment must be made where the previously agreed consideration for a supply has been altered by agreement with the recipient, whether due to the offer of a discount or for any other reason, and the supplier has already furnished a return in relation to that supply.

Where rate of exchange adjustments are made by the vendor in order to charge the recipient a price based on the actual rate, while VAT was accounted for in respect of a price based on a different rate, it amounts to the alteration of the previously agreed consideration, as contemplated in section 21(1)(c).

‌28/3/28-1 December 1992 and withdrawn with effect from 1 September 2002 – see ruling No. 60.

‌295‌

‌Belastingtydperke - verandering vanaf kategorie A na B Tax periods - changing from category A to B‌

Vraag

Kan ’n ondernemer aansoek doen dat sy belastingtydperk vanaf kategorie A na B verskuif word of omgekeerd?

Antwoord

Alhoewel die Wet nie voorsiening maak dat ’n ondernemer aansoek kan doen dat hy van kategorie A na kategorie B of omgekeerd kan verander nie, bepaal artikel 27(2)(d) dat die Kommissaris van tyd tot tyd opdrag kan gee dat sodanige omskakeling wel gedoen mag word. Waar dit sinvol is dat so ’n verandering wel sal plaasvind en die redes daarvoor onder die aandag van die Kommissaris gebring word, kan hy opdrag gee dat dit gedoen word.

‌28/3/25-23 Augustus 1991

‌296‌

‌Welfare organisation - goods given to needy Welsynsorganisasie – goedere aan behoeftiges geskenk‌

Question

A welfare organisation registered under the Nonprofit Organisations Act, 1997, acquires goods and services which enable it to assist people. Can the organisation claim an input tax credit in respect of the acquisition of such goods and services?

Answer

If the welfare organisation is registered as a Vendor for VAT purposes, an input tax credit may be claimed in terms of sections 16(2), 16(3), 17(1) and 20 in respect of goods and services acquired for the purposes of welfare activities, even where it does not charge or receive any consideration for the supply of such goods and services. See definition of "enterprise" in section 1.

‌28/3/21-28 February 1992 and amended on 1 September 2002.

‌297‌

‌Welfare organisation - grants from local authorities Welsynsorganisasie – skenkings van plaaslike owerhede‌

Question

Must a welfare organisation registered under the Nonprofit Organisations Act, 1997, account for VAT in respect of

grants received from local authorities?

Answer

Grants and subsidies received from local authorities by welfare organisations are subject to VAT at the zero rate

in terms of section 11(2)(n) subject to the provisions of section 8(5).

‌28/3/21-28 February 1992 and amended on 1 September 2002.

‌298‌

‌Suretyship - general customs bond Borgakte – algemene doeane-obligasie‌

Question

A customs bond is often provided by a bank or an insurer to the SARS to ensure that an importer observes the customs and excise laws of the Republic governing such business to the satisfaction of the Commissioner. Is the issue of the customs bond a taxable supply?

Answer

The provision of a suretyship in respect of a general customs bond (DA110) is regarded as a "service" as defined in section 1 and accordingly subject to VAT. The general VAT principles regarding insurance are, therefore, applicable to any amounts paid in terms of such a customs bond.

‌28/3/19-30 July 1992 and amended on 1 September 2002.

‌299‌

‌Medical expenses - employee injured at work Mediese onkoste – werknemer aan diens beseer‌

Question

Can a registered vendor who pays the medical expenses incurred by his employee who was injured on duty claim

an input tax deduction, if he is in possession of a tax invoice in terms of sections 20(4) or 20(5)?

Answer

The medical expenses paid when an employee has been injured at work are incurred in the normal course or furtherance of the vendor’s enterprise and he may therefore claim an input tax deduction in respect thereof in terms of sections 16(2), 16(3), 17(1) and 20. The account from the doctor or hospital should be made out to the vendor.

‌28/3/23-25 November 1991.

‌300‌

‌Insurance - loss of profits - deemed supply

‌Verrsekering – verlies aan inkomste – geagte lewering

Question

Will an insurance policy for loss of profit be regarded as a financial service and accordingly the premium

income be exempt from VAT?

Answer

The supply of insurance against loss of profits does not constitute a financial service in terms of section 2

and is therefore subject to VAT in terms of section 7(1)(a).

‌28/3/19 – amended on 1 September 2002.

‌301‌

‌Vereniging sonder winsoogmerk – vrywillige ledegeld

‌Association not for gain – voluntary membership fees

Vraag

Lede betaal vrywilliglik ledegeld aan ’n "vereniging sonder winsoogmerk" soos omskryf in artikel 1 wat aan hulle slegs die reg verleen om te stem, om aan komitees te behoort en om op die bestuur van die vereniging te dien. Geen verdere regte of voordele val die lede toe nie. Die ledegeld is ’n bron van inkomste vir die vereniging wat dit dan verder aanwend om sy doelstellings te bevorder. Moet die vereniging BTW op die ledegeld verantwoord?

Antwoord

Alhoewel die lede sekere regte ontvang in ruil vir hulle ledegeld, kry hulle geen identifiseerbare regstreekse waardevolle voordeel in die vorm van ’n lewering van goed of dienste nie. Daar word dus aanvaar dat die ledegeld wat vrywilligers aan ’n vereniging sonder winsoogmerk betaal ’n "onvoorwaardelike skenking" uitmaak soos omskryf in artikel 1. Die vereniging is dus nie verplig om BTW op die ledegeld van vrywilligers ontvang te verantwoord nie, aangesien dit nie "vergoeding" is nie.

‌28/3/21 - 21 April 1993 en gewysig op 1 September 2002.

‌302‌

‌Koop van tweedehandse goed - skep van ’n

leningsrekening

‌Purchase of second-hand goods - creation of a loan

account

Vraag

’n Ondernemer koop "tweedehandse goed" soos omskryf in artikel 1 van ’n nie-ondernemer vir aanwending in sy onderneming om belasbare lewerings mee te doen. Betaling vir die eiendom geskied by wyse van ’n leningsrekening wat in die koper se boeke gekrediteer word ten gunste van die verkoper. Sal die ondernemer op ’n insetbelastingkrediet geregtig wees ooreenkomstig die bepalings van paragraaf (b) van die woordomskrywing van "insetbelasting" in artikel 1 saamgelees met artikel 16(3)(a)(ii)?

Antwoord

Vir sover betaling by wyse van die kreditering van ’n leningsrekening geskied, word dit nie as betaling vir die doeleindes van paragraaf (b) van die woordomskrywing van "insetbelasting" in artikel 1 saamgelees met artikel 16(3)(a)(ii) beskou nie, aangesien die verpligting van die koper teenoor die verkoper om die koopsom van die eiendom te betaal nie verminder of nagekom is nie. Die ondernemer sal dus nie op ’n

insetbelastingkrediet ten opsigte van die leningsrekening geregtig wees nie, maar slegs op betalings wat

gedoen word wat die effek het om die koopsom gedeeltelik of ten volle te delg.

‌28/3/18 - 28 Januarie 1993: aangepas met wysiging aan artikel 16(3)(a)(ii) deur Wet 97/93

‌303‌

‌Insurance - imported services

‌Versekering – ingevoerde dienste

Question

An insurer, situated in an export country, not being a vendor in the Republic, concludes insurance contracts outside the Republic with various clients living within the Republic. During the course of its business, indemnity payments will be made to its clients in the Republic. Will these indemnity payments be subject to VAT?

Answer

As the services supplied by the foreign insurer are not subject to VAT in terms of section 7(1)(a), no VAT is payable in terms of section 8(8) in respect of any indemnity payments received by vendors in the Republic (refer to the proviso to section 8(8)).

In the case of an insured vendor who uses or consumes the insurance service for purposes other than making taxable supplies or an insured non-vendor, the insurance service will attract VAT in the hands of the insured (not the insurer) as this will constitute an "imported service" as envisaged in section 7(1)(c). "Imported Services" constitute:

a supply of services;

made by a supplier who is neither resident nor carries on business inside the Republic;

to a recipient who is a resident of the Republic;

to the extent that the services are utilized or consumed in the Republic otherwise than for making taxable supplies.

Should a vendor utilise such services in the course of making taxable supplies, such services will not

constitute imported services and will therefore not be subject to VAT as envisaged in section 7(1)(c).

‌28/3/19 - 25 May 1993 and amended on 1 September 2002.

‌304‌

‌Opsievergoeding - insetbelasting

‌Consideration for option - input tax

Vraag

’n Ondernemer verkry ’n opsie om ’n vaste eiendom by ’n nie-ondernemer te koop. Die ondernemer moet ’n bedrag aan die nie-ondernemer betaal ten einde die opsie te bekom. Is die ondernemer op ’n aftrekking van geagte insetbelasting geregtig ooreenkomstig die bepalings van paragraaf (b) van die woordomskrywing van "insetbelasting" in artikel 1 saamgelees met artikel 16(3) ten opsigte van die bedrag wat hy aan opsievergoeding moes betaal?

Antwoord

Die verlening van ’n opsie stel nie die lewering van tweedehandse goed daar nie, maar behels die lewering van ’n "diens" soos omskryf in artikel 1. Dus is geen insetbelasting toelaatbaar op die blote verkryging van ’n opsie nie.

Indien die opsievergoeding wat betaal is egter later aangewend word as gedeeltelike betaling van die koopprys van die vaste eiendom, kan die koper ‘n insetbelastingaftrekking eis ingevolge die bepalings van die woordomskrywing van "insetbelasting" in artikel 1 saamgelees met artikel 16(3)(a)(ii), waar die ondernemer op die faktuurbasis geregistreer is. Waar die ondernemer egter op die betalingsbasis geregistreer is mag ‘n insetbelastingaftrekking slegs tot die mate waarin die opsievergoeding as betaling van die koopsom aangewend word, geëis word.

‌28/3/1 - 12 November 1993 en gewysig op 1 September 2002.

‌305‌

‌Contractual penalty - foreign company

‌Kontraktuele boete – buitelandse maatskappy

Question

A local vendor has entered into a contractual agreement with a foreign company whereby the vendor has acquired sole distributorship of the foreign company’s products in the Republic. The contract stipulates that in the event of the foreign company supplying its products directly to purchasers in the Republic, the local vendor will be entitled to a commission from the foreign company which is in essence a penalty payable by the foreign company for breaking the agreement. Will this commission received from the foreign company be subject to VAT?

Answer

The local vendor is obliged to account for VAT in terms of section 16(4) on the amounts received from the foreign company which represent the penalty payable. However, as the services are supplied to a non- resident who is, outside the Republic at the time the services are rendered, the supply will in terms of section 11(2)(l ) be zero-rated.

‌28/3/29 - 27 November 1992 and amended on 1 September 2002.

‌306‌

‌Input tax - subscription fees paid on behalf of employee

‌Insetbelasting – intekengelde betaal names werknemers

Question

Is a vendor entitled to an input tax deduction in respect of subscription fees paid on behalf of his

employees to, for example professional associations?

Answer

If membership of the association is a condition of employment the VAT paid on the subscription may be claimed in terms of section 16(2), 17(1) and 20 as input tax by the vendor. The vendor must, however, be in possession of a tax invoice issued to him and not to the employee before the input tax deduction can be claimed.

‌28/14/9/1 - 18 April 1994

‌307‌

‌Question‌

Agent/principal - recovery of costs

Agent/Prinsipaal – verhaling van koste

An agent who is a vendor incurs expenses on behalf of a principal and recovers these costs from him. Some of the expenses relate to supplies which are not subject to tax. Must the agent levy VAT on the recovery of these costs from the principal?

Answer

Where an agent incurs expenses on behalf of a principal he passes these costs on to the principal without adding tax to the items that are not subject to tax, as these goods or services are deemed to have been supplied to the principal in accordance with section 54(2). The principal will claim the input tax on those expenses where VAT was paid. Should these expenses, however, be part of the agent’s costs for services which he renders to the principal, these expenses are viewed as having been incurred in the course or furtherance of the agent’s enterprise. The agent/principal relationship does, therefore, not apply to these expenses and the agent must add VAT to the various costs which he recovers from the principal.

‌28/3/23 - 26 July 1993

‌308‌

‌Credit notes - cannot be related to original supply

‌Kreditnotas – kan nie aan oorspronklike lewering gekoppel

word nie

Question

A vendor supplied goods prior to the change in the tax rate. The goods were returned after the change in the tax rate. Due to the nature of the goods it is impossible to relate the goods that are returned to the date on which they were originally supplied. May the vendor issue credit notes at the new rate of tax in respect of goods that were returned after the change in the tax rate?

Answer

Where it is impossible for a vendor to relate a credit note to a supply which occurred prior to the change in tax rate, he may on approval of the Commissioner in terms of section 21(5) issue all credit notes at the new rate provided the supplies in question were made between registered vendors.

‌28/3/23 - 22 July 1993 and amended on 1 September 2002.

‌309‌

‌Insurance - vendor receives indemnity payment after

deregistration

‌Versekering – ondernemer ontvang

skadeloosstellingsbetaling na deregistrasie

Question

A vendor receives an indemnity payment from an insurer after he has deregistered for VAT purposes. The

claim was made while he was a vendor. Must he account for output tax on the indemnity payment?

Answer

In terms of section 8(2), where a person ceases to be a vendor, any goods (other than any goods in respect of the acquisition of which by the vendor a deduction of input tax under section 16(3) was denied in terms of section 17(2) or would have been denied if these sections had been applicable prior to the commencement date) or right capable of assignment, cession or surrender which form part of the assets of his enterprise shall be deemed to be supplied by him in the course of his enterprise immediately before he ceased to be a vendor.

As the insurance claim is a right capable of assignment, cession or surrender, the vendor must include the

value of the insurance claim in the total assets taxable in terms of section 8(2) prior to deregistration.

‌28/3/19 - 20 April 1993

‌Vraag‌‌‌

310 Versekering - ex gratia-betaling

Insurance - ex gratia payments

’n Ondernemer se perseel is deur ’n brand beskadig. Die versekeraar het die versekeringskontrak tussen hom en die ondernemer gekanselleer op grond daarvan dat die ondernemer nie daarvan melding gemaak het dat sy vorige perseel afgebrand het toe die kontrak beding is nie. Die versekeraar het egter ’n ex gratia-betaling aan die ondernemer gedoen. Moet die ondernemer uitsetbelasting op die ex gratia-betaling verantwoord?

Antwoord

Ex gratia-betalings word nie ingevolge ’n versekeringskontrak gedoen nie en gevolglik is die bepalings van artikel 8(8) nie van toepassing nie. Ex gratia-betalings is ook nie vergoeding vir die lewering van "goed" of "dienste" soos omskryf in artikel 1 nie en is gevolglik nie aan belasting ingevolge artikel 7(1)(a) onderhewig nie. Gevolglik is geen uitsetbelasting deur die ondernemer betaalbaar nie.

‌Nota:

Die versekeraar is nie geregtig om ‘n insetbelastingaftrekking ingevolge die bepalings van artikel 16(3)(c)

te eis op die ex gratia-betaling nie.

‌28/3/19 - 25 Oktober 1993 en gewysig op 1 September 2002.

‌Vraag‌‌‌

311

Motorvoertuie - insetbelasting

Motor vehicles - input tax

’n Ondernemer koop ’n minibus aan wat aan die woordomskrywing van ’n "motor" in artikel 1 voldoen. Die ondernemer gaan verdere kostes aan om veranderinge aan die voertuig aan te bring sodat dit uitsluitlik vir die vervoer van vrag aangewend kan word. Kan die ondernemer nou ’n insetbelastingkrediet eis op die aankoop van die voertuig?

Antwoord

Aangesien die minibus binne die omskrywing van ’n "motor" in artikel 1 val, sal die ondernemer ingevolge die bepalings van artikel 17(2)(c) nie ’n insetbelastingkrediet op die aankoop van die voertuig kan eis nie Die aard van die voertuig en nie die doel waarvoor dit aangewend word nie bepaal of ’n insetbelastingkrediet op die aankoop van die voertuig toegelaat kan word aldan nie. Die ondernemer sal wel op ’n insetbelastingkrediet geregtig wees op die koste wat hy aangegaan het om die voertuig aan te pas sodat dit vir die vervoer van vrag aangewend kan word.

‌28/3/13 - 11 Augustus 1993

‌312‌

‌Loss adjusting services to foreign insurer - zero rate

‌Eisebemiddelaarsdienste aan buitelandse versekeraar - nulkoers

Question

A local vendor renders loss adjusting services to an overseas insurer. The instructions requesting the services to be rendered are received from a local agent acting on behalf of the overseas insurer. Will the supply of the loss adjusting services be subject to tax at the zero-rate?

Answer

Where loss adjusting services are rendered to an overseas insurer, the supply of those services will be zero-rated in terms of section 11(2)(l ), as it is not regarded as services supplied directly in connection with movable property situated inside the Republic. It should be stressed that the zero-rating referred to will only apply where the services are rendered to a person (e.g. an insurer) who is not a resident of the Republic. This will be the case even if the instructions are received from a local agent acting on the overseas insurer’s behalf, provided that the agent is in fact acting in his capacity as an agent for the overseas principal. Should, for some reason, the loss adjusting services be rendered to a local agent in his capacity as a principal and not as agent for an overseas insurer the supply of services would be subject to tax at the standard rate in terms of section 7(1)(a).

‌28/3/19 - 17 March 1992

‌Question‌‌‌

313

Insolvency - Commissioner has preferent claim

Insolvensie – Kommissaris het preferente eis

A vendor has incurred a liability to account for output tax prior to being liquidated. Does the Commissioner have a right to claim output tax incurred prior to sequestration over and above the rights of secured creditors?

Answer

In terms of section 99(cD) of the Insolvency Act, No. 24 of 1936, the balance of the free residue of the estate is to be applied to defray any amount of VAT, interest or penalty which in terms of the Act was due by the insolvent immediately prior to the sequestration of the estate, after paying secured creditors, the costs of maintaining and realising any property, funeral expenses, as well as the costs of sequestration and execution.

It is therefore clear that the Commissioner’s claim to tax is classified as preferent, and is only settled once secured creditors and the other costs referred to above have been paid from the insolvent estate.

‌28/3/29 - 27 May 1993

‌314‌

‌Self insurance - payment to third party - input tax

‌Selfversekering-betaling aan derde party - insetbelasting

Question

A vendor makes use of his own transport to distribute his products. Occasionally some of his vehicles are involved in accidents while distributing products. Due to the costs involved in conventional short-term insurance the vendor has a policy of self insurance whereby the vendor bears the costs of accidents from his own resources. These costs apply to his own vehicles as well as that of the third parties involved in the accidents. Will the vendor be entitled to an input tax credit in respect of payments made for repairs to third party vehicles?

Answer

Where goods or services are acquired in respect of repairs to third party vehicles which were damaged in accidents caused by employees of the vendor in the course of distributing his products, such goods or services are acquired for the purpose of consumption, use or supply in the course of making taxable supplies. Any VAT paid in respect thereof may, therefore, be claimed as input tax credit in terms of sections 16(3), 17(1) and 20.

Where the third party opts to receive cash for damages incurred to his vehicle rather than having his vehicle repaired, an input tax credit cannot be claimed in terms of section 16(3)(c), as the indemnity payment is not made in terms of a contract of insurance between the vendor and the third party involved in the accident.

However, where the third party is a vendor and receives cash for the damages he is obliged to issue the vendor with a tax invoice in respect of the surrendering of a right which constitutes a "service" as defined in section 1 rendered to the vendor. Output tax must accordingly be accounted for by the third party

(vendor) in terms of section 16(4) and an input tax deduction may be claimed by the vendor in terms of

sections 16(2), 16(3), 17(1) and 20.

‌28/3/19 - 15 April 1992 and amended on 1 September 2002.

‌315‌

‌Share block company - collection of rentals

‌Aandeleblokmaatskappy - huurinvorderings

Question

A share block company collects rent on behalf of the share block holders in respect of a commercial property which it owns. After the deduction of a levy for administration and other charges, the rent collected amounts to approximately R42 000 per month. The rent is then distributed to the share block holders in the share block company and they account for the rent received as taxable income for income tax purposes. All the share block holders receive rental income of less than R300 000 per annum. What is the position of the share block company and its share block holders regarding the liability for VAT on the rentals received?

Answer

The supply of services in respect of which levies are charged to the share block holders is exempt from VAT in terms of section 12(f) (unless the Commissioner has given permission that such services be regarded as taxable). As the share block company can only act as an agent on behalf of the share block holders the rent received will not form part of the value of the share block company’s taxable supplies. The share block holders will therefore have to account for VAT on their portion of the rental received if they are registered for VAT.

‌28/3/2 - 18 November 1991

‌316‌

‌Vraag‌

Kontrakwaarde vir seëlregdoeleindes

Contract value for stamp duty purposes

Moet die seëlreg op kontrakte op die waarde van die kontrak met inbegrip van of sonder BTW bereken word?

Antwoord

In die geval van vaste eiendom moet seëlreg op ’n som gelyk aan die totale bedrag van die huurgeld, BTW uitgesluit, bereken word slegs indien die BTW afsonderlik aangedui word, andersins nie. (BTW maak nie deel uit van ander vergoeding nie.) Indien die BTW-inklusiewe metode gebruik word, moet seëlreg op die totale kontrakbedrag bereken word. (Sien Nota 20 van Item 14 van Bylae 1 tot die Wet op Seëlregte, No. 77 van 1968.)

In die geval van roerende goed moet seëlreg op die bruto koopprys voor die aftrekking van die bedrag van die kontantdeposito en/of inruiling met inbegrip van enige rente en finansierings- of ander koste bereken word. BTW maak deel uit van ander koste en dus is seëlregte ook op die BTW-element betaalbaar. (Sien Nota 7 van Item 13A van Bylae 1 tot die Wet op Seëlregte, No. 77 van 1968.)

‌28/3/6 - 23 Oktober 1991 en omsendbrief 60/91 van 26 November 1991 - verwysing 3/1/1.

‌317‌

‌Services supplied for a foreign trade delegation

‌Dienste verskaf vir ‘n buitelandse handelsafvaardiging

Question

In terms of an agreement with a foreign organisation, a South African vendor arranges and oversees a trade fair in South Africa, which is attended by foreign businessmen. The vast majority of work to organise the fair is done before the arrival in South Africa of any of the foreign visitors. Will the supply of these services to the foreign organisation be subject to VAT at the rate of zero per cent as provided for in section 11(2)(l )?

Answer

In terms of section 11(2)(l ) the services must be supplied to a person who is not a resident of the Republic and the said person or any other person who benefits from the service must not be in the Republic at the time the services are rendered.

The view is held that, although the majority of work is done before the arrival in South Africa of the foreign visitors, this work is of a preparatory nature which does not, in itself, constitute a supply of services but culminates in the supply of a service, being the trade fair, for the benefit of the foreign visitors during their visit to South Africa. The service of supplying the trade fair is therefore not zero-rated in terms of section 11(2)(l ).

‌28/2/1 - 11 July 1995 and amended on 1 September 2002.

‌318‌

‌Bad debts

‌Slegte skulde

Question

A company which is a vendor for VAT purposes merged with its holding company to form a new company which is a separate person for VAT purposes. The account receivable on which the vendor declared and paid output tax at the standard rate was transferred as part of the merger on a non-recourse basis. May the new company claim the tax on debts gone bad subsequent to the merger?

Answer

The new company is in terms of section 22(1A) read with section 16(3) entitled to claim a bad debt

deduction.

‌28/3/29 - 16 July 1993 and amended on 1 September 2002.

‌319‌

‌Sale of motor car - employer to employee

‌Verkoop van motor – werkgewer aan werknemer

Question

An employer sells a motor car (for which he was denied an input tax credit) to an employee for a nominal amount. This constitutes a fringe benefit as contemplated in paragraph 2(a) of the Seventh Schedule to the Income Tax Act. Must the employer account for output tax on such transaction as envisaged in section 18(3) of the VAT Act?

Answer

The supply of a motor car, which constitutes a fringe benefit for the purposes of paragraph 2(a) of the Seventh Schedule to the Income Tax Act, is, in terms of section 18(3) of the VAT Act deemed to be a taxable supply.

In terms of section 8(14), where any motor car is supplied by a vendor and an input tax deduction in respect of the acquisition by the vendor of such motor car was denied in terms of section 17(2), the supply by the vendor is deemed not to be a taxable supply. The provisions of section 8(14), therefore, override the provisions of section 18(3) and VAT must, therefore, not be accounted for.

If the employer was entitled to an input tax deduction on the vehicle (e.g. if he was a motor manufacturer or car dealer) output tax would have to be accounted for on (a) the nominal amount received from the employee and (b) the difference between this amount and the open market value of the vehicle, i.e. the fringe benefit for income tax purposes. (See sections 7(1)(a), 10(13) and 18(3)).

‌28/3/7 - 28 July 1992

‌320‌

‌Sale of partner’s interest in a partnership

‌Verkoop van vennote se belang in ‘n vennootskap

Question

Three partners namely A, B and C are equal partners in a partnership that is registered as a vendor.

Partners A and B wish to cease being partners of the partnership and intend selling their undivided interest in the partnership to the remaining partner C. Partner C is to continue conducting the business of the partnership as a sole proprietor. What are the VAT implications on the sale of A and B’s undivided interest in the partnership if the provisions of section 51(2) cannot be applied?

Answer

The sale of the assets of the partnership to the remaining partner constitutes a taxable supply by the partnership. Section 11(1)(e) provides that the supply of an enterprise or part thereof which is capable of separate operation may be zero-rated, if the supply is made to a registered vendor and the enterprise is disposed of as a going concern. (Subject to all the requirements of sections 8(7) and 11(1)(e) read together with Practice Note No. 14 dated 20 January 1995 being met).

Where the transaction does not constitute the sale of an enterprise as a going concern and therefore not zero-rated, the provisions of section 7(1)(a) will be applicable. The vendor (partnership) has to account for output tax at the standard rate on the supply of the assets which formed part of the enterprise (other than any goods in respect of the acquisition of which a deduction of input tax under section 16(3) was denied in terms of section 17(2) or would have been denied if these sections had been applicable prior to the commencement date) upon supply to the remaining partner.

‌28/3/29 - 1 February 1993 and amended on 1 September 2002.

‌321‌

‌Local authority - township development - transfer

payment

‌Plaaslike bestuur – dorpsontwikkeling - oordragbetaling

Question

A local authority sells stands for residential purposes to buyers below cost price. The shortfall is made up by way of a subsidy received by the local authority from Central Government. Must the local authority levy VAT on the sale of the stands?

Answer

The fact that the subsidy covers the shortfall in the selling price satisfies the requirements of paragraph (c)(iv)(bb) of the definition of "enterprise" in section 1. The local authority is therefore regarded as conducting an enterprise (township development) as far as the sale of the stands are concerned and VAT will therefore have to be accounted for at the standard rate on the selling price of the sites to the respective buyers in terms of section 7(1)(a).

The subsidy paid by Central Government to the local authority is treated as a "transfer payment" as defined in section 1 and is therefore taxable in terms of section 8(5) in the hands of the local authority at the rate of zero per cent in terms of section 11(2)(p).

Where the subsidies are paid directly to the buyers and the stands are sold below cost, the local authority will not be carrying on an enterprise. VAT will not be levied on such sales and the local authority will not be entitled to deduct input tax in respect of such supplies (See paragraph ©(iv)(bb) of the definition of "enterprise" in section 1).

‌28/3/3 - 27 April 1993 and amended on 1 September 2002.

‌322‌

‌Conveyance fees - third party pays costs - input tax

‌Oordragkoste – derdeparty betaalkoste - insetbelasting

Question

A vendor has instructed an attorney to effect the transfer of fixed property which he has bought. The vendor and the seller have come to an agreement whereby the seller will pay a portion of the conveyance fees. This payment will be made directly to the attorney who is effecting the transfer of the property. Will the seller (who has not instructed the attorneys to effect transfer of the property), be entitled to an input tax credit in respect of the portion of the fees for which he is liable?

Answer

Where a seller is obliged to pay an attorney who received instructions from the purchaser, or is acting on behalf of the purchaser, the seller is entitled to a tax invoice issued by the attorney for purposes of claiming an input tax credit in terms of sections 16(3), 17(1) and 20, to the extent that the costs were paid by him in the normal course of his enterprise.

‌28/3/1 - 22 July 1993

‌Vraag‌‌‌

323

Insetbelasting - Blote eiendomsreg Input Tax - Bare Dominium

Wat is die BTW-implikasies van ’n lewering van die blote eiendomsreg van ’n bate waar ’n oorlede ondernemer die blote eiendomsreg aan ’n verbonde persoon, wat ’n geregsitreerde ondernemer is, bemaak het terwyl die vruggebruik van die bate aan iemand anders bemaak is.

Antwoord

Vruggebruik is ’n persoonlike serwituut wat aan die vruggebruiker ’n beperkte saaklike reg verleen om daardie bate van die blote eiendomsreghouer waarop die vruggebruik betrekking het te gebruik en die inkomste daaruit te ontvang. Dit bring mee dat, solank as wat die vruggebruik bly voortbestaan, die blote eiendomsreghouer nie daardie blote eiendomsreg kan gebruik in die loop van die maak van belasbare lewerings nie. Selfs al sou hy ’n vergoeding gelyk aan die ope markwaarde van die blote eiendomsreg betaal het om dit te bekom, sou hy dus nie geregtig wees om ’n insetbelastingaftrekking met betrekking daartoe te doen nie.

Aangesien die blote eiendomsreg op die erfgenaam oorgaan teen geen vergoeding nie of ’n vergoeding in geld wat minder is as die ope markwaarde daarvan, die erflater en die erfgenaam verbonde persone is met betrekking tot mekaar en die erfgenaam nie geregtig sou wees om ’n aftrekking van die volle bedrag insetbelasting te doen nie, word die ope markwaarde van die blote eiendomsreg ingevolge artikel 10(4) geag die waarde van die lewering daarvan te wees en moet die boedel van die oorlede ondernemer uitsetbelasting teen die standaardkoers op die ope markwaarde daarvan verantwoord.

Vruggebruik word gewoonlik vir die leeftyd van ’n persoon verleen maar kan ook slegs vir ’n bepaalde tydperk of tot die vervulling van ’n voorwaarde verleen word, in welke geval die vruggebruik ook verval met die vroeëre dood van die vruggebruiker. Alhoewel die vruggebruiker sy reg op gebruik van die eiendom kan verkoop of verhuur, kan hy, weens die persoonlike aard van ’n vruggebruik, nie sy saaklike reg daaronder vervreem nie. Eers op die tydstip waarop die vruggebruik verval, verkry die blote eiendomsreghouer volle eiendomsreg van die betrokke eiendom en kan hy dan sy vroeëre blote eiendomsreg gebruik in die loop van die maak van belasbare lewerings. Op daardie stadium sal die blote eiendomsreghouer ingevolge artikel 18(4)(b) geregtig wees om insetbelasting met betrekking tot die verkryging van die blote eiendomsreg te eis, op die ope markwaarde van die blote eiendomsreg ten tye van die verkryging daarvan.

‌28/3/1-15 Desember 1993 en gewysig op 1 September 2002.

‌324‌

‌Second-hand goods – wool

‌Tweedehandse goed - wol

Question

A vendor purchases virgin wool from a non-vendor. Will he be entitled to an input tax credit in respect of

the purchase of the wool?

Answer

Where a vendor purchases virgin wool from a non-vendor he will not be entitled to a notional input tax

credit in respect thereof, as envisaged by the provisions of paragraph (b) of the definition of "input tax" in

section 1 as wool is not regarded as being "second-hand goods" as defined in that section, as it has not

been used before.

‌28/3/1 - 19 May 1993

‌Question‌‌‌

325

Racehorse industry – stakes

Renperdbedryf - prysgeld

Must a racehorse owner account for VAT on stakes received from the Turf (race) club if he is a vendor?

Answer

It has been decided that Turf clubs do not have to add VAT to the stakes which they pay to the racehorse owner. The club will therefore not be entitled to claim any input tax deduction in respect of these supplies. This arrangement is made in terms of section 72 and is subject to the following conditions:-

Owners who submit tax invoices and insist on the payment of tax on their stakes must be paid the tax.

The racing Clubs will in these circumstances be entitled to an input tax deduction for the tax actually paid.

Except where (i) above is applicable, the stake statements must contain a message to owners that VAT is not payable on the stakes and if the owner is a vendor, he must account for the amount of the stakes in block 2 (zero-rated supplies) of the VAT 201 return.

‌28/3/9 - 20 September 1991

‌326‌

‌Tripartite agreements - fixed property - single supply

‌Drieledige ooreenkoms – vaste eiendom – een lewering

Question

What are the VAT implications if a vendor has sold a property and has subsequently entered into a tripartite agreement in terms of which the original sale is cancelled and a new sale to a third party takes place?

Answer

If the tripartite agreement is accepted i.e. the sale purportedly cancelled has been accepted as cancelled, the Receiver will only take cognizance of the sale from the original seller to the third party who purchased the property from the original buyer. The original seller will therefore in terms of sections 7(1)(a) and 16(4) have to account for VAT on the transaction. The consideration for the supply will be the amount paid by the third party to the agreement.

Where the original purchaser is a vendor, any amount received by him in respect of such cancellation of the original supply, constitutes consideration for the supply of a service and is, therefore, subject to VAT in terms of section 7(1)(a).

‌28/3/3 - 18 March 1992

‌Question‌‌‌

327

Time of supply - inter-company charges

Tyd van lewering – inter-maatskappy fooie

Is a supply in respect of which inter-company charges are made (i.e. a supply between connected persons of, for example, administrative services and property rentals) always deemed to take place when the services are performed as provided in section 9(2)?

Answer

Where goods are supplied under a rental agreement or where services are supplied under any agreement which provides for periodic payments, they are deemed to be successively supplied for successive parts of the period of the agreement and each of the successive supplies are deemed to take place when a payment becomes due or is received, whichever is the earlier. This time of supply rule which is contained in section 9(3)(a) of the Act applies notwithstanding the provisions of section 9(2).

Therefore, where inter-company charges are successive on an annual basis, the supply is deemed to take place when such payments become due (i.e. where an invoice is issued or a book entry is put through) or is received.

‌28/14/9/1 - 18 April 1994

‌328‌

‌Recovery of costs - salaries paid to employees

‌Verhaling van koste – salarisse betaal aan werknemers

Question

A vendor recovers from other vendors a portion of the salaries which he pays to his employees for services rendered by his employees to those vendors. Must the vendor levy VAT on the recovery of the salaries from the other vendors?

Answer

The vendor will not pay VAT on salaries paid to employees (see the third proviso to paragraph (c) of the definition of an "enterprise" in section 1), but when a part of the salaries paid to employees are recovered from other vendors, the recovery thereof is subject to VAT in terms of section 7(1)(a) as the vendor is regarded as having supplied a "service" as defined in section 1 to the other vendors.

‌28/3/1 - 10 May 1993

‌329‌

‌Liquidation dividend in specie - value of supply

‌Likwidasie dividend in spesie – waarde van lewering

Question

Is a liquidation dividend in specie subject to VAT on cessation of business?

Answer

Where the distribution of a dividend in specie to shareholders (who are connected persons in relation to the company) involves no consideration payable by them the value of the supply is in terms of section 10(23) nil, provided they would be entitled to an input tax deduction in respect of the full amount of VAT paid in respect of the goods received.

Where the dividend in specie accrues to a person who would not be entitled to an input tax credit and who is a connected person in relation to the company, the value of the supply is in terms of section 10(4) the open market value thereof. Where the non-vendor is not a connected person to the company the value of the supply is nil in terms of section 10(23).

It follows that VAT will only have to be accounted for on the supply of a liquidation dividend in specie to a person who is not entitled to an input tax deduction in respect of the full amount of VAT paid and who is a connected person in relation to the company.

‌28/3/29 - 20 September 1991, adjusted for amendment of section 10(4) by Act No. 97 of 1993.

‌330‌

‌Second-hand goods – bones

‌Tweedehanddse goed - bene

Question

Are bones of animals purchased by bonemeal factories regarded as being "second-hand goods" as defined in section 1 and will the bonemeal factories (vendors) be allowed an input tax credit in respect of the purchase thereof from non-vendors?

Answer

Bones are considered as not having been used previously and therefore they cannot be regarded as being "second-hand goods" as envisaged in section 1. A vendor will therefore not be allowed an input tax credit in respect of the purchase of bones in accordance with the provisions of paragraph (b) of the definition of "input tax" in section 1 read with section 16(3).

‌28/3/1 - 5 January 1993

‌331‌

‌Maatskappymotor - byvoordele - nie belasbaar ingevolge

artikel 18(3) nie maar wel ingevolge artikel 7(1)(a)

‌Company car - fringe benefits - not taxable in terms of

section 18(3) but in terms of section 7(1)(a)

Vraag

Waar ’n werknemer sy werkgewer vergoed vir die gebruik van ’n maatskappymotor en die maandelikse vergoeding gelyk is aan die byvoordeel (soos bereken ingevolge die Inkomstebelastingwet) is daar geen inkomstebelasting op die byvoordeel betaalbaar nie. Wat sal die BTW- implikasie in hierdie geval wees?

Antwoord

Indien die werkgewer geregtig was of sou wees op ’n insetbelastingkrediet vir die maatskappymotor (insluitend alle soorte voertuie) asook op die koste van die herstelwerk, instandhouding of versekering wat hy dra, sal die lewering van die motor en die loopkoste ingevolge artikel 7(1)(a) aan BTW onderhewig wees. Ingevolge artikel 10(3)(a) is die waarde van die lewering die vergoeding in geld wat deur die werknemer aan die werkgewer betaal word.

Indien die werkgewer nie geregtig was op ’n insetbelastingkrediet ten opsigte van die motor nie, kan die vergoeding nietemin volgens die bepalings van artikel 10(22) verdeel word tussen die gedeelte wat na behore aan die lewering toeskryfbaar is (loopkoste) en die gedeelte wat volgens artikel 8(14), nie geag word nie ’n lewering van goed te wees nie (die motor).

‌28/3/7 - 8 Julie 1993

‌332‌

‌Indemnity payments received from Lloyd’s of london

‌Skadeloosstellingbetalings ontvang vanaf Lloyd’s of

London

Question

Must a vendor who is insured by Members of Lloyd’s of London account for output tax on any indemnity

payment received under a contract of insurance in terms of section 8(8)?

Answer

‌28/3/19 - 20 December 1993 and amended on 19 April 2002. (Also see rulings No. 273 and 290.)

‌333‌

‌Deregistration – goodwill

‌Deregistrasie - klandisiewaarde

Question

A vendor deregisters for VAT purposes. Must he account for VAT on "goodwill" for the purposes of section

8(2)?

Answer

In terms of section 8(2) where a person ceases to be a vendor, any goods or right capable of assignment, cession or surrender which formed part of the assets of his enterprise shall be deemed to be supplied by him in the course of his enterprise immediately before he ceased to be a vendor. As goodwill falls within the definition of "services" as defined in section 1 by virtue of the fact that the sale thereof is viewed as being the cession or surrender of a right, goodwill is included in the deeming provision of section 8(2), and would therefore be subject to VAT at the standard rate.

The value of the goodwill is determined in terms of section 10(5), as the lesser of the cost or the open

market value.

‌28/3/1 - 1 June 1992 (Receiver of Revenue, Cape Town)

‌334‌

‌Transfer of rental agreements - closing balance Oordrag van huurooreenkomste - sluitingsaldo‌

Question

A financial institution enters into a rental agreement with a client. Prior to the expiry of the rental agreement the client informs the institution that he no longer has use for the item which he rented. A new client is then sought to take over the rental and the closing balance of the previous client’s account is transferred to the new rental agreement. Must the financial institution account for VAT on the closing balance of the original client’s account?

Answer

Where a journal entry is done to close an original account and open a new account to which the balance is transferred, the entry does not constitute "consideration" as defined in section 1 for a taxable supply as no settlement has been paid by the lessor to the lessee. The transaction is purely a book entry to clear the original debtor’s account.

‌28/3/1/06 - 24 July 1992 (Receiver of Revenue, Cape Town)

‌335‌

‌Insolvent estate - liquidator’s fees - foreign creditors Insolvente boedel – likwidateursfooie – buitelandse‌

krediteure

Question

A local company in liquidation, owns goods in a foreign country. At the time of liquidation the goods are in

the possession of a company situated in the foreign country, who has a lien over the goods in respect of

its charges. In settlement of its claim the foreign company takes possession of the goods. The liquidator (a local vendor) issues an invoice to the local company in respect of the services which it supplied in winding up the SA Company in liquidation, which includes the fees charged in settlement of the foreign company’s claim. Will the liquidator’s fees charged be subject to VAT in total at the standard rate, or must an apportionment be made in respect of the services rendered in settlement of the foreign company’s claim?

Answer

As the liquidator was appointed to wind up the SA Company in liquidation in question and in so doing he supplied his services to the SA Company in liquidation. The fact that a secured foreign creditor’s claim was settled during the process of winding up the estate does not imply that the liquidator supplied his service to the foreign creditor and not to the insolvent estate. The supply of those services is therefore subject to VAT at the standard rate in terms of section 7(1)(a).

‌28/3/1 - 16 August 1993

‌Vraag‌‌‌

336

Eskalasie - boukontrakte

Escalation - building contracts

Konstruksiewerk aan ’n bouprojek oorspan die datum waarop daar ’n verhoging in die BTW-koers is. Argiteksertifikate word periodiek uitgereik om die hoeveelheid werk wat in ’n sekere tydperk afgehandel is, te bepaal. Die sertifikate dien dan ook as fakture waarop vorderingsbetalings ten opsigte van die konstruksiewerk gedoen word. Die boukontrakteur se projekkoste word opwaarts aangepas ingevolge ’n

eskalasieklousule in die kontrak om vir prysstygings voorsiening te maak. In die praktyk word die prys wat op die argiteksertifikate aangedui word aangepas nadat hulle uitgereik is. Watter belastingkoers moet op die eskalasies in berekening gebring word?

Antwoord

Vir sover die konstruksiedienste aan BTW onderhewig is, sal die eskalasies wat daarop betrekking het aan BTW onderhewig wees teen die koers wat van toepassing is op die tydstip waarop die konstruksiedienste gelewer is. Sien artikel 9(3)(a) vir die vasstelling van die tyd van die lewering.

‌28/3/3 - 6 Mei 1993

‌337‌

‌Warranty claim against foreign company

‌Waarborgeis teen buitelandse maatskappy

Question

A vendor imports motor parts from a foreign company for its own stock. The foreign company offers a warranty against defective parts. The parts are sold to customers and the vendor is sometimes required to replace or repair the defective parts. The company then makes a warranty claim against the foreign company. Must VAT be levied on the warranty claim?

Answer

Where the vendor replace parts to customers for which a warranty is issued by the foreign company, the vendor acts as agent on behalf of the foreign company. The warranty claim payment, whether received in money or otherwise (vendor’s stock replaced by foreign company) constitutes "consideration" as defined in section 1. As the goods are not exported, the zero-rate cannot apply and VAT must be accounted for at the standard rate in terms of section 7(1)(a).

Where the foreign company compensates the vendor by way of replacing the defective part, the importation thereof will in terms of item 412.26/0000/01.00 of paragraph 8 of Schedule 1 read in conjunction with section 13(3) be exempt from VAT.

Where the vendor repairs parts which have been supplied under warranty, the vendor continues to act as agent on behalf of the foreign company in providing the "service" as defined in section 1. The warranty claim payment received by the vendor from the foreign company in respect of the supply of the service whether in money or otherwise constitutes consideration. The supply cannot be zero-rated in terms of section 11(2)(l ) as the services are supplied in respect of movable goods situated in the Republic at the time the services are rendered. (See section 11(2)(l )(ii)). The supply is accordingly subject to VAT at the standard rate in terms of section 7(1)(a).

‌28/3/1 - 1 June 1992 and amended on 1 September 2002.

‌338‌

‌Onteiening van grond

‌Expropriation of land

Vraag

’n Geregistreerde ondernemer se tydelike reg van gebruik oor ’n gedeelte van ’n plaas word deur die Provinsiale Administrasie onteien, ingevolge die bepalings van artikel 12 van die Onteieningswet, 1975. Is die onteiening van bogenoemde reg van gebruik aan BTW onderhewig?

Antwoord

Die lewering van ’n reg van gebruik oor eiendom is die lewering van òf ’n saaklike òf ’n persoonlike reg in vasgoed en is dus die lewering van of goed of dienste, respektiewelik, soos in artikel 1 omskryf. Die lewering is dus ’n belasbare lewering teen die standaardkoers ingevolge artikel 7(1)(a). Die betaling van die vergoeding deur ’n Provinsiale Administrasie ten opsigte van ’n onteiening van grond, is nie ’n oordragbetaling soos omskryf nie. Omdat die betaling nie aan die vereistes van ’n "oordragbetaling", soos omskryf voldoen nie, is die bepalings van artikel 11(2)(p) nie van toepassing nie.

‌28/3/16 - 23 Desember 1993 (Ontvanger van Inkomste, Port Elizabeth)

‌339‌

‌Tweedehandse goed - betaling - geagte insetbelasting

‌Second-hand goods - payment - notional input tax

Vraag

’n Nie-ondernemer verkoop sy jagplaas aan ’n ondernemer wat op die betalingsbasis geregistreer is en as gedeeltelik betaling lewer die koper ’n woonhuis aan die verkoper. Die balans van die koopsom bly op hierdie stadium nog uitstaande maar die hereregte is wel ten volle betaal. Het betaling plaasgevind en mag ’n aftrekking van geagte insetbelasting gedoen word?

Antwoord

Die koper sal, ingevolge die bepalings van artikels 9(3)(d) en 16(3)(b)(i) saamgelees met paragraaf (b) van die woordomskrywing van "insetbelasting" in artikel 1, wel op ’n geagte insetbelastingkrediet geregtig wees, bereken as die belastingbreukdeel van die waarde van die woonhuis soos in die ooreenkoms uiteengesit, beperk tot die bedrag hereregte betaal.

‌28/3/18 - 11 Oktober 1993 en gewysig op 1 September 2002.

‌340‌

‌Game - animals - not second-hand goods

‌Wild – diere – nie tweedehandse goed nie

Question

A vendor registered on the invoice basis acquires a game farm from a non-vendor. Is he entitled to a

notional input tax credit in accordance with the provisions of section 16(3)(a)(ii)(bb) read with paragraph

(b) of the definition of "input tax" in section 1 in respect of the purchase of the farm and the game

thereon?

Answer

The vendor will be allowed an input tax credit on the purchase of the property, subject to an adjustment in respect of the farmhouse and labourers houses, in accordance with the provisions of sections 16(3)(a)(ii)(bb) and 17(1) provided that transfer duty has been paid in full. For purposes of this Act, game constitutes animals and is therefore excluded from the definition of "second-hand goods" in section 1. An input tax credit can therefore not be claimed on the purchase of game acquired from a non-vendor.

‌28/3/18 - 20 March 1994

‌341

‌Foreign-going ships - medical and dental services (agent)

‌Skip op vreemde vaart – mediese en tandheelkundige dienste (agent)

Question

Will the provisions of section 54(6)(b)(ii), be applicable to medical and dental services supplied to crew members of a foreign-going ship, and may the agent therefore claim the input tax deduction on behalf of his principal?

Answer

The supply of medical and dental services do not fall within the ambit of section 54(6)(b)(ii), as the services are not supplied in connection with the operation or management of a foreign-going ship, but rather in respect of the crew members. The agent may therefore not claim a deduction of input tax in respect of these services. The suppliers of the medical services will charge VAT at the standard rate and the cost of these services (including VAT) would therefore be passed on to the owner or master by the agent.

‌28/3/2 - 23 November 1993

‌342‌

‌Boedels - blote eiendomsreg - waarde Estates - bare dominium - value‌

Vraag

Hoe word die waarde van die lewering van blote eiendomsreg bepaal?

Answer

Waar die blote eiendomsreg van ’n bate aan ’n verbonde persoon wat nie die volle bedrag BTW (indien dit betaalbaar was) as insetbelastingaftrekking sou kon eis nie, gelewer word, moet die ope markwaarde van die lewering ooreenkomstig artikel 3 bepaal word (sien artikel 10(4)). Waar die ope markwaarde van ’n lewering nie bepaal kan word deur vas te stel wat die vergoeding is wat so ’n lewering gewoonlik sou haal is nie, word dit bepaal ooreenkomstig ’n metode deur die Kommissaris goedgekeur. Vir dié doeleindes word die inkomstebelastingmetode om die waarde van die blote eiendomsreg van ’n bate te bepaal, ook vir BTW- doeleindes gebruik, maar die landbankwaarde mag nie gebruik word nie. Die blote eiendomsreg is gelyk aan die

markwaarde van die eiendom minus die waarde van die vruggebruik daarvan. Vruggebruik word ooreenkomstig

artikel 62(1)(a) van die Inkomstebelastingwet, soos volg bereken:

"... die jaarlikse waarde van die reg op die genot van die goed waarop so ’n reg gehou is of word, vir sover die begiftigde op bedoelde reg van genot geregtig word, teen twaalf persent oor die vermoedelike lewensduur van die skenker, of indien bedoelde reg van genot vir ’n korter tydperk as die lewensduur van die skenker gehou moet word, oor sodanige korter tydperk te kapitaliseer".

‌28/3/29 - 4 April 1993

‌343‌

‌Plaaslike besture - uitklaringsgelde Local authorities - clearance fees‌

Vraag

Is die heffing van uitklaringsgelde deur munisipaliteite en streeksdiensterade aan BTW onderhewig?

Answer

Uitklaringsgelde wat deur ’n munisipaliteit gehef word in verband met die uitreik van ’n uitklaringsertifikaat ten opsigte van eiendomsbelasting is nie aan BTW onderhewig nie. Die rede hieroor is dat die uitklaringsgelde wat gehef word, nie deel vorm van enige van die gelyste kategorieë van sake soos uiteengesit in Regulasie No. 2570 gedateer 21 Oktober 1991, saamgelees met item (cc)(A) van paragraaf (c)(iv) van die woordomskrywing van "onderneming" in artikel 1 nie.

Waar ’n streeksdiensteraad uitklaringsgelde hef, sal dit ingevolge die bepalings van artikel 7(1)(a) belasbaar wees, vir sover die bedrywighede van so ’n raad gefinansier word deur heffings soos in artikel 8(6)(b) vermeld.

‌28/3/9 - 26 Julie 1995

‌344‌

‌Short-term insurance: foreign insurers Korttermyn versekering: buitelandse versekeraars‌

Question

Is short-term insurance supplied by foreign insurers taxable for VAT purposes?

Answer

Where the foreign insurer complies with the requirements of section 4(3)(bis) and section 5 of the Insurance Act the foreign insurer is permitted to carry on that class of insurance business in the Republic and as such is consequently carrying on an enterprise in the Republic. The foreign insurer is obliged to be registered for VAT and must be registered in terms of section 23(1) if the total value of its taxable supplies exceeds the R300 000 threshold.

Where the conditions of section 4(3)(bis) and section 5 of the Insurance Act are not met, the foreign insurer will not be permitted to carry on that class of insurance business in the Republic, and for this reason and due to the fact that the acceptance of the policy (signing of the insurance document when cover commences) takes place at the foreign insurer’s place of business in the foreign country, it is accepted, for VAT purposes, that the foreign insurer is not carrying on an enterprise in or partly within the Republic. The services supplied by these insurers will therefore not be subject to VAT. Input tax is not claimable in respect of such premiums and indemnity payments are not subject to output tax in terms of section 8(8).

Where and to the extent that the insurance services are used for purposes other than for making taxable supplies, the service constitutes an "imported service" as defined in section 1. The recipient must therefore payover output tax in respect of such portion of the premiums in terms of section 7(1)(c) read with section 14.

‌28/3/19 - 7 July 1994

‌345‌

‌Exchange rate - time of supply Wisselkoers – tyd van lewering‌

Question

A local registered vendor exports goods and invoices his overseas customer in dollars. Another local registered vendor who supplies the goods to the exporting vendor also invoices that particular vendor in dollars. What rate of exchange should be used to convert the dollars to rands when determining the input and output amounts?

Answer

The rate of exchange used to effect the conversion must be determined in accordance with the time of supply rules. In terms of section 9(1) a supply is deemed to take place at the time an invoice is issued by the supplier or the time any payment of consideration is received by the supplier in respect of that supply, whichever time is earlier. This rule applies to both parties and if an invoice is then issued before any payment is received, both the supplier and the recipient will calculate their respective output and input tax in accordance with the rate of exchange on the date of the invoice.

‌28/8/3 - 30 September 1992 and amended on 1 September 2002

‌346‌

‌Deregistrasie - btw op erfgoed Deregistration - vat on inheritance‌

Vraag

’n Geregistreerde ondernemer (boer), wat grond geërf het voor die inwerkingtreding van BTW, word gederegistreer. Watter waarde sal by die deregistrasie aan die erfgrond waarop BTW ingevolge artikel 8(2) oorbetaal moet word, gekoppel word?

Answer

Ingevolge artikel 10(5) is die vergoeding in geld vir ’n lewering wat ingevolge artikel 8(2) plaasvind die minste van die koste van verkryging of die ope markwaarde van die lewering. Indien die ondernemer by die erf van grond geen vergoeding in geld aan die tersaaklike boedel betaal het nie, is die koste van verkryging van die grond minder as die ope markwaarde daarvan. Gevolglik vind die lewering by deregistrasie ingevolge artikel 10(5) teen geen waarde plaas nie en is geen BTW ingevolge artikel 8(2) op die lewering betaalbaar nie.

Indien die erfgenaam (ondernemer) by die erf van die grond egter wel ’n bedrag geld aan die tersaaklike boedel betaal het, maak daardie bedrag die koste van die grond uit. Indien dit minder as die ope markwaarde van die grond is, moet BTW op daardie bedrag oorbetaal word.

‌28/3/28 - 21 Februarie 1994

‌347‌

‌Lease of suite at sport stadium – entertainment Huur van losie by sportstadion - onthaal‌

Question

A vendor leases a suite at a sport stadium. To entertain his client base he periodically issues tickets (free of charge) to the suite to selected clients who make use of the facility to attend sporting events. Is the vendor entitled to an input tax deduction in respect of the lease of the suite?

Answer

The vendor is not allowed an input tax deduction in respect of the lease of the suite as he is supplying "entertainment", as defined in section 1, to his clients and the input tax deduction is therefore denied in terms of section 17(2)(a). In terms of the afore-mentioned section, the vendor is also not entitled to an input tax deduction in respect of food and beverages which he supplies to his clients in the suite.

‌28/3/4 - 17 February 1994

‌348‌

‌Apportionment in respect of services supplied to a non-resident Toedeling ten opsigte van dienste gelewer aan ‘n nie-inwoner‌

Question

What are the VAT implications on fees charged by an RSA attorney which relate to the preparatory services supplied to a non-resident client before he enters the RSA and litigation services supplied while the non-resident client is in the RSA?

Answer

The preparatory services supplied to the non-resident client before he enters the RSA is subject to VAT at the zero rate in terms of section 11(2)(l ). The portion of the fee charged by the RSA attorney which relates to services supplied while the non-resident client is in the RSA is subject to VAT at the standard rate.

The apportionment of what in practice will constitute a single fee can be done in terms of section 8(15).

‌28/5 - 23 February 1994

‌349‌

‌Export of scrap metal - zero rated supply Uitvoer van skrootyster - nulkoerslewering‌

Question

A scrap metal dealer exports scrap metal to a client in an export country. Prior to being exported, the scrap metal undergoes certain processing to convert it into a form suitable for foundry purposes. The company claimed an input tax credit on the purchase of the scrap metal as contemplated in paragraph (b) of the definition of "input tax" in section 1. Is the export of the scrap metal subject to VAT at the zero rate?

Answer

The proviso to section 11(1) prohibits the zero rate to be applied to the export of goods on which a notional input tax deduction has been made in accordance with the provisions of paragraph (b) of the definition of "input tax" as defined in section 1 read with section 16(3). The scrap metal has, however, undergone a change and is therefore not the same goods as those on which an input tax deduction was claimed as referred to above. The export thereof will consequently be subject to VAT at the zero rate in terms of section 11(1)(a) read with paragraph (a) of the definition of "exported" in section 1 and VAT Practice Note No. 2 of 1998.

‌28/8/3 - 3 February 1992

‌350‌

‌Input tax claimable in respect of incorrect amount on tax invoices

‌Insetbelasting aftrekbaar ten opsigte an foutiewe bedrag op belastingfakture

Question

Where a registered vendor knows that the VAT shown on any tax invoice which he holds is incorrect, due to the fact that the consideration for the supply should either be increased or decreased, what amount can be claimed by the vendor as an input tax deduction?

Answer

In terms of section 21(6), a registered vendor may, where he knows that any tax invoice which he holds is incorrect as a result of any one or more of the events specified in any of paragraphs (a), (b), (c) or (d) of section 21(1), only claim the correct input tax attributable to the invoice which has been issued to him but must notify the supplier that the value of the supply has been reduced or altered. The supplier in turn must confirm the position by issuing a credit or debit note. (Example: vendor A supplies goods for R114 to vendor B but incorrectly makes out a tax invoice for R1 140. B may only claim R14 input tax).

In terms of section 16(2) read with the definition of "input tax" in section 1, a vendor must be in possession of a tax invoice before he is entitled to claim an input tax deduction and may only do so to the extent of the actual amount of tax charged in terms of section 7(1)(a). It follows that the recipient may not claim more input tax than that shown on the tax invoice, even where he is aware that an incorrect (i.e. lesser) amount is shown on the invoice. The additional input tax deduction may be claimed only when a debit note in respect of the supply in question is received.

‌28/3/23 - 1 February 1993

‌351‌

‌Fertilizer - supplies, transport and application Kunsmis – lewering, vervoer en aanwending‌

Question

A vendor is producing prescription blended suspension fertilizers for sugar farmers, which crystallizes and settles out after only 2-3 days, and therefore they use specialized equipment to handle the product. The vendor provides an all inclusive package comprising of the transportation of the fertilizer to the farms and the application thereof to the fields. What are the VAT implications?

Answer

Provided the requirements of Part A of Schedule 2 are met, the nature of the fertilizer is such that specialized equipment is required to handle the product, and the vendor invoices the fertilizer sale at a net price per ton spread, the supply will be zero-rated in terms of section 11(1)(g).

‌28/2/1 - 13 January 1992 (Receiver of Revenue, Durban)

‌352‌

‌Damage to municipal property Beskadiging van munisipale eiendom‌

Question

Is the cost of damages to municipal property which is recovered from third parties subject to VAT?

Answer

Where the municipal property was used in one of the departments of which makes taxable supplies, the compensation received from third parties falls within the definition of "services" as defined in section 1 being the surrendering of a right. The amounts recovered are subject to VAT at the standard rate in terms of section 7(1)(a).

However, where such property forms part of a department which does not make taxable supplies, the recovery from third parties is not subject to VAT. The compensation received will in this instance be regarded as a supply of money as the department who supplies the service does not satisfy the requirements of paragraph (c) of the definition of "enterprise" in section 1.

‌28/3/9 - 1 March 1994 and amended on 1 September 2002.

‌353‌

‌Lewering van mediese dienste deur plaaslike owerhede Supply of medical services by local authorities‌

Vraag

Mediese dienste word deur ’n plaaslike owerheid gelewer en hulle ontvang ’n subsidie vanaf die Staat om die jaarlikse bedryfstekorte wat mag ontstaan te delg, as ’n deurlopende subsidie ten opsigte van die behandeling van staatspasiente. Wat is die BTW-implikasies ten opsigte van die hospitaaltariewe en subsidies ontvang?

Antwoord

Subsidies en hospitaaltariewe is nie aan BTW onderhewig nie, aangesien die lewering van mediese dienste deur plaaslike owerhede nie die bedryf van ’n onderneming uitmaak nie. (Sien die omskrywing van "onderneming" in artikel 1, en die uitsluiting van mediese dienste as ’n kategorie by wyse van Staatskoerant No. 13593 van 21 Oktober 1993.)

‌28/2/1 - 26 Junie 1992 (Ontvanger van Inkomste, Germiston)

‌354‌

‌Onteiening van grond - troosgeld Expropriation of land - solatium‌

Vraag

’n Ondernemer se grond word deur ’n openbare owerheid onteien. Die vergoeding wat die openbare owerheid aan die ondernemer betaal bestaan uit ’n bedrag vir die grond en ’n troosgeld. Is die troosgeld wat aan die ondernemer uitbetaal word aan BTW onderhewig?

Antwoord

Ingevolge die bepalings van artikel 8(21) sal die troosgeld wat aan die ondernemer betaal word deel vorm van die vergoeding wat die ondernemer ontvang vir die onteiening van sy grond en is dus ingevolge artikel 7(1)(a) aan BTW onderhewig.

‌28/3/16 - 20 Oktober 1993 en gewysig op 1 September 2002.

‌355‌

‌Ambulance services Ambulansdienste‌

Question

Will ambulance services supplied by a vendor or by local authorities be subject to VAT?

Answer

Where a vendor is carrying on a business of an "ambulance service" the exemption in terms of section 12(g) applies, as he is transporting fare-paying passengers. The charge which either the patient or his medical aid fund pays for the services is regarded as a fare. The Concise Oxford Dictionary defines fare as "Cost of passenger’s conveyance, passage money".

Ambulance services operated by local authorities have not been included in the list of taxable activities published in Government Notice 2570 of 21 October 1991 for two reasons - fare-paying passenger transport by road or rail is exempt from VAT and local authorities invariably finance ambulance services mainly out of property rates as such services are generally operated at a loss.

‌28/3/20 - 22 February 1994

‌356‌

‌Vervoerkoste van meubels van ’n verplaasde werknemer Cost of conveying furniture of a transferred employee‌

Vraag

’n Ondernemer verplaas ’n werknemer van een standplaas na ’n ander. Kan die ondernemer insetbelasting op die vervoerkoste van die werknemer se meubels eis?

Antwoord

Die ondernemer sal geregtig wees om ’n insetbelastingkrediet ingevolge die bepalings van artikel 16(3) ten opsigte van die vervoerkoste van meubels, wat verband hou met die oorplasing van ’n werknemer te eis, indien die werkgewer in besit is van ’n belastingfaktuur wat in sy naam uitgereik is en hy vir betaling van die volle bedrag (en nie net die BTW gedeelte nie) verantwoordelik is.

‌28/3/1 - 9 Februarie 1994

‌357‌

‌Remuneration received - part-time district surgeons and district pharmacists

‌Vergoeding ontvang – deeltydse distriksgeneeshere en distriksaptekers

Question

Will salaries received by part-time district surgeons and district pharmacists who are vendors from Provincial or

Local authority hospitals be taxable for VAT purposes?

Answer

Where the vendor renders his service in terms of his employment contract at his own premises using his own facilities and equipment, that portion of his services forms part of his "consideration" as defined in section 1, and is accordingly subject to VAT at the standard rate in terms of section 7(1)(a), notwithstanding the fact that PAYE and/or SITE has been deducted.

‌28/3/1 - 7 September 1994 and amended on 1 September 2002.

‌358‌

‌Agent/principal: consideration received on behalf of an overseas principal

‌Agent/prinsipaal: vergoeding ontvang namens ‘n buitelandse prisipaal

Question

Will the consideration received by an RSA-agent, for services rendered by the agent on behalf of the overseas

principal to local clients, be subject to VAT?

Answer

The services rendered by the RSA-agent on behalf of the overseas principal to local clients will not be subject to VAT, as the services are deemed to be rendered by the overseas principal. The fee or commission charged by the agent will however, be subject to VAT at the zero rate in terms of section 11(2)(l ).

However, should the consideration which the agent receives on behalf of the overseas principal, exceed the R300 000 threshold as specified in section 23(1), the overseas principal will be obliged to register as a vendor for VAT purposes in terms of the said section read with the definition of "enterprise" in section 1. The services supplied by the principal to the local clients, will in these circumstances, be subject to VAT at the standard rate in terms of section 7(1)(a). The fee or commission charged by the agent in this circumstance, will be subject to VAT at the standard rate in terms of section 7(1)(a).

‌28/3/2 - 9 May 1994 and amended on 1 September 2002.

‌359‌

‌Opvoedkundige dienste: boerderybedrywighede beoefen deur ’n landbouskool

‌Educational services: farming activities performed by an agricultural school

Vraag

Sal ’n landbouskool wat ’n boerdery bedryf as deel van sy opvoedkundige dienste verplig wees om vir BTW te

registreer en sal die verkoop van die landbouprodukte aan BTW onderhewig wees?

Antwoord

Die verkoop van die landbouprodukte vorm nie deel van die opvoedkundige dienste soos beoog in artikel 12(h) nie, en gevolglik sal die lewerings aan BTW onderhewig wees, indien die omset uit die verkoop van sodanige produkte die perk van R300 000 per jaar soos beoog in artikel 23(1) oorskry.

‌28/9/1/11 - 9 Mei 1994 en gewysig op 1 September 2002.

‌360‌

‌Plaaslike besture - interowerheidstoekennings Local authorities - inter authority grants‌

Vraag

Sal interowerheidstoekennings wat deur Openbare Owerhede aan Plaaslike Besture gemaak word as

nulkoerslewerings kwalifiseer?

Antwoord

Vir sover die toekennings uit "oordragbetalings" soos omskryf in artikel 1 bestaan en daar aan die bepalings van artikel 8(5) voldoen word, sal dit ingevolge artikel 11(2)(p) vir die nulkoers kwalifiseer in die hande van die betrokke plaaslike owerheid wat dit ontvang. Vir meer besonderhede verwys na mediaverklaring gedateer 18 Oktober 1993.

‌28/3/1 - 23 November 1994 en gewysig op 19 April 2002.

‌361

‌Plaaslike besture - lening vanaf Nasionale Behuisingskommissie

(NBK)

‌Local authorities - loan from the National Housing Committee (NHC)

Vraag

Is die verkryging van ’n lening, vanaf die Nasionale Behuisingskommissie deur Plaaslike Besture aan BTW

onderhewig?

Antwoord

Waar ’n munisipaliteit of ’n streeksdiensteraad ’n lening verkry vanaf die Nasionale Behuisingskommissie, sal die lening nie aan BTW onderhewig wees nie, aangesien ’n lening ingevolge die bepalings van artikel 2(1)(f) as ’n finansiële diens beskou word en dus ingevolge die bepalings van artikel 12(a) van BTW vrygestel is.

‌28/3/1 - 23 November 1994

‌362‌

‌Plaaslike besture - ontvangs van SDR subsidies Local authorities - receipt of RSC subsidies‌

Vraag

Is ’n subsidie wat deur ’n munisipaliteit vanaf ’n streeksdiensteraad ontvang word aan BTW onderhewig?

Antwoord

Waar ’n munisipaliteit ’n subsidie vanaf ’n streeksdiensteraad ontvang, sal die subsidie belasbaar wees teen die standaardkoers indien dit aangewend sou word deur die munisipaliteit ten opsigte van standaardkoerslewerings (soos uiteengesit in Regulasie No. 2570 gedateer 21 Oktober 1991, saamgelees met paragraaf (c) van die woordomskrywing van "onderneming" in artikel 1). Die munisipaliteit sal in hierdie omstandighede verplig wees om ’n belastingfaktuur ingevolge die bepalings van artikel 20(1) aan die streeksdiensteraad uit te reik, aangesien dit ’n belasbare lewering daarstel. Indien die subsidie aangewend sou word ten opsigte van nie-lewerings of vrygestelde lewerings, sal die subsidie nie in die munisipaliteit se hande belasbaar wees nie.

‌28/3/1 - 23 November 1994

‌363‌

‌Plaaslike besture - begraafplaasgelde Local authorities - cemetary fees‌

Vraag

Is die heffing van begraafplaasgelde deur munisipaliteite en streeks-diensterade aan BTW onderhewig?

Antwoord

Waar ’n munisipaliteit enige gelde hef ten opsigte van grafinligting, grafoprigting, grawe van grafte, verkoop van grafplotte asook die besprekings van grafte, sal sodanige fooie nie aan BTW onderhewig wees nie. Die rede hiervoor is dat die bedryf van ’n begraafplaas nie een van die belasbare aktiwiteite volgens Regulasie No. 2570 gedateer 21 Oktober 1991 is nie.

Waar ’n streeksdiensteraad fooie ten opsigte van enige van die bogenoemde aktiwiteite hef, sal dit ingevolge die bepalings van artikel 7(1)(a) belasbaar wees, vir sover die bedrywighede van so ’n raad gefinansier word deur heffings soos in artikel 8(6)(b) vermeld.

‌28/2/1 - 23 November 1994

‌364‌

‌Plaaslike besture - serwituutgelde Local authorities - servitude fees‌

Vraag

Is die heffing van serwituutgelde deur munisipaliteite en streeksdiensterade aan BTW onderhewig?

Antwoord

Waar ’n munisipaliteit een van die gelyste kategorieë van munisipale sake soos uiteengesit in Regulasie No. 2570 gedateer 21 Oktober 1991 (byvoorbeeld dorpsontwikkeling of boerdery) bedryf en serwituutgelde gehef word, sal die serwituutgelde wel belasbaar wees. Sou die serwituutgelde egter verband hou met oorbodige uitvalgrond, parke en deurlope, sal die serwituutgelde nie aan BTW onderhewig wees nie.

Indien ’n streeksdiensteraad serwituutgelde hef, sal dit aan die standaardkoers van BTW onderhewig wees, vir

sover die bedrywighede van so ’n raad gefinansier word deur heffings soos in artikel 8(6)(b) vermeld.

‌28/2/1 - 23 November 1994

‌365‌

‌Plaaslike besture - opsiegelde Local authorities - option fees‌

Vraag

Is die heffing van opsiegelde deur munisipaliteite en streeksdiensterade aan BTW onderhewig?

Antwoord

Waar ’n munisipaliteit een van die gelyste kategorieë van sake soos uiteengesit in Regulasie No.2570 gedateer 21 Oktober 1991 (byvoorbeeld dorpsontwikkeling of boerdery) bedryf waarop opsiegelde gehef word, sal die opsiegelde wel teen die standaardkoers ingevolge die bepalings van artikel 7(1)(a) belasbaar wees. Die tyd van lewering word ingevolge artikel 9(1) bepaal. Indien die opsiegelde wat gehef word egter verband hou met oorbodige uitvalgrond, parke en deurlope sal die opsiegelde nie aan BTW onderhewig wees nie.

Indien ’n streeksdiensteraad opsiegelde hef sal die opsiegelde ook belasbaar wees, ongeag op watter tipe grond die opsiegelde gehef word, vir sover die bedrywighede van so ’n raad gefinansier word deur heffings soos in artikel 8(6)(b) vermeld.

‌28/3/1 - 23 November 1994

‌366‌

‌Hospitalisation services - supplied by an employer to employees as a result of injuries on duty

‌Hospitalisasiedienste verskaf deur ‘n werkgewer aan werknemers as gevolg van beserings aan diens

Question

Will the hospitalisation service which an employer supplies to one of its employees who sustains an injury on duty, at either the employer’s hospital (i.e. on the employer’s premises) or at a private hospital, be regarded as a taxable (fringe) benefit and may the employer claim the input tax in respect of the cost relating thereto?

Answer

Where an employer supplies hospitalisation services to one of its employees, who sustains an injury on duty, at either the employer’s hospital (i.e. on the employer’s premises) or at a private hospital, the supply of such hospitalisation service will not be regarded as a taxable (fringe) benefit as contemplated in section 18(3) of the VAT Act. No benefit accrues or is supplied in favour of the employee as in terms of the provisions of the Compensation for Occupational Injuries and Diseases Act, 1993, the employer is compelled to provide medical care in these circumstances.

A further point is that the hospitalisation service is not treated as a benefit or advantage granted to the employee in terms of the provisions of the Seventh Schedule to the Income Tax Act as the service is not in respect of the employee’s employment by his employer, but as a result of an injury sustained on duty and is thus not taxable.

An important point to be noted is that part of the hospitalisation service falls within the ambit of the definition of "entertainment" in section 1 of the VAT Act, namely, the provision of food, beverages and accommodation. As the provisions of section 17(2)(a) of the VAT Act specifically deny an input tax deduction in respect of entertainment, the employer would not be entitled to claim an input tax deduction in respect of such expenditure [i.e. food, beverages, the construction/building costs of the wards (accommodation) and the kitchen]. However, the employer will be entitled to claim an input tax deduction in respect of the medical expenditure (i.e. medicine, operations, medical practitioners as well as the building and maintenance of theatres and consulting rooms) incurred in respect of the treatment of the employee’s injuries. The input tax has a direct bearing on the making of taxable supplies. See rulings 367 and 368.

‌28/3/7 - 23 November 1994

‌367‌

‌Hospitalisation services supplied by an employer to an employee otherwise than as a result of an injury on duty

‌Hospitalisasiediens verskaf deur ‘n werkgewer aan ‘n werknemer anders as gevolg van ‘n besering aan diens

Question

Will the medical services rendered by an employer (vendor) to its employees, otherwise than as a result of an injury on duty, be regarded as a fringe benefit and will the employer be entitled to claim an input tax deduction in respect of the cost relating thereto?

Answer

Where an employer renders hospitalisation services to one of its employees, otherwise than as a result of an injury on duty, at the employer’s hospital, the supply of these services will not be treated as a fringe benefit as contemplated in section 18(3) of the VAT Act. The reason being that paragraph 10(2)(c) of the Seventh Schedule to the Income Tax Act places no value on the service, if the benefit can be enjoyed by the employees only at their place of work. Should the employer have the service rendered by a private hospital to one of its employees, at no consideration or for a consideration in money which is less than the open market value of the supply, the service will still not be treated as a fringe benefit as contemplated in section 18(3) of the VAT Act. The reason being that paragraph 10(2)(d) of the Seventh Schedule to the IT Act places no value on the supply of the services, if the costs to the employer in respect of the treatment of the employee, in aggregate does not exceed the sum of R500 during the year of assessment. However, should the R500 limit per year of assessment be exceeded, the excess would be taxed as a fringe benefit in terms of the provisions of section 18(3) of the VAT Act. The employer will be entitled to claim an input tax deduction in respect of the medical expenditure (excluding entertainment) incurred in respect of the treatment of the employee’s injuries, irrespective of whether the said hospitalisation service is taxed as a fringe benefit.

A further point to be noted is that if the employee pays his employer any monetary amount, or if any monetary amount is recovered by the employer from the employee in respect of the hospitalisation service, such amount will form part of "consideration" as defined in section 1 of the VAT Act and will therefore be taxable in the hands of the employer in terms of the provisions of section 7(1)(a) of the VAT Act. The provisions of section 10(21) of the VAT Act must also be borne in mind if the consideration has a direct bearing on "entertainment". Where a deduction of input tax is denied the amount received by the employer in respect of the provision of "entertainment" will not be taxed.

Although medicine is, strictly speaking, goods and not a service and is thus treated as a fringe benefit in terms of paragraph 2(a) of the Seventh Schedule to the IT Act, it is accepted that where the medicine is supplied as part and parcel of a service (being an integral part of the service) the medicine will not be taxable in terms of the preceding paragraph. (See rulings 366 and 368.)

‌28/3/7 - 23 November 1994

‌368‌

‌Hospitalisation services supplied by an employer to relatives of employees

‌Hospitalisasiedienste verskaf deur ‘n werkgewer aan werknemers se familielede

Question

Will the medical services, rendered by an employer to relatives of employees be regarded as a fringe benefit and

will the employer be entitled to claim an input tax deduction in respect of the cost relating thereto?

Answer

In terms of the provisions of paragraph 16(1)(a) of the Seventh Schedule to the Income Tax Act the supply of a benefit or advantage to a relative of an employee is deemed to be made to the employee. Where an employer thus supplies a hospitalisation service to a relative of an employee at the employer’s hospital, for no consideration or for a consideration in money which is less than the open market value of the supply, the hospitalisation service will not be treated as a fringe benefit as contemplated in section 18(3) of the VAT Act. The reason being that paragraph 10(2)(c) of the Seventh Schedule to the IT Act places no value on the service, if the benefit can be enjoyed by relatives of the employee only at the work place of the employee.

Should the employer arrange for the services to be provided by a private hospital to a relative of the employee, the supply of the services will not be treated as a fringe benefit as contemplated in section 18(3) of the VAT Act, as paragraph 10(2)(d) of the Seventh Schedule to the IT Act places no value on the supply of the service, if the medical expenditure in respect of the treatment of the employee (including his relatives) to the employer in aggregate does not exceed the sum of R500 during any year of assessment. However, should the limit of R500 per year of assessment be exceeded, the excess will be taxed as a fringe benefit in terms of the provisions of section 18(3) of the VAT Act. The employer will only be entitled to claim an input tax deduction in respect of the medical expenditure (excluding entertainment) incurred in respect of the treatment of the employee’s relatives, irrespective of whether the hospitalisation service is taxed as a fringe benefit.

Where the employee or his relatives compensate the employer for the supply of the service, such amount will be

taxable in the hands of the employer in terms of the provisions of section 7(1)(a) of the VAT Act.

In view of the fact that medical treatment by state or provincial hospitals is not subject to VAT, no input tax deduction can be claimed by the employer if the employee or his relative is treated in such an institution. (See rulings 366 and 367.)

‌28/3/7 - 23 November 1994

‌369‌

‌Sale - rehydrated garlic - standard rated supply Verkoop – gerehidreerde knoffel – standaardkoers lewering‌

Question

Will the sale of rehydrated garlic be taxable at the standard or zero rate?

Answer

Dehydrated garlic, which is rehydrated has been subjected to a process other than that for the purpose of preserving such vegetable in its natural state, and may therefore no longer be supplied at the zero rate in terms of section 11(1)(j), but is taxable at the standard rate in terms of section 7(1)(a).

‌28/3/6 - 10 July 1995.

‌370‌

‌Change in use of a motor vehicle Verandering in gebruik van ‘n motor voertuig‌

Question

An undertaker buys a station wagon which he intends to convert into a hearse. Will he be entitled to an input tax deduction on the acquisition thereof as well as on the conversion, and what would the tax situation be should the undertaker decide to buy a station wagon after it has been adapted for use as a hearse?

Answer

`In terms of section 17(2)(c), a vendor is not entitled to deduct any amount of input tax in respect of the supply of a motor car, as defined in section 1, to himself. The subsequent conversion of the motor car to a hearse does not change the nature of the initial supply and does therefore not entitle the vendor to an input tax deduction in respect of the initial cost of acquisition of the motor car. The vendor will be entitled to an input tax deduction in respect of the cost of adapting the motor car for use as a hearse. This will, however, not have the effect of a resale of the vehicle being a taxable supply. As a deduction of input tax on the initial supply of the motor car was denied in terms of section 17(2), the resale of the adapted vehicle will, in terms of section 8(14), be deemed to be a supply otherwise than in the course or furtherance of the vendor’s enterprise.

Where an undertaker buys a station wagon after it had been adapted for use as a hearse, the undertaker will not be entitled to an input tax credit as the vehicle was originally constructed for the carriage of passengers and therefore remains a "motor car" as defined. The exclusion contained in paragraph (d) of the definition of "motor car" in section 1, only refers to vehicles constructed for a special purpose and not to vehicles adapted for a special purpose.

‌28/3/13 - 15 August 1995

‌371

‌Collection of embryos - Export

‌Question:

Insameling van embrios - Uitvoer

A registered vendor performs a service of collecting livestock embryos, as agent on behalf of foreign clients.

Will the collection of embryos for export purposes be subject to VAT at the zero rate in terms of section 11(2)(l )?

Answer:

The collection of embryos of livestock for export purposes are subject to VAT at the zero rate in terms of section 11(2)(l ). The section provides that output tax shall be levied at the zero rate where the services are supplied to a person who is not a resident of the Republic; not being services which are directly (i) in connection with land or any improvement thereto situated inside the Republic; or (ii) in connection with movable property situated inside the Republic at the time the services are rendered; except movable property which is exported to the said person subsequent to the supply of such services.

Persons supplying the embryos may supply them at a zero rate where the embryos are delivered to a Designated Commercial Port as envisaged in paragraph 1.4 of Part 1 of the VAT Export Incentive Scheme read in conjunction with Part 2 and paragraph (d) of the definition of "exported" in section 1.

‌1 September 2002

‌372

‌Supply of Maize grit

‌Question:

Lewering van Mielie gruis

Is the sale of maize grit subject to VAT at the standard or zero rate ?

Answer:

The supply in its raw state (uncooked), of "maize grit", being whole mealies which are crushed, the fat removed and then water added, cannot be zero-rated in terms of the provisions of section 11(1)(j). The reason being that maize grit is, firstly, not included in any of the items of Part B of Schedule 2 and, secondly, in this case it has been further prepared and/or processed. Furthermore, maize grit cannot be regarded as mealie rice (Item 4 of Part B of Schedule 2), because the fineness between them differs.

‌1 September 2002

‌373

‌Unrefined sunflower oil

‌Question:

Ongeraffineerde sonneblom olie

Is the supply of unrefined sunflower or vegetable -oil subject to VAT at the standard rate?

Answer:

The supply of unrefined sunflower or vegetable -oil is subject to VAT at the standard rate. It does not qualify for zero rating in terms of item 14 of Part B of Schedule 2, read with section 11(1)(j). The zero rate applies only to vegetable oil, excluding olive oil, marketed and supplied for use in the process of cooking food. Unrefined sunflower oil must be processed before it can be used in the cooking process.

‌1 September 2002

‌374

‌Township development – access road

‌Dorpsontwikkeling - toegangspad

Question:

Will a Local Authority be entitled to claim an input tax deduction on the cost of constructing an "access road", in

respect of "Township Development"?

Answer:

The term "access road", as used by a local authority in regard to a township development project, means:

Specifically required to link the township development to an existing infrastructure; and

is constructed in conjunction with the township development.

A local authority will, in terms of the provisions of section 16(3), read in conjunction with sections 16(2), 17(1) and 20, be entitled to claim an input tax deduction on the cost of constructing an "access road" which links a proposed township to an existing infrastructure.

‌1 September 2002

‌375

‌Sale of Paprika

‌Question:

Verkoop van Paprika

Is the supply of paprika subject to VAT at the zero rate?

Answer:

Item 19 of Part B of Schedule 2 refers to edible legumes and pulses of leguminous plants. The Dictionary describes these terms as follows: Pulses: seeds of papilionaceous plants; Legumes: long , dry dehiscent fruit produced by leguminous plants (pods); and Pods: the fruit of any leguminous plant, consisting of a long two- valved case that contains several seeds and splits along both sides when ripe.

It is clear that paprika is not a legume. Fresh paprika, however, falls under the stipulations of Item 12 of Part B of Schedule 2 which reads as follows:- " Vegetables, not cooked or treated in any manner except for the purpose of preserving such vegetables in their natural state, but excluding dehydrated, dried, canned or bottled vegetables." The supply of fresh paprika is thus subject to VAT at the zero rate.

The supply of dried paprika is, however, subject to VAT at the standard rate.

‌1 September 2002

‌376

‌Till- rolls stored on electronic medium

‌Kasregistersrolle bewaar op elektroniese medium

Question:

Under what circumstances will permission be granted to a registered vendor to retain his till- rolls on compact

discs (CD’s)?

Answer :

Permission to retain till- rolls on CD’s will be granted in terms of section 55(4)(a). The registered vendor is obliged in terms of section 55(4)(b), to retain the original till-rolls for a period of one year from the end of the tax period to which they relate.

‌1 September 2002

‌377

‌Soya beans

‌Question:

Soya bone

Is the supply of raw Soya beans subject to VAT at the standard rate if it is used as animal feed?

Answer:

The rate of zero per cent applies under the provisions of section 11(1)(j), subject to the provisions of item 6 of Part B of Schedule 2, in respect of the supply of raw Soya beans. The supply of, unprocessed and unprepared Soya beans is a zero-rated supply, irrespective of the purpose for which the soya beans are purchased and whether the purchaser is registered as a vendor for VAT purposes or not.

If the Soya beans are processed further by the vendor and sold as animal feed to a farmer who does not have a valid notice of registration as required in terms of the stipulations of paragraph 2 of Part A of Schedule 2, then the supply of animal feed (Soya beans) will in terms of section 7(1)(a) be subject to VAT at the standard rate.

‌1 September 2002

‌378

‌Requirements for acceptance of scanned documents Vereistes vir die aanvaarding van geskandeerde dokumentasie‌

Question:

What are the requirements for acceptance of scanned documents for VAT purposes?

Answer:

Permission has been granted for computer scanning of documents, provided that the following requirements are

met:

A proper audit trail is maintained.

The necessary equipment to reproduce paper copies of such documents will always be available at the vendor’s premises.

Due to the fact that a copy of the original documents is made, paper copies of the documents scanned should be clearly marked as "copy".

An effective index should be maintained in respect of the scanned documents.

The database does not permit any alteration or manipulation of the scanned documents.

The scanned and subsequently printed documents should be of a good quality and allow for easy reading.

The original documents must be retained for a period of 12 months from the beginning of tax period to which they relate [section 55(4)]. However, the documents saved in electronic form must be retained for a period of 5 years as envisaged in section 55(3).

‌1 September 2002

‌379

‌Sale of palm- oil

‌Question:

Verkoop van Palm-olie

May the sale of palm-oil (a vegetable oil), "marketed and supplied for use in the process of cooking food" and

which is in a semi-solid or a solid form at room temperature, be treated as a zero-rated supply for VAT purposes?

Answer:

The sale of palm-oil (a vegetable oil) which is semi-solid or solid at room temperature, will be regarded as a standard-rated supply for VAT purposes. A literal interpretation is applied to "vegetable oil" as set out in Item 14 of Part B of Schedule 2. This has the effect that palm-oil, in a hardened or solid, or semi-solid state, is considered to be a fat and any derivative thereof remains a fat.

‌1 September 2002

‌380

‌Commission on Lotto ticket sales

‌Question:

Kommissie op verkoop van Lotto kaartjies

Will the commission on Lotto ticket sales be subject to VAT at the standard rate?

Answer:

In terms of the provisions of sections 7(1)(a) and 16(4), registered vendors are liable to account for output tax at the standard rate on the commission they, as agents, receive for the sale of Lotto tickets on the Lottery operator’s behalf.

‌1 September 2002

‌381‌

‌Sale of Coriander – Foodstuff

‌Question:

Verkoop van Koljander - Voedingsmiddele

Will the supply of coriander be subject to VAT at the zero rate?

Answer:

The supply of whole coriander is subject to VAT at the standard rate. Coriander does not qualify as a zero-rated supply in terms of the provisions of Part B of Schedule 2, read with section 11(1)(j). The reason is that coriander is not a vegetable nor is it a leguminous plant.

‌1 September 2002

‌382‌

‌Health Levy- received by Body Corporate

‌Gesondheisheffing – ontvang deur ‘n regspersoon

Question:

Members of a body corporate pay two types of levies to the body corporate. The levies consist of the normal type of levy paid for rates, maintenance, etc., while the second levy is paid for the use of medical facilities available on the premises. Both levies are fixed monthly amounts.

Will the payment of a health levy be subject to VAT?

Answer:

In terms of the provisions of section 12(f), the supply of any services to any of its members in the course of the management of a body corporate, as defined in section 1 of the Sectional Titles Act, 1986,will be exempt from VAT, where the cost of supplying such services is met out of contributions levied by such body corporate. The normal levy paid is in respect of the management and upkeep of the physical assets of the body corporate.

The health levy is paid for an additional service that is provided to the members and which cannot be regarded as being for the management and upkeep of the physical assets. As the health levy does not fall within the ambit of section 12(f) of the Act, it is taxable at the standard rate, in terms of the provisions of section 7(1)(a) of the Act.

‌1 September 2002

‌383‌

‌Lottery prizes

‌Question:

Loterypryse

What are the VAT implications in respect of the selling of Lottery tickets? Who will be entitled to claim an input

tax deduction on amounts paid out as prizes or winnings?

Answer:

Section 8(13), provides that a person with whom a bet is placed (for instance the operator of the national lottery) is deemed to supply a service to the person who places the bet with him. The operator of the lottery is therefore liable for output tax equal to the tax fraction of the amounts received as consideration for the sale of lottery tickets.

In terms of section 16(3)(d), the operator of the lottery is entitled to an input tax deduction equal to the tax fraction of amounts paid out by him as prizes or winnings. In addition, the operator is also entitled to an input tax deduction equal to the tax fraction of amounts paid to the National Lottery Distribution Trust Fund. In this way only the amount retained by the operator of the lottery, i.e. his value added, is taxed.

Prize winners are not liable to account for output tax in respect of prizes received from the operator of the national lottery, as any activity carried on by a natural person essentially as a private or recreational pursuit or hobby, or any activity carried on by a person other than a natural person and which would, if it were carried on by a natural person, be carried on essentially as a private or recreational pursuit or hobby, shall not be deemed to be the carrying on of an "enterprise" as defined in section 1.

However, where the person buying a lottery ticket is registered as a vendor in respect of the supply of betting services contemplated in section 8(13), (for instance a person with whom bets are placed or who runs a competition in respect of which tickets are sold) that person will, in respect of prizes won, be liable to account for output tax, in terms of section 8(13A), unless paragraph (iv) of the proviso to the definition of "enterprise" applies in his particular circumstances.

‌1 September 2002

384

‌Purchases made by employees on behalf of a vendor

‌Question:

Aankope deur werknemers names ‘n ondernemer

May a registered vendor claim an input tax deduction on purchases made by employees, on his behalf?

Answer:

A vendor, is entitled to claim an input tax deduction on expenses incurred in the course or furtherance of his

enterprise even if the tax invoice is issued in the name of his employee, provided that :

the registered vendor pays for the cost on the account or, alternatively, reimburse the employee;

the registered vendor retains the tax invoice which was issued to the employee; and

the registered vendor maintains sufficient records to adequately identify the nature of the costs incurred.

The employee acts in the capacity of agent for the vendor in terms of section 54(2).

‌1 September 2002

‌385‌

‌Brothel and Sex workers - Services Bordeel en Sekswerkers - Dienste‌

Question

A vendor operates a brothel which supplies rooms and certain other services to sex workers. The clients pay the sex workers who retain two-thirds and pay over one-third to the brothel keeper. Must the brothel keeper declare output tax on the full amount or only on the one-third paid over by the sex workers?

Answer

The relationship between a sex worker and the owner of a brothel or similar institution is invariably that of

employer and employee. Employees’ tax must be deducted from the amount which is retained by the sex worker.

The full amount received by the brothel keeper (reflecting 3/3), whether paid directly to the vendor or to the employees concerned, constitutes "consideration" as defined in section 1. The vendor is accordingly, in terms of the provisions of sections 7(1)(a) and 16(4), liable to account for VAT at the standard rate on the full amount received which is attributable to the services supplied, reflecting 2/3, which is kept by the sex worker, as well as on the 1/3 paid to the brothel keeper for the renting of the rooms and other services.

The view is held that the manner in which sex workers and such establishments operate would, in any case,

render them liable for registration as a body of persons in terms of section 50A of the Act.

‌1 September 2002

‌386‌

‌Sub-letting of buildings Onderverhuring van geboue‌

Question

Company A lets out a block of flats to Company B who in turn sub-lets the building to third parties. The lease

provides that the flats will be used for residential purposes. Will the rent between A and B be subject to VAT?

Answer

Company A is supplying Company B with “dwellings” as defined in section 1. Provided Company B lets out the flats to persons as dwellings, the rent payable by Company B to Company A will be exempt from VAT in terms of section 12(c). If Company B lets the block of flats partly as dwellings and partly as offices, the rental charge from Company A to Company B must be apportioned in terms of section 10(22) between the exempt supply (i.e. the letting of the dwellings) and the taxable supply (i.e. the letting of the offices). Company B must also levy VAT on the supply of the offices.

‌1 September 2002

(Corrected 1 September 2003) PF2332/sn

‌387‌

‌Caravan- input tax deduction

‌Question:

Karavaan - Insetbelastingaftrekking

Is a registered vendor entitled to claim an input tax deduction on a caravan?

Answer:

A vendor is entitled to claim the full amount, being the tax fraction of the purchase price of the caravan, as an input tax deduction in terms of the provisions of sections 16(2), 16(3), 17(1) and 20. The vendor is entitled to an input tax deduction in respect of the cost of alterations to the caravan to increase the workspace and to make it more suitable for carrying equipment.

The fact that the caravan may be used for a dual purpose, namely to be used firstly, as accommodation for employees, which falls within the definition of "entertainment" in section 1, and, secondly, for use as a mobile office for employees, does not necessitate apportionment of the input tax claim. The reason being that the provisions of section 17(2)(a)(ii) entitles the vendor to claim the full input tax deduction and that this accommodation does not fall within the provisions of section 12(c), read in conjunction with the definition of "dwelling" in section1.

‌1 September 2002

‌388‌

‌De-registration- Fixed property- Loan account

‌Question:

De-registrasie – Vaste eiendom - Leningsrekening

An individual, Mr A, is registered for VAT purposes and owns commercial fixed property that is used for making taxable supplies. Mr A is also a director and shareholder of Company B (Pty) Ltd, a vendor, for which he derives director fees.

Mr A subsequently sells the property to Company B (Pty) Ltd in a deal that does not constitute a going concern. No payment is made at the time of the transfer of the property and a loan account in the books of Company B (Pty) Ltd reflects the amount as payable to Mr A.

Will Mr A be entitled to de-register without making any adjustments in respect of the property?

Answer:

The loan account is regarded as a right, capable of assignment, cession or surrender in terms of the provisions of

section 8(2).

Mr A is therefore, liable to declare output tax on the amount of the loan account which reflect the sale of the

commercial fixed property.

Company B (Pty) Ltd, is in terms of section 16(3)(a)(iiA), only entitled to claim an input tax deduction in respect of taxable supplies made to it under sales concluded on or after 6 June 1996 and in respect of which the provisions of section 9(3)(d) apply, to the extent that during that tax period, all consideration which has the effect of reducing or discharging any obligation relating to the purchase price for those supplies has been paid.

‌1 September 2002

‌389‌

‌Film production company- entertainment- catering services Film produksie maatskappy – onthaal - spysenieringsdienste‌

Question:

A film production company, making advertisements for television and film, supply catering services for crew members, clients and production staff during the production of these commercials.

May a film production company claim an input tax deduction on the supply of catering services to crew members,

clients and production staff?

Answer

In terms of the provisions of section 17(2), a vendor is not entitled to claim an input tax deduction in respect of goods acquired by such vendor, to the extent that such goods or services are acquired for the purpose of entertainment.

The disallowance of an input tax deduction does not apply, in terms of proviso (i) to section 17(2)(a), in cases where the goods or services are acquired for making taxable supplies in the ordinary course of an enterprise which continuously or regularly supplies entertainment for a consideration which covers both the direct and indirect cost of the entertainment ,or the open market value thereof.

In terms of the second proviso to section 17(2)(a), a vendor is entitled to claim an input tax deduction where the goods or services are acquired in respect of the personal subsistence of employees or office holders, who, by reason of their duties, are obliged to spend at least one night away from their usual place of residence and usual working-place.

Foreign crew members will only be regarded as employees or office holders if an employment contract has been

entered into between the parties concerned. In such cases, proviso (ii) to section 17(2)(a) will be applicable.

The film production company is entitled to claim an input tax deduction in respect of personal subsistence incurred by local crew members who are away from their usual place of residence and their usual working-place while involved in the production of a film or making of an advertisement on location.

‌1 September 2002

‌390‌

‌Mining - Input tax deduction in respect of hostel charges

‌Mynbou – Insetbelastingaftrekking in verband met losieshuis onkostes

Question:

Company A (a shaft- sinking company) is sinking shafts for company B (a mining company). Company A’s employees who are involved in the shaft- sinking process stay in hostels situated on the mine premises. They are required to stay there for longer than 28 days.

The company that runs the hostel is company C which invoices Company B for the total cost of the hostel charge.

Company B then issues company A with an invoice for the exact amount, as charged by Company C.

May company A claim an input tax deduction in respect of the hostel charges for its employees, should VAT have

been levied?

Answer:

A vendor’s supply of accommodation mainly for the benefit of its employees in a hostel on its premises constitutes an exempt supply in terms of section 12(c). As Company C is not providing accommodation to its employees but to Company A’s employee such supply is regarded as the supply of accommodation which falls within the definition of "entertainment" in section 1. Being entertainment, the supply is excluded from the ambit of section 18(3) and therefore it cannot be said that the supply is being used by Company A for purposes of making taxable supplies. Hence, an input tax deduction cannot be claimed in terms of section 17(2)(a).

However, proviso (ii) to section 17(2)(a) of the Act permits an input tax deduction in respect of the personal subsistence of employees in respect of any night that such employees are, by reason of the vendor’s enterprise, obliged to spend away from their usual place of residence and usual working place.

‌1 September 2002

‌391‌

‌Question:

Transfer Fees on Soccer Players

What are the VAT implications where a soccer player is transferred from one club (vendor) to the other (vendor)?

Answer:

Under rules established by Fèdèration Internationale de Football Association (FIFA), a player that is contracted to a club can have his contract sold to another club through a process known as the transfer system. This system requires a club buying a player to pay compensation to the club surrendering its player. Simply put, a transfer fee is an amount paid by one club to another for the services of a player. Usually the player is also given a percentage of his transfer fee, but this is negotiated between the player and the club which transfers him (his old club).

In light of the above, it is apparent that what is being sold is not the player, but his services. The surrendering/granting of the right by the selling club to the purchasing club is the supply of a service, and accordingly, the compensation paid by the purchasing club constitutes consideration. Consequently, VAT at standard rate should be levied in terms of section 7(1)(a) of the Value-Added Tax Act, 1991 by the vendor when the services of the player are sold. As the player is an employee and is not carrying on an enterprise he cannot levy VAT on the percentage of the transfer fee his old club pays to him.

These services ) when they arewill be subject to VAT at zero rate in terms of section 11(2)( supplied to a foreign

club who is not a resident of the Republic.

‌30 September 2003

‌392‌

‌Production of film/videos for a foreign company Vervaardiging van films/video’s vir ‘n buitelandse maatskappy‌

Scenario

A RSA vendor (a production company) provides a support network to the film, photographic and other related industries. An overseas client contacts a RSA vendor and enquires of any suitable locations to produce a commercial in the Republic. Once approved, the overseas client arrives in the Republic. The RSA vendor provides the cast of actors, models, film production etc. within the Republic and conducts the commercial for the overseas client.

Question

What are the VAT implications for the RSA vendor?

Answer

The RSA vendor will in terms of the provisions of sections 17(1) of the Act be entitled to claim input tax on the expenses incurred relating to the production of the film/video e.g. the hiring of actors, production cost, hiring of a venue, etc.

The rights in any film, video production or other intellectual property vests in the “author” (i.e. the production company) in terms of the Copyright Act, 1978. It follows that where such material is produced by a South African vendor for a foreign client, the transfer of these rights to the foreign client is subject to VAT at the zero rate in terms of section 11(2)(m), where and to the extent that such rights are for use outside South Africa. The RSA vendor therefore issues a zero-rated tax invoice to the overseas client.

‌14/8/2003 – 28/2/

‌393‌

‌Goods exported – Re-imported Goedere uitgevoer – Heringevoer‌

Question

What are the VAT implications in respect of goods produced in South Africa that were previously exported but are now returned because their quality is unacceptable?

Answer

Item No. 409.02/00.00/01.00 in paragraph 8 of Schedule 1 to the Act, read with section 13(3) of the Act, provides a VAT exemption in respect of the re-importation of goods (including packing containers) where such goods are produced or manufactured in South Africa, exported and subsequently returned to or brought back by the exporter or any other party into South Africa. In addition, the goods must not have been subjected to any process of manufacture or manipulation, or any change of ownership having taken place subsequent to their exportation from South Africa. The goods must be identified on re-importation as being the same goods as those originally exported.

There is, nevertheless, a proviso to this exemption, which states that the exemption is not applicable if the supply of the goods was charged with VAT at the rate of zero percent in terms of section 11 of the Act or if a refund was granted in terms of section 44(9). In this instance, the return of the goods will be subject to VAT in terms of section 7(1)(b) of the Act.

‌28/8/2 – 13 December 2002

‌394‌

‌Activity set up for a specific purpose Aktiwiteit opgestel vir ‘n spesifieke doeleinde‌

Scenario

A special purpose vehicle (SPV), i.e. a trust is created for the sole purpose of financing an asset. The asset is supplied to the SPV and is on-supplied to another vendor (B) under an instalment sale agreement over a period of 5 years. Finance charges are earned by the SPV. The SPV incurs administration costs at the end of each financial year. The asset is supplied by the SPV to B for an economic, market related consideration.

Question

What will the VAT implications be for the SPV and should the SPV remain registered if this is its only activity?

Answer

The Act, defines an “enterprise” as an enterprise (“business” per dictionary definition) or “activity” (per dictionary definition) which is carried on continuously or regularly and in terms of which goods or services are supplied to another person for a consideration.

The SPV will be carrying on its business and activity for a period of 5 years, even though it will make only 1 supply in the carrying on of its enterprise. The trust will therefore remain on register for VAT purposes until the contract has run its course.

The repayments over the period represent both capital and interest. The provisions of sections 9(3)(c) and 10(6)

determine the time and the value of the supply.

The VAT on the purchase of the goods which the SPV will dispose of under an instalment sale agreement is directly attributable to the making of taxable supplies and is claimable in full (see definition of “input tax” in section 1 and 16(3)).

The amount of VAT incurred on the administration charges (and any other indirect expenses) must be

apportioned in terms of section 17(1) to determine what portion may be claimed as input tax.

‌28/3/26 – 27 May 2003

‌395‌

‌Imports – temporary– repair or service Invoere – tydelik – herstel of diens‌

Question

What are the VAT implications as well as the procedures to be followed where goods are imported temporarily into South Africa for the specific purpose of being serviced and repaired?

Answer

VAT implications

Goods imported temporarily into the Republic for the specific purpose of being serviced and / or repaired can be serviced and / or repaired by the South African vendor at the zero-rate in terms of section 11(2)(g) of the VAT Act. Any parts or components used in the service and / or repair may also be zero-rated in terms of section 11(1)(b). The services supplied directly in respect of goods temporarily admitted into the RSA from an export country which are exempt from VAT on importation under Item no.’s 470.02/00.00/01.00 or 470.02/00.00/02.00 in paragraph 8 of Schedule 1, may be supplied at the zero rate provided the VAT262 form is duly completed and the necessary procedures complied with.

The VAT262 form authorises the SA VAT registered vendor performing the service and / or repair to apply the zero rate of VAT to the consideration charged for the services supplied by the vendor.

Procedures

The movable goods must be declared on the relevant import declaration form, (i.e. a CCA1 / DA500), to the RSA Customs as a temporary import for the purposes of being serviced or repaired.

The importer must complete a VAT262 form obtainable from the RSA Customs / SARS Internet

The RSA Customs official must complete the applicable sections of the VAT262.

The goods must be verified against the description on the VAT262 form. The RSA Customs official must stamp the form.

A provisional payment may be required as security for the VAT and a DA70 form will be issued.

The RSA Customs official will retain the original page and return the 1st , 2nd and 3rd copy of the VAT262 form, together with the relevant copies of the CCA1 or DA500 declaration form to the importer.

The remaining copies of the VAT262 form must be handed to the RSA vendor who will perform the repair and / or service and complete Part B of the form.

The RSA vendor must retain the 1st copy and return the 2nd and 3rd copies to the importer. The forms must then be handed to the RSA Customs on exiting South Africa, together with the permanent export declaration form, (i.e. CCA1 / DA550)..

The 2nd copy will be checked to the original that was retained by Customs on importation to confirm that the same goods are being exported.

This ruling only applies to goods specifically admitted temporarily for service and / or repair and not to goods

temporarily admitted for further processing or manufacture.

‌28/8/1 – 27/2/2003

‌396‌

‌Capital goods – close corporationKapitaalgoed – Beslote korporasieScenario

‌A vendor which is a Close Corporation (CC) needs to purchase a light delivery vehicle for its enterprise.

Question

What are the VAT implications if:

The vehicle is acquired in the name of the member?

The vehicle is acquired and subsequently supplied by the CC?

The CC acquires the right of use of the vehicle from the member?

Answer

Vehicle acquired by the member

In the circumstances where a member acts in his / her own capacity, the contract will be concluded between the member and the financial institution. The member is not acting as agent on behalf of the CC. The vehicle is registered in the name of the member and not in the name of the CC. No input tax deduction is claimable by the CC, the reason being that the vehicle does not belong to the CC and the CC has not acquired the vehicle. In the case of registerable goods, it is an absolute requirement that the goods are registered in the name of the person (CC) in order to claim the input tax paid.

Vehicle acquired by the CC

Where a member acts on behalf of a CC, the member represents the CC in the signing of the contract and the member does therefore not conclude the contract in his/her own capacity. The CC is, in these circumstances, the purchaser of the light delivery vehicle and the vehicle will be registered in the name of the CC. The CC is entitled to claim an input tax deduction in so far as the vehicle is used in the course or furtherance of the CC’s enterprise. Should the CC sell the vehicle it is obliged to declare output tax in terms of the provisions of section 7(1)(a). The CC will in terms of the provisions of section 8(2), be obliged to declare output tax on the vehicle upon de- registration. However, should the vehicle be repossessed, the CC is deemed to be the debtor in terms of the provisions of section 8(10) and the CC is obliged to declare output tax thereon.

The CC acquires the right of use of the vehicle

Where the CC obtains the right of use of an asset (i.e. a light delivery vehicle), by way of an agreement concluded between the member and the CC, for the payment of monthly instalments, the consideration paid by the CC to the member, will be an expense in the CC’s books of account. The CC is entitled to an input tax deduction in respect of the right of use of the vehicle, only if the member is registered as a vendor and the applicable provisions of sections 16(3), 17(1) and 20 are met.

If the member is not registered as a vendor, the CC cannot claim an input tax deduction on the right of use of

the vehicle as the member will not levy VAT and provide a tax invoice to the CC..

‌28/3/20 – 28 April 2003

‌397‌

‌Estates Boedels‌

Question

Can the main beneficiary of a deceased person’s estate be held liable for the deceased person’s outstanding VAT?

Answer

In terms of section 31 of the Administration of Estates Act, 1965 (Act No. 66 of 1965) if a person lodges his/her claim after the expiry of the period of notice laid down by the executor and does not satisfy the master that he/she has a reasonable excuse for the delay, he / she is liable for costs payable out of the estate in connection with the reframing of any account or otherwise as a result of the delay. Furthermore, he / she is not entitled in respect of his/her claim to demand restitution from any other claimant of moneys paid to such a claimant at any time before he / she lodged his / her claim as the case may be, in pursuance of a valid claim against the estate. In Benade v Boedel Alexander 1967 1 SA 648 (O) it was held that a creditor who has not lodged a claim timeously and has not lodged an objection to the account lying for inspection is not barred from sharing in the assets of the estate as reflected in the distribution account.

Section 35(7) of the Administration of Estates Act provides that any person interested in the estate may at any time before the expiry of the period allowed for inspection, lodge with the master in duplicate any objection, with reasons, to the liquidation and distribution account. An objector who has not availed himself / herself of the opportunity in lodging an objection during the period that the account lies for inspection cannot thereafter invoke the provisions of section 35 of the Administration of Estates Act. In Grunberg v The Assistant Master 1949 1 SA 365 (O), it was held that neither the master nor the court is empowered to extend the period for the lodgement of objections.

In terms of section 31(b) of the Administration of Estates Act, SARS cannot hold a main beneficiary liable for the deceased person’s outstanding taxes. However, SARS may submit a late claim against the estate in terms of section 31(a) of the Administration of Estates Act. To invoke the provisions of section 35(7) of the Administration of Estates Act, SARS must lodge an objection during the period that the liquidation and distribution account lies for inspection.

‌3/11/2003

‌398‌

‌Married in community of property Getroud binne gemeenskap van goed‌

Question

What are the VAT implications of the joint estate of spouses married in community of property?

Answer

Spouses married in community of property are for VAT purposes treated as an unincorporated body of persons, similar to that of a partnership. The joint estate that was formed as a result of the marriage, is for VAT purposes, treated separately and individually from the husband and wife.

For VAT purposes, any registration will either be in the name of the husband or the wife, but it will not affect the principle that the registration as a vendor is applicable to the joint estate. Section 51(1) provides that subject to the provisions of section 46, where any body of persons, whether corporate or unincorporated (other than a company), carries on or is to carry on any enterprise, such body shall be deemed to carry on such enterprise as a person separate from the members of such body. As such, the husband, wife and the joint estate are able to register separately for any enterprise carried on by each person.28/10/1 – 6 October 1999

‌399‌

‌Hostel

‌Scenario

Losieshuis

Vendor A’s employees reside in a hostel operated by vendor B. Vendor A pays vendor B for the supply of the

accommodation, together with the supply of domestic goods and services in the hostel.

Question

What are the VAT implications for vendor A?

Answer

The supply of the accommodation together with the supply of domestic goods and services by vendor B is taxable at the standard rate in terms of the provisions of section 7(1)(a). The reason being that the supply falls within the definition of “commercial accommodation” in section 1.

The value of the supply of the commercial accommodation is in terms of the provisions of section 10(10) deemed to be 60 per cent of the all-inclusive charge, should the residents or vendor A pay an all inclusive charge and the commercial accommodation is supplied for an unbroken period exceeding 28 days.

The provisions of section 12(c) are not applicable to vendor A due to the fact that the supply (as set out above)

falls within the ambit of “commercial accommodation” as defined in section 1.

Vendor A will, however, not be entitled to claim an input tax deduction in respect of the costs of accommodation together with the domestic goods and services acquired and paid for on behalf of its employees, as the on-supply of the accommodation to the employees is an exempt supply in terms of section 12(c)(ii). As the employees reside at the hostel at or near their usual workplace which is also regarded as their usual residence, section 17(2)(a)(ii) is not applicable.

‌28/3/29 – 13/1/2004

VAT Rulings

Rulings 400 - 421

‌400

Airlines – Flight simulator training Lugredery – Vlug simulasie opleiding Question:

An airline company (vendor) renders flight simulator training in the Republic to foreigners who do not carry on an enterprise in the Republic. The skills gained from these services by the foreigners (non-vendors) are to be utilised in piloting foreign-going aircraft. Will these services qualify for zero rating?

Answer:

As the flight simulator training cannot be regarded as services provided in connection with the operation or management of any foreign-going aircraft, the services do not fall within the provisions of section 11(2)(h)(ii). Because the trainees are in the Republic at the time the training services are rendered, the provisions of section 11(2)(ℓ) can also not be applied.

With effect from 19 July 2000, the vocational training of employees for an employer who is not a resident of the Republic and who is not a vendor, may be zero-rated in terms of section 11(2)(r) of the Act.

‌28/3/1 – 6 March 2000

‌401

Gold coins and other coins – Imported Goudmuntstukke en ander muntstukke – Ingevoer Question:

What are the VAT implications on the importation of gold coins into South Africa?

Answer:

Gold coins (being goods), imported as such and which the Reserve Bank has issued in the Republic in accordance with the provisions of section 14 of the South African Reserve Bank Act, 1989 (Act No. 90 of 1989), or which remain in circulation as contemplated in the proviso to subsection 1 of that section, are exempt from VAT levied on the importation into the Republic, in terms of section 13(3), read with paragraph 3 of Schedule 1 to the VAT Act. The exemption on importation applies to South African gold coins, being, inter alia, the Krugerrand, Protea, Natura series, R2 and R1 gold proof coins, gold sovereigns dated 1923 – 1932 and gold coins of the ZAR.

The importation of foreign gold coins and other collectors items which do not fall within the definition of “money” in section 1, are accordingly subject to VAT at the standard rate in terms of section 7(1)(b).

The importation of “money” as defined in section 1, is not regarded as “goods” or “services” as defined in section 1, and is therefore not subject to VAT.

‌28/2/1 – 15 November 2002

‌402

Diving expeditions – Export country Duikekspedisies – Uitvoerland

Question:

A South African tour operator (vendor) conducts diving expedition packages in an export country. What are the VAT implications?

Answer:

The supply of goods and services by the tour operator (e.g. hotel accommodation, meals and expeditions as well as the hiring of diving equipment) which will be used or consumed outside the “Republic” will be subject to VAT at the zero rate in terms of the provisions of sections 11(1)(c) and 11(2)(k) read with section 8(11). The transport of passengers as well as their personal belongings from the Republic to an export country and back will also be subject to VAT at the zero rate in terms of section 11(2)(a).

Any goods or services provided to the participants as part of the package which are consumed while inside the “Republic” will be subject to VAT at the standard rate in terms of section 7(1)(a).

‌28/2/1 – 19 June 2002

‌403

Movable goods sent abroad - Warranty agreement Roerende goed na buiteland gestuur - Waarborgooreenkoms Question:

What are the VAT implications in respect of movable goods sent abroad for the purposes of being repaired, replaced or upgraded in terms of a warranty agreement?

Answer

Where movable goods have been sent abroad to be repaired (including goods under a warranty agreement), the re-importation of those goods into the Republic, will be exempt from VAT in terms of section 13(3), read with paragraph 8 of Schedule 1 to the Act, but subject to various provisos and notes as set out in Schedule 1. The following item numbers apply in this regard:-

Item No. 409.04/00.00/01.00

Where goods are sent abroad for repair, and there is no charge by the original supplier in respect of the repair, the exemption will apply in full. However, as the exemption only applies in respect of the value of the goods at the time that they were sent abroad, if the original supplier charges an amount to carry out the repair, VAT will be payable

at 14% on the value of the repairs. The exemption applies under condition that the goods:-

are exported under customs and excise supervision;

retain their essential character;

are returned to the owner (exporter) without any change of ownership having taken place subsequent to their exportation from the Republic; and

can be identified on re-importation.

Item No. 412.26/00.00/01.00

Where the goods (or parts thereof) are defective and these are replaced free of charge, the importation of the replacement goods will be exempt on condition that:-

in terms of a warranty agreement the goods are supplied by the original supplier;

the original goods which are now being replaced have been exported to the original supplier, or disposed of as directed by the Commissioner. (This excludes upgrading which is dealt with below); and

a copy of the original bill of entry and the supporting documents for the original entry is submitted.

Item No. 412.27/00.00/01.00

Where goods for upgrading are supplied free of charge to replace parts which are covered by a warranty agreement by the original supplier, the importation of the upgraded goods will be exempt. However, where the original supplier charges an amount for upgrading the goods, VAT will be payable at 14% on the increase in value of the upgraded goods. The exemption applies under condition that:-

a specific permit issued by the Director-General: Trade and Industry, on recommendation of the Board on Tariffs and Trade, is submitted ;

the replacement goods are supplied by the original supplier; and

there is proof that the goods being replaced have been exported to the original supplier, or disposed of as directed by the Commissioner; and

a copy of the original bill of entry and the supporting documents for the original entry is submitted.

‌28/8/1 – 14 March 2003

‌404

Medical aid scheme – Administration

Mediesefonds - Administrasie

Question:

What are the VAT implications for a medical aid scheme and its administration?

Answer:

A medical scheme is included in paragraph (b) of the definition of a “benefit fund” in section 1 of the Income Tax Act, 1962, and the activities of a medical aid scheme fall within the definition of a “superannuation scheme” in section 2(2)(vii) of the Value-Added Tax Act, 1991. The provision of an interest in a superannuation scheme is a financial service in terms of section 2(1)(j), which results in the activities of a medical aid scheme constituting an exempt supply in terms of section 12(a). Accordingly, a medical aid scheme will not be liable to register as a vendor for VAT purposes. In terms of paragraph (v) of the definition of “enterprise”, any activity shall to the extent to which it involves the making of exempt supplies not be deemed to be the carrying on of an enterprise.

However, a medical aid scheme can either be administered by a separate legal entity being the administrator of the medical aid scheme or handle its administration internally.

The activities of an administrator of a medical aid scheme fall within the definition of “enterprise” in section 1. This results in the services supplied by a VAT registered administrator to a medical aid scheme, being subject to VAT at the standard rate in terms of section 7(1)(a). The medical aid scheme is not allowed to claim an input tax deduction in respect of this administration service insofar as it relates to the making of exempt supplies, nor may it pass such VAT on to the members of the medical aid scheme as VAT – it merely forms part of its cost structure which is passed on to its members.

‌28/3/11 – 14 April 2003

‌405

Tax invoices issued by way of plain paper facsimile Belastingfakture uitgereik by wyse van gewone papier faksimilee Question:

Do plain paper facsimiles of tax invoices debit and credit notes meet the requirements of sections 16(2), 20 and 21 for the purposes of claiming input tax?

Answer:

A plain paper facsimile can never take the place of the original tax invoice. However, the plain paper facsimile tax invoice will be allowed for retention purposes if the following requirements are met:

The provisions of section 20 must be met; and

The vendor who issues the original tax invoice and who transmits it must indicate on the facsimile transmission that it is a copy (the word “copy” must appear in a prominent place on the tax invoice) of the original invoice.

‌28/3/23 – 8 May 2003

‌406

Coconuts and dates – Zero-rated Kokosneute en dadels – Nulkoers Question:

Is the supply of de-husked coconuts and de-pitted dates subject to VAT at the zero rate?

Answer:

The supply of coconuts that have been de-husked (i.e. the hairy outer covering removed), and dates which have been de-pitted and compressed into packs of dates, but not dehydrated or dried, and not cooked or treated in any manner except for the purposes of preserving it in its natural state, are regarded as fruit. Fruit falls within Item 13 of Part B of Schedule 2 to the Act and accordingly may be supplied at the zero rate. The mere de- husking of coconuts or the de-pitting and compression of dates into packs of dates, do not alter the essential nature of the products. These processes are similar to the removal of leaves from bunches of carrots or beetroot.

‌28/8/1 and 28/3/6 – 23 April 2003

‌407

Date of payment - Cheque Datum van betaling - Tjek Question

When does payment by cheque constitute payment? Is it when the cheque is issued, when it is honoured by the bank, or after the clearance period?

Answer:

The position with regard to cheque payments was set out as follows in Eriksen Motors (Welkom) Ltd v Protea Motors, Warrenton 1973 (3)(SA) 685 (A) at 693G:

“In general payment by cheque is prima facie regarded as immediate payment subject to a condition. The condition is that the cheque be honoured on presentation. When the cheque is so honoured, the date of payment of the debt is the date of the giving of the cheque. Conversely, if the cheque is dishonoured, there has been no payment.”

Payment by way of a post-dated cheque, however, will take place only when the cheque becomes payable.

‌28/3/1 - 13 March 2003

‌408

Registration policy - VAT Registrasie beleid - BTW Question:

May a vendor register for VAT in the magisterial district in which the vendor’s accountants are situated rather than the magisterial district in which the vendor’s business is situated?

Answer:

SARS’ policy in respect of the registration of a vendor is that a vendor will be registered in the magisterial district in which the vendor’s business premises are situated.

A vendor will not be allowed to register where its accounting officer, bookkeepers or auditors are situated, notwithstanding the fact that the books of account and other records may be held in a different magisterial district.

‌28/3/29 - 13 March 2003

‌409

Advertising services – two supplies in terms of one contract Advertensie dienste – twee lewerings in terme van een kontrak Question:

A foreign entity (not a resident and not a vendor) and its South African subsidiary (a vendor) enter into a contract with a South African advertising agent (vendor) to provide

advertising services in South Africa. The services consist of the rental of billboard space and the display of the international brand logo thereon near an international airport in South Africa. In terms of the contract, the foreign entity and its South African subsidiary are each liable to pay a certain portion of the total consideration charged in respect of the advertising services supplied in terms of the contract.

What will the VAT implications of the contract be for the foreign entity and its South African subsidiary?

Answer:

Where a single supply is made to two separate parties, or where the components of the supply have different tax rates applicable to them, each part of the supply is deemed to be a separate supply.

Advertising services fall within the scope of the Act, and accordingly will be taxed at the standard rate in terms of section 7(1)(a) of the Act, if the services are consumed in the Republic.

The foreign entity is receiving a supply of advertising services at a time when they will not be in the Republic and being neither a vendor, nor resident of the Republic, the consideration payable will be subject to VAT at the rate of zero percent in terms of section 11(2)( ) of the Act.

There is a separate supply of advertising services being made to the South African subsidiary and therefore VAT at the standard rate must be charged on the consideration for which it is co-liable in terms of the contract. The VAT paid by the South African subsidiary may be claimed back as input tax in terms of sections 16(2), 16(3), 17(1) and 20 to the extent that the services are acquired for the purpose of making taxable supplies.

Although the supply of advertising services is made to two separate persons in terms of a single contract, they are deemed in terms of section 8(15) to be separate supplies for VAT purposes. In this case, each supply also attracts a different rate of tax. (The South African subsidiary being charged 14% VAT and the foreign entity 0% VAT). The advertising agent must therefore issue separate tax invoices to each of the parties to the contract.

‌28/3/29 – 17 September 2003

‌410

Importation of returnable containers Invoer van terugsendbare houers Question:

If a vendor exports liquor from South Africa in glass returnable containers to an export country, what are the VAT implications when the empty bottles are returned to South Africa to be re-used ?

Answer:

In terms of paragraph 8 of Schedule 1 (item 409.02/00.00/01.00), and section 13 (3) of the Act, certain goods produced or manufactured in the Republic which have been exported and thereafter returned to South Africa may be exempt from VAT on importation under certain conditions. However it is unlikely that the glass returnable containers will be exempt in terms of this item as it would be disqualified on one or more of the following grounds:-

the original supply would either have been charged with tax at the rate of zero per cent in terms of section 11(1)(a) (direct export) or a refund in terms of section 44 (9) of the Act would have been granted (indirect export); or

a transfer of ownership of the containers may have taken place subsequent to the exportation from the Republic; or

on re-importation, the customs officials will not be able to identify the containers as being the same goods which left the country.

VAT would therefore be payable at 14% in most cases on the re-importation. The importer would be able to claim the VAT back as input tax in terms of sections 16(2), 16(3), 17(1) and 20 to the extent that the containers are acquired for the purpose of making taxable supplies.

‌28/8/2 – 13 January 2004

‌411

Motor dealers incentive commission Motorhandelaars aanspoorings kommissie Question:

What are the VAT implications where a motor dealer receives a payment from a finance house/bank for introducing a client or for the discounting of an instalment credit agreement?

Answer:

Instalment credit agreements (ICA’s)

Direct deals - Where a dealer introduces a customer to the bank who then enters into an ICA with the customer, the payment of an incentive commission to the dealer is subject to VAT at the standard rate in terms of section 7(1)(a). The dealer must account

for output tax in terms of section 16(4). This income is referred to as dealer introductory commission (“DIC”)

Discounted Deals - Where the dealer has concluded an ICA with a customer and then discounts the deal to the bank, the payment to the dealer is consideration for the cession of a debt security and as such is exempt in terms of sections 12(a) and 2(1)(c). Such cession may either be at a premium or a discount on the face value of the debt security. This premium or discount is also exempt in terms of section 12(a) and 2(1)(c) and is sometimes termed a commission or rebate.

Other commissions

Where a motor dealer receives payment in respect of commission earned (i.e. “kickbacks”), output tax must be accounted for in respect of the supply. The commission received is regarded as being consideration for services rendered. These other commissions could include the following:-

Credit life

Advertising subsidies

Volume rebate where the dealer receives cash for selling a certain number of motor vehicles.

‌28/3/13 – 20 January 2004

‌412

Sale of a “lifetime use” in a horse

Verkoop van ‘n “lewenslange gebruik” in ‘n perd

Scenario:

A vendor sells shares in a stallion, which entitles the purchaser/s to the “lifetime use” of the stallion to cover their own mares for free. The ownership of the stallion remains vested in the selling vendor.

Question:

What are the VAT implications?

Answer:

The supply of the “lifetime use” of the stallion constitutes the supply of a real right in a corporeal movable thing which is encompassed in the definition of “goods” in section 1. Since the right is not an “equity security” as defined in section 2(2)(iv), the supply does not qualify for exemption as a financial service in terms of section 12(a) read with section 2(1)(d).

This supply will therefore be subject to VAT at the standard rate in terms of section 7(1)(a) and the vendor selling the right must issue a separate tax invoice to each purchaser. If the purchaser is a vendor, an input tax deduction may be claimed in terms of section 16(3), read with sections 16(2), 17(1) and 20 to the extent that the right is acquired for making taxable supplies.

‌30 March 2004

‌413

Samples – Input tax deduction Monsters - insetbelastingaftrekking Question:

Is a vendor, who does not normally supply goods directly to the general public, entitled to claim an input tax deduction on promotional products that are given away to members of the general public for sampling purposes?

Answer:

The supply of the promotional products to the general public is considered as being part of the general carrying on of an enterprise. As the vendor is giving the promotional products away for free to promote the enterprise and the particular product to the general public, a supply of goods is made for no consideration. In these circumstances, section 10(23) deems the value to be nil. (Unless the recipient is a “connected person” in relation to the supplier – in which case the supplier will be taxed on the open market value of the supply if the recipient is not entitled to claim a full input tax deduction in respect of the supply).

The vendor supplying the samples is therefore entitled to claim an input tax deduction in terms of sections 16(3) and 16(2), 17(1) and 20 for the manufacture and supply of the samples. Note however, that where the samples are classified as “entertainment” goods or services, the input tax would be denied in terms of section 17(2)(a) if the enterprise is not in the entertainment business.

‌30 March 2004

‌414

Service/Motor plan – Input tax deduction Diens/ Motorplan - insetbelastingaftrekking Scenario:

A motor car dealer sells a motor car (as defined), inclusive of a service/motor plan for a specified period or specified distance, e.g. 5 years or 100 000 kms.

Question:

Is the purchaser (vendor) entitled to claim an input tax deduction on the VAT incurred on the service/motor plan?

Answer:

Where the purchase of the service/motor plan is included in the purchase price of the car

i.e. one supply of goods, the VAT on the acquisition of the motor car including the service plan will be denied in terms of section 17(2)(c), read with the definition of “motor car” in section 1.

However, where an additional or extended service/motor plan is purchased as a separate supply or the service plan is purchased as an extra-cost item, the vendor will be entitled to claim an input tax deduction of the VAT charged on the service plan if it is acquired for consumption or use in the course of making taxable supplies.

‌30 March 2004

‌415

Educational Institutions - Sport Bureau/Clubs Opvoedkundige Instellings - Sportburo/Klubs Question:

In what circumstances will the activities of a sports club conducted by an educational institution (such as a University or Technikon) be regarded as the carrying on of an “enterprise” as defined in section 1.

Answer:

The activities of a sports club by an educational institution will in the following circumstances be regarded as the carrying on of an “enterprise” as defined in section 1, and as such the institution will be liable to account for VAT and have to register for VAT purposes in terms of section 23(1), as soon as its taxable turnover exceeds R300 000 per annum:

For example, where the income consists of any of the following:-

ticket sales at sporting events;

letting of sport fields;

membership fees from students and non-students where there is a separate levy to be paid to join the sport club;and

sponsorships received in return for the rendering of advertising services.

If the sports club is an “association not for gain” as defined in section 1, any income in the form of donations, or any goods or services donated to the educational institution’s sport club (unconditional gifts) will not be subject to VAT provided the club does not make a supply to the donor (or a connected person in relation to the donor) in return for the donation (i.e the donor does not receive an identifiable direct valuable benefit from the club).

‌28/3/29 –13 March 2003

‌416

Delivery note – Time of supply Afleweringsnota – Tyd van lewering Question:

Can a delivery note be regarded as an invoice for the purposes of triggering the time of supply rules in section 9, and in so doing, require the supplier to declare output tax?

Answer:

In terms of the general time of supply rule contained in section 9(1), the time of supply takes place at the earlier of :-

the time an invoice is issued by the supplier or the recipient in respect of the supply; or

the time any payment of consideration is received by the supplier in respect of the supply.

The term “invoice” is defined in section 1 as “a document notifying an obligation to make payment”.

The view is held that generally, a delivery note is only an acknowledgement of receipt and not an obligation to make any payment. The time of supply rules in section 9 will therefore not be triggered by the mere issue of a delivery note (except in the case of an instalment credit agreement in terms of section 9(3)(c)).

Where the delivery note also notifies the recipient of an obligation to make payment, the delivery note would constitute an invoice and would in fact trigger the time of supply.

‌28/3/1 – 17 January 2002

‌417

Exports – Products manufactured and delivered outside the RSA Uitvoere – Produkte vervaardig en afgelewer buite die RSA Scenario:

Vendor A receives an order from a local customer (Vendor B), to manufacture and deliver certain products at an address in export country X. Vendor A in turn places an order with a company in export country Y to manufacture and deliver the products to Vendor B’s client in export country X. The products never enter the Republic.

Question:

Can the transaction between Vendor A and Vendor B as well as the transaction between Vendor B and its client in export country X qualify as zero-rated supplies in terms of section 11(1)(a)?

Answer:

A direct export is where an RSA vendor supplies movable goods and consigns or delivers the goods to the recipient in an export country and the supplier is in control of the export process (this could also include delivery to the recipient’s representative or to the recipient’s client). Direct exports are zero-rated in terms of section 11(1)(a), read with paragraph (a) of the definition of “exported” in section 1 and to qualify as such, the documentary requirements as set out in VAT Practice Note No. 2 of 1998 (the Practice Note) must be met.

The term “recipient” is defined in the Practice Note as follows:-

” ‘recipient’ means the person to whom the supply of movable goods in terms of a sale or instalment credit agreement is made.”

Usually (but not in all cases), the recipient is also the person to whom the goods are delivered in the export country and the delivery address in the export country is also normally the recipient’s business address. The Practice Note does not stipulate that the goods must be delivered to the recipient’s address in an export country, nor does it stipulate that the recipient must be a non-resident.

It follows that a “recipient” can be any person (including an RSA vendor) to whom goods are consigned or delivered at an address in an export country. Therefore the supply between Vendor A and Vendor B as well as the supply between Vendor B and its client in export country X qualify as zero-rated supplies in terms of section 11(1)(a).

‌28/8/3 – 15 November 2002

‌418

Brown bread and dough mixture Bruin brood en deegmengsel Scenario:

A vendor manufactures and sells brown bread and dough mixtures. The vendor does not use brown bread flour to manufacture these products, but instead uses white bread flour and digestive bran.

Question:

Will the supply of the brown bread and dough mixtures qualify as zero-rated supplies?

Answer:

Brown bread is defined in Regulation 1 of the Regulations in terms of Government Notice No. 577 published in Government Gazette No. 13074 of 15 March 1991 (the Regulations). The VAT treatment of the supply of brown bread is further dealt with in VAT Practice Note No. 12 dated 24 November 1993 (the Practice Note). One of the guidelines for brown bread in terms of the Regulations and the Practice Note is that the dough used to make the bread must consist of at least 50% brown bread meal.

In terms of section 11(1)(j) read with Item 1 of Part B of Schedule 2, the supply of brown bread, as defined, is zero-rated.

In terms of section 11(1)(j) read with Item 17 of Part B of Schedule 2, the supply of brown wheaten meal, being pure, sound wheaten meal, but excluding separated wheaten bran, wheaten germ and wheaten semolina also attracts VAT at the rate of zero percent.

If a vendor uses white bread flour to manufacture bread and dough mixture which purports to be brown bread and brown bread meal, the requirements of the Regulations and the Practice Note will not be met for either of these products to be supplied at the zero rate as provided for in terms of Items 1 and 17 of Part B of Schedule 2 and section 11(1)(j).

The vendor will therefore be liable to account for output tax at the standard rate on both the bread and the dough mixture in terms of section 16(4).

‌28/3/6– 13 October 2003

‌419

Subletting of fixed property – export country

Onderverhuring van vaste eiendom - Uitvoerland

Question:

Will the subletting of fixed property situated in an export country qualify as a zero-rated supply?

Answer:

“Fixed property” falls within the ambit of the definition of “goods” as defined in section

1. The zero-rate in terms of section 11(1)(c) for goods supplied under a rental agreement which are used exclusively in an export country can only apply if the supply would otherwise have been subject to VAT at the standard rate in terms of section 7(1)(a) of the Act.

The imposition of tax in terms of section 7(1) is subject to the exemptions, exceptions, deductions and adjustments provided for in the Act. This means that the supply of goods or services detailed in section 12 will not qualify for zero-rating in terms of section 11 (with the exception of sections 12(a) and 12 (g)), even if they are exported or otherwise fulfil the criteria for the zero-rated status provided for in section 11. These supplies will remain exempt since they would never be charged with VAT under section 7(1)(a).

Consequently, the supply of the fixed property situated in an export country is an exempt supply in terms of section 12(e) and cannot be zero-rated.

‌28/1/1 – 20 August 2004

‌420

Insurance policies - offshore Versekeringspolisse - aflandig Scenario:

An insurance broker (vendor) sells short term insurance policies provided by an offshore insurance company to persons in South Africa. The insurance company pays the commission on policies concluded into the broker’s offshore bank account.

Question:

What are the VAT implications?

Answer:

Where an insurance broker receives commission for selling short term insurance policies from an offshore insurer (non-resident and non-vendor), the commission will be zero-rated in terms of section 11(2)( ).

However, where the insurance contracts are concluded in the Republic, the offshore insurer will be obliged to register as a vendor in terms of section 23(1) of the Act if its turnover from these policies exceeds R 300 000 per annum. In this instance the commission received by the broker will be subject to VAT at the standard rate in terms of section 7(1)(a).

Should the offshore insurer not be required to register as a vendor, the following will apply:-

The persons taking out the insurance cover for private purposes, exempt supplies or other non-taxable activities will be importing a service into the Republic and will be required to complete a VAT 215 declaration and pay the VAT thereon at the standard rate to SARS within 30 days of the importation (Section 7(1)(c) the read with section 14(1) and the definition of “imported services” in section 1).

Where the services are acquired by a vendor in the course or furtherance of an enterprise (i.e. in the course of making taxable supplies), VAT will not be payable as the services will not comply with the definition of “imported services” in section 1.

‌4 February 2004

‌421

Late payments of VAT – deposit payments and extensions Laat betalings van BTW – Deposito betalings en uitstelle Question:

What must a vendor do if circumstances are such that it will not be possible to make the required VAT payment by the due date?

Answer:

In terms of section 28, a vendor is required to furnish a VAT 201 return and pay any VAT due by the 25th day of the calendar month following the end of any particular tax period. If the 25th falls on a Saturday, Sunday, or a public holiday, the return and payment must be furnished on the last business day prior to that date.

Where there are circumstances beyond the vendor’s control which may result in the VAT not being paid on time, a deposit (“provisional payment”) equal to an estimate of the tax payable may be made in terms of section 38.

An application may also be made in terms of section 28(3) to extend the time period in which the VAT 201 must be submitted.

When the tax liability is finally determined, any excess “provisional payment” will be refunded and any deficit amount recovered from the vendor. If the “provisional payment” made is not sufficient to cover the VAT liability for the period, penalty and interest will be levied on the shortfall. The vendor may however make a written application to have the penalty and/or interest remitted.

Where the vendor does not extend the time period in which the return may be rendered or make a “provisional payment” for the estimated VAT liability, the penalty and interest may be imposed on the entire VAT liability and may further result in additional tax being imposed and/or becoming liable for prosecution for an offence in terms of section 58(d).

‌30 March 2004

VAT Rulings

Rulings 422 - 425

‌422

Entertainment - Sport Board Onthaal - Sport Raad

Scenario

A Sport's Board (e.g. cricket board) is registered as a vendor for VAT purposes. The activities of the Board falls within the definition of "entertainment" as defined in section

The provision of entertainment and amusement includes for example, the hosting of cricket matches for spectators and television audiences. The Board acquires, in the course of its enterprise, goods and services for the purposes of supplying "entertainment" as defined.

This includes: " The supply of food and drinks to players, scorers and umpires, and " The issuing of meal vouchers on match days to security guards.

Question

Will the Board be entitled to claim an input tax deduction in respect of the provision of food and beverages supplied to players, umpires, scorers and security guards?

Answer

The Board is not entitled to claim an input tax deduction in respect of the provision of food and beverages supplied to players, umpires, scorers and security guards in terms of the provisions of sections 16(3) and 17(2)(a)(i)(aa), as the Board does not charge any consideration for these specific supplies.

28/3/1 - 8 March 2004

‌423

Taxidermist services Taksidermis dienste

Scenario

A foreign hunter visits the Republic for a hunting expedition. Once he has hunted an animal, the animal is delivered to a taxidermist (vendor), who either -

" Mounts the animal/ trophy as a finished product ; or " Prepares a so-called "dip and pack" shipment, to be further processed by another taxidermist abroad.

Question

What VAT rate is applicable on the services supplied?

Answer

The supply of goods (being movable goods) in terms of a sale or instalment credit agreement are in terms of the provisions of section 11(1)(a) subject to VAT at the zero rate, if the supplier has exported the goods in the circumstances contemplated in paragraph (a), (b) or (c) of the definition of "exported" in section 1.

The view is held that where the taxidermist mounts the trophy into the final product, the total amount charged by the taxidermists shall be subject to VAT at the zero rate in terms of the provisions of section 11(2)(l)((ii)(aa). The reason is that the services are in connection with movable property which is going to be exported subsequent to the supply of such services. It is important to take note that the provisions of this section will only apply if the final product (trophy or "dip and pack" parcel) is exported. If some of the taxidermist fee for preparation is for a portion of the animal that is not exported, then the standard rate must be applied for this part.

Other services (e.g the salting, drying and disinfection of the skin) supplied by the taxidermist, that are required to ensure that the trophy does not undergo decay before it is properly preserved and/or mounted, will also be subject to VAT at the zero rate in terms of the provisions of section 11(2)(l)(ii)(aa). It is also confirmed that any other services e.g

the "dip and pack" in order to send the 'product' abroad to be mounted by a taxidermist will be subject to VAT at the zero rate.

28/8/3 - 3 February 2004

‌424

Compensation - hijacked goods Skadeloosstelling - gekaapte goed

Scenario

A vendor who supplies zero-rated foodstuff, subcontracts its transport function to other transport companies. In terms of the "Standard Conditions of Carriage", (i.e. the agreement between the vendor and the transport company), the transport company is required to have in place all risks insurance cover and/or indemnity covering the full value of the transported foodstuffs. The agreement also provides that the transport company shall be liable for any consequential loss and/or damage suffered by the vendor as a result of loss and/or damages sustained to the transported foodstuff.

The transport vehicle is hijacked and the cargo is stollen. Accordingly, the vendor makes a claim against the transport company.

Question

Is the compensation for the loss of the zero-rated foodstuff subject to VAT at the standard rate or the zero rate?

Answer

The view is held that the consideration received by the vendor for the hijacked foodstuff constitutes consideration for the supply of a service. The exercise of the right (which is a right acquired in terms of the Standard Conditions of Carriage agreement) to claim for damaged/lost goods constitutes a "service" as defined in section 1. Accordingly, the vendor must in terms of section 7(1)(a) account for output tax at the standard rate on the proceeds received from the transport company, for the hijacked goods. Note that the payment is for the service as provided in the "Standard Conditions of Carriage agreement" being that the transport company shall have in place all risks insurance cover and/or indemnity covering the full value of the transported goods. It is not linked to the zero-rated status of the foodstuff.

28/3/29 - 15 April 2004

‌425

Repair of asset - insurance policy Herstel van bate - versekeringskontrak

Scenario

A vendor's truck which is covered under a short-term insurance policy is damaged in an accident. The insurance company decides to undertake the repair of the truck, and not to pay the cash to the vendor.

The panel beater is paid directly by the insurance company for the repairs done, whilst the vendor is only liable for the excess payment.

Question

Will the insured (vendor) be obliged to account for output tax in respect of the amount that the insurance company pays to the panel beater for the repair of the truck?

Answer

According to the provisions of section 8(8) an insured (vendor) is in terms of an insurance contract with his insurance company liable to account for output tax on any indemnity payment received or any payment made to a third party in order to indemnify the insured.

The situation is best explained by way of an example:

Insurance Company

(Pays R1 000 + R140 VAT)

Vendor (Insured)

(Pays R100 excess payment + R14 VAT) Payment

Excess payment Panel beater Contract for services

1. The panel beater must declare output tax in terms of sections 7(1)(a) and 16(4) on R154. 2. The insurance company is entitled in terms of sections 16(2), 16(3), 17(1) and 20 to claim an input tax deduction of R140. 3. The vendor is entitled in terms of the sections 16(2), 16(3), 17(1) and 20 to claim an input tax deduction of R14.

In this example, the insured is not required to account for any output tax in terms of the provisions of section 8(8) on the amount of R1 000 paid directly to the panel beater. The reason being that the panel beater is supplying a service to the insurance company and not the insured to the insurance company. The insured is not indemnified as a result of the payment by the insurance company to the panel beater due to the fact that the insured does not owe the panel beater money.

28/3/19 - 26 January 2004

VAT Rulings 426 to 442

‌426

Cancellation fees charged by airlines or their agents Kansellasie fooie gehef deur lugrederye of

hulle agente

Question

What are the VAT implications for airlines or agents acting on their behalf in respect of fees for the processing of

refunds or cancellations with regard to international or domestic air transport?

Answer

Where an airline charges a fee in respect of the processing of a refund and/or cancellation, the fee for these services will be subject to VAT at the standard rate in terms of the provisions of section 7(1)(a), whether or not these services are in respect of international or domestic air transport.

Where an airline, which is not registered as a vendor, charges a fee in respect of the processing of the refund

and/or cancellation, the fee charged for these services will not have any VAT implications.

Where the service in respect of the processing of the refund and/or cancellation is physically rendered outside the Republic by the airline, which is registered as a vendor, the fee charged for these services will be taxable at the zero rate in terms of the provisions of section 11(2)(k).

Where an agent which is registered as a vendor supplies refund and/or cancellation services to an airline, the agent is in terms of the provisions of sections 7(1)(a) and 16(4), liable to account for output tax at the standard rate on the supply of these services.

However, where an agent which is registered as a vendor supplies refund and/or cancellation services to a

foreign airline not registered for VAT purposes and not in the Republic at the time the services are rendered, such

services will be taxable at the zero rate if the requirements of section 11(2)( ) are met.

28/8/3 - 23 July 2004

‌427

Vegetable oil – zero-rated Plantaardige olie - nulkoers

Question

May the supply of vegetable oil to which a colourant has been added be supplied at the zero rate?

What are the VAT implications if vegetable oil is supplied and subsequently used for purposes other than in the

process of cooking food?

Answer

The supply of vegetable oil, marketed and supplied for use in the process of cooking food, but excluding olive oil, is in terms of the provisions of section 11(1)(j), read with Item 14 of Part B of Schedule 2 subject to VAT at the zero rate.

Where only a colourant is added to the vegetable oil and the nature of the product has not been changed and it is still used in the process of cooking food, the supply of the oil will be taxable at the zero rate. However, if flavouring is added to the vegetable oil, the supply of the oil will be subject to VAT at the standard rate in terms of the provisions of section 7(1)(a).

Should vegetable oil be marketed and supplied for the purposes of cooking food but is subsequently used for

other purposes the supply thereof will remain zero-rated, if it complies with the conditions set out above.

28/3/6 – 30 September 2002

‌428

Frozen potato chips – zero-rated Gevriesde aartappelskyfies – nulkoers

Scenario

Frozen potato chips are blanched in a solution of hot water and oil for the purposes of preservation. A preservative may also be added. In addition, additives are added to darken the frozen potato chips in the cooking process.

Question

Will the supply of frozen potato chips which has been treated for preservation purposes be subject to VAT at the

zero rate?

Where additives are added or processes followed in order to darken or flavour the frozen potato chips, will the

supply remain taxable at the zero rate?

Answer

In terms of section 11(1)(j), read together with Item 12 of Part B of Schedule 2, the supply of vegetables, not cooked or treated in any manner, except for the purpose of preserving such vegetables in their natural state, but excluding dehydrated, dried or canned or bottled vegetables, will be subject to VAT at the zero rate.

The supply of frozen potato chips that are blanched as part of the preserving process in a solution of hot water

and oil, will be subject to VAT at the zero rate as the purpose is to preserve the product in it’s natural state.

However, if additives are added to the frozen potato chips in order to make the chips darker in the cooking process and/or are further cooked or treated, this is not part of the preservation process of the frozen potato chips. Consequently, the frozen potato chips to which additives are added must be supplied at the standard rate in terms of the provisions of section 7(1)(a).

28/3/1 – 3 October 2002

‌429

Sale of pre-paid cell phone cards Verkoop van selfoonkaarte

Scenario

A vendor’s main business is the sale of pre-paid cell phone cards to various businesses. Some cards are exported to a neighbouring country and supplied to dealers in that country. The pre-paid cards may then be used within the foreign country where limited, incidental South African network coverage may be available from the network towers situated in South Africa.

Question

Can the pre-paid cell phone cards be exported at the zero rate?

Is a foreign dealer who purchases such cards in the Republic entitled to claim a refund from the VAT Refund

Administrator?

Answer

The supply of pre-paid cell phone cards entitles the recipient to a right to make or receive telephone calls. Accordingly, such supply constitutes a “service” as defined in section 1. This service is available in the Republic and the infrastructure is installed in the Republic for a service provided in the Republic. As such the pre-paid cell phone card cannot be exported at the zero rate and the service is supplied in terms of section 7(1)(a). The purpose of a pre-paid cell phone card is to provide a consumer of the service with the access information (PIN code) to receive the service. A pre-paid cell phone card as such is not being supplied but the right to use the telephone service. These cards are intended to be used in South Africa only, and the service is not exported. The fact that there is signal spillage across the border is incidental and is not intended to provide such services in the neighbouring country.

Since the supply of the pre-paid cell phone cards constitutes a service, the VRA may not process any refund of VAT for pre-paid cell phone cards exported to a foreign country. The VRA may only process VAT refunds in respect of the indirect export of goods.

28/8/3 – 7 April 2004

‌430

Freight forwarding and clearing services Vragversendings en klaringsdienste

Scenario

The vendor is a freight forwarding and clearing company (‘the freight forwarder”). Its main business activity is the exporting of goods. The freight forwarder receives goods on behalf of a client and the goods are packaged and exported. The transport of the goods is zero-rated. Will the handling/packaging fee also be zero-rated? The freight forwarder also exports goods on behalf of non-residents who are also non-vendors. The transport of the goods is zero-rated.

Question

Will the packing/handling fee and other ancillary services be zero-rated?

Answer

The transport of passengers or goods from a place in the Republic to a place in an export country, is in terms of the provisions of section 11(2)(a)(ii) subject to VAT at the zero rate. Furthermore, section 11(2)(e) provides that the zero rate may be applied to services comprising the transport of goods or any “ancillary transport services” provided that the services supplied are directly in connection with the exportation from or the importation of goods into the Republic.

In addition, section 11(2)(e) requires that these services must be rendered to a person who is a non-resident of the Republic and who is not a vendor. The services must also not be supplied through an agent or intermediary. When such services are supplied through an agent or intermediary, the supply will be subject to VAT at the standard rate. The agent who is the recipient of any such services on behalf of a foreign principal is allowed under section 54(6) to claim an input tax deduction on such services. The agent will therefore be able to pass these costs on to the foreign principal free of VAT.

The packing/handling services that are supplied by the freight forwarder, falls within the ambit of “ancillary transport services”. Services supplied to vendors or residents of the Republic will be subject to VAT at the standard rate in terms of the provisions of section 7(1)(a). The freight forwarder will have to account for output tax in terms of the provisions of section 16(4), but will be entitled to claim input tax in terms of the provisions of sections 16(2), 16(3), 17(1) and 20.

Where the packaging/handling services are supplied by the freight forwarder to a non-vendor who is a non-

resident, such services will in terms of the provisions of section 11(2)(e) be subject to VAT at the zero rate.

28/8/1 – 30 July 2004

‌431

Joint ventures Gesamentlike onderneming

Scenario

Two vendors enter into a joint venture for a building project.

Question

Will the joint venture require to register as a vendor in its own right?

What are the VAT implications in relation to the joint venture and the participating vendors?

Answer

As the two vendors have embarked on a project/venture that is separately identified from their other activities, a new person for VAT purposes has been formed and consequently must register for VAT where the turnover will exceed R300 000 or is expected to exceed this amount.

The joint venture must account for output tax and claim input tax separately from the participating vendors. If a participating vendor makes a monetary contribution to the joint venture, then this is regarded as a capital contribution and there is consequently no VAT implication. However, where a participating vendor makes a contribution of goods from his/her enterprise, output tax must be declared by the vendor making the contribution (supply) and the joint venture may claim input tax. Similarly, if the joint venture makes a supply of goods, the joint venture must account for output tax.

The making available of the right of use of an asset by a participating vendor to the joint venture in exchange for a consideration is taxable at the standard rate in terms of section 7(1)(a). Where there is no consideration, the value of the supply is deemed to be nil in terms of section 10(23).

Where the services are provided to the joint venture by a participating vendor for a consideration, the

participating vendor must declare output tax and the joint venture may claim input tax.

The profit of a joint venture can be distributed by way of a profits distribution. In such a case, there is no VAT implication. However, where a fee is charged by the participating vendor, the participating vendor must declare output tax and the joint venture may claim input tax.

On the winding up of the joint venture, any distribution or sale of assets will be subject to VAT at the standard

rate.

‌432

Supply of servitude Lewering van serwituut

Scenario

A vendor constructs a filling station on his property. An agreement is reached with a fuel company to become a

quota service station. The fuel company reimburses the vendor for the installation cost of their underground

petrol tanks, pumps and lightning protection and pays the vendor for the registration of a product servitude over

the property.

Question

Will the supplies be subject to VAT?

Answer

In terms of section 1, the term “goods” is defined as “corporeal movable things, fixed property and any real right in any such thing or fixed property …”. Section 7(1)(a) provides that the supply of any goods or services, if not specifically exempt or zero-rated, is subject to VAT at the standard rate.

In view of the above, the supply of underground petrol tanks, pumps and lightning protection by the vendor to

the fuel company constitutes a supply of goods which is taxable at the standard rate.

The definition of “goods” includes any real right. The product servitude therefore amounts to goods. In terms of

section 7(1)(a), the supply of the product servitude is subject to VAT at the standard rate.

28/3/1 – 18 February 2000

‌433

Patent cooperation treaty Patente samewerkingsverdrag

Scenario

A vendor (e.g. patent attorney) files both local and international patent applications under the Patent Co- operation Treaty on behalf of local and non-resident foreign clients. The services encompass receiving instructions, opening a file, preparation of the application papers, etc.

Question

Will the fees charged for such services be subject to VAT at either the standard or zero rate?

Answer

Local clients. As the applications relate to local and international applications, both the standard and zero rate will apply. Services relating to intellectual property rights which are for use in the Republic are subject to the standard rate in terms of section 7(1)(a). Similarly to the extent that the services relate to intellectual property rights outside the Republic, it will, in terms of section 11(2)(m), be subject to VAT at the zero rate.

In the event that one composite supply of services is made in respect of both local and international applications the provisions of section 8(15) will apply. This requires the supplier of the services to attribute the consideration between standard rated and zero-rated components using a fair and reasonable method.

Non-resident foreign clients. Where such services are rendered to non-resident foreign clients it will be zero-rated in terms of the provisions of either section 11(2)(ℓ) or 11(2)(m), irrespective of where the intellectual property rights are to be used.

28/3/1 – 21 January 2000

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Educational Association – Registration Opvoedkundige Vereniging – Registrasie

Scenario

An independent educational association is established to represent, promote and serve the common interests of its members in order to advance the quality of education and to facilitate the contributions of its members to the development of education in the Republic. Its members are mainly educational institutions who supply exempt educational services as envisaged in section 12(h). These members pay subscriptions or fees to the association to represent or assist them in various matters, which it would otherwise have to attend to itself.

Question

Is the association required to register as a vendor for VAT purposes?

Answer

The association itself is not providing any educational services as envisaged in section 12(h), but is providing a supporting role to its members. The association will be obliged to register as a vendor, if the value of its taxable supplies, which include subscriptions and fees, exceed the R300 000 threshold per annum as specified in terms of section 23(1). If the fees do not exceed the threshold, the association may apply for voluntary registration provided its turnover exceeds R20 000 per annum.

28/3/1 - 20 January 2000

‌435

Supplies – bonded warehouse Lewerings – doeanepakhuis

Questions

A vendor supplies goods which have been imported and entered into a licensed Customs and Excise warehouse but have not been entered for home consumption to a customer in the Republic. Must VAT be levied on these supplies and can the customer be invoiced in a foreign currency?

The vendor also supplies goods to a customer outside the Republic but the goods are delivered to a warehouse in the Republic (not a licensed Customs and Excise warehouse). Must VAT be levied on these supplies and can the customer be invoiced in a foreign currency?

Answer

Where a VAT registered vendor supplies goods which have been imported and entered into a licensed Customs and Excise warehouse but have not been entered for home consumption, the supply is subject to VAT at the zero rate in terms of proviso (ii) to section 13(1).

In the event that the importer declares the goods to SARS Customs as being entered into the Republic for home consumption, 14 percent VAT is payable to SARS Customs on the importation of the goods into the Republic in terms of section 7(1)(b). The subsequent supply of such goods in the Republic is subject to VAT at the standard rate in terms of section 7(1)(a).

A vendor is, in terms of section 20(4), obliged to issue a tax invoice in the currency of South Africa. The proviso to section 20(4), however, allows a vendor to issue a zero-rated tax invoice in a foreign currency. Where the supply is subject to VAT at the standard rate, the vendor may issue tax invoices in a foreign currency, but the value, tax and consideration must also be stated in rands.

As the goods are being delivered to the purchaser at an address in South Africa, the supply of the goods is subject to VAT at the standard rate, in terms of section 7(1)(a). The supply may be invoiced in a foreign currency, but the value, tax and consideration must also be stated in rands.

28/8/3 – 24 March 2005

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Promotional gifts – entertainment Promosie geskenke - onthaal

Scenario

A vendor acquires various items to use as gifts and promotional items for clients. Some items have the business

logo imprinted on them while others have no distinguishing features to identify the item with the business.

Question

Is the vendor allowed to claim input tax on the costs of these items?

Answer

Gifts and promotional items are acquired for the purposes of the furtherance of an organisation. Where the gifts and promotional items are applied by a vendor in respect of taxable supplies, the input tax, subject to section 17, will be allowed.

However, if the nature of the item falls within the ambit of entertainment as defined in section 1, the input tax would be denied in terms of section 17(2)(i). Items that can be regarded as entertainment include wine, chocolates, hampers, tickets to functions, computer games, CD’s etc. even if an entertainment item displays the organisation’s logo or branding.

Input tax incurred on gifts and promotional items that are not part of entertainment may be claimed. This could include items such as diaries, pens, mouse pad, clothing, product samples, etc. The supply is made in terms of section 10(23).

28/3/4 – 24 March 2005

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Time of supply – cheques or credit cards Tyd van lewering – tjek of kredietkaarte

Scenario

When does the time of supply occur for VAT purposes when payment is made by cheque or credit card?

Answer

The general time of supply rule in section 9(1) is the earlier of the issue of an invoice or the receipt of any

payment.

Cheques

A cheque is an instruction to a bank to make payment. My view is that payment is, in law, only received when the cheque is honoured by the bank. For practical reasons (i.e. accounting purposes) payment is recorded when the cheque is received. Where payment is made by cheque, prior to the issue of an invoice, the time of supply is regarded as the date when the cheque is received by the supplier. However, if a cheque is subsequently dishonoured, it is treated as if payment has not been made. In the case of a post dated cheque, payment is made when the cheque can be presented to the bank.

Credit cards

Where payment for the acquisition of goods or services is effected by credit card, the view is held that the time of supply occurs on the date the transaction takes place. Once the supplier has accepted payment by credit card i.e. processed the transaction, then payment has taken place.

28/3/27 – 24 March 2005

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Promotion subsidised by wholesaler Promosies gesubsidieer deur groothandelaar

Scenario

Vendor A (retailer) promotes an item by making an offer of “buy 2 for the price of 1” and Vendor B (wholesaler)

makes a contribution to Vendor A towards the promotion.

Question

What are the VAT implications for Vendor A and Vendor B?

Answer

If retailer A acquires 2 items from wholesaler B at say R2.28 (VAT inclusive) and sells 1 item for say R3.42 (VAT inclusive) and includes 1 promotional item at no charge, the vendor is entitled to input tax on the 2 items acquired. The supply of the promotional item at no charge is a taxable supply (see section 10(23)) as it is made in the course or furtherance of A’s enterprise, namely to sell item 1. However, if a contribution in cash is made by wholesaler A to retailer B, A must provide B with a tax invoice for the amount of the contribution in respect of the promotional services supplied. Output tax must be declared by Vendor A, and Vendor B may claim input tax.

Vendor A must declare output tax on the actual consideration received from the sale of the goods to the

customer.

28/3/1 – 24 March 2005

‌439

Non-statutory fines, penalties Nie statutêre boetes

Scenario

Non-statutory fines or penalties are imposed by clubs, associations, trade unions, cooperative societies and other vendors for breech of conditions and rules which are applicable to the operation of the organisation.

Question

Is such a non-statutory fine or penalty subject to VAT?

Can a vendor who is subject to the payment of a non-statutory fine or penalty claim input tax?

Answer

VAT is imposed on the supply or importation of goods and/or services. Where a service can be identified in the imposition of a non-statutory fine by a vendor, then the amount payable will be regarded as consideration. Usually, the fine or penalty is due to the action or lack of action by the person who must pay the fine or penalty. As such, the fine or penalty relates to a supply made and is subject to VAT at the standard rate.

Input tax may only be claimed in the course or furtherance of making taxable supplies. Unless the input tax is denied in terms of section 17 of the VAT act, input tax may be claimed if the amount payable is in respect of making taxable supplies.

If the penalty is in effect interest for a late payment by the debtor, such penalty is not subject to VAT as it is

exempt in terms of section 12(a) read with section 2(1)(f).

28/4/4 – 24 March 2005

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Purchasing and selling of foreign currency Koop en verkoop van buitelandse valuta

Scenario

A vendor carries on the business of purchasing and selling foreign currency to the general public. Its branches are situated throughout the Republic. The vendor supplies the following services to South African residents and to non-residents visiting the Republic, namely the provision of travellers cheques, foreign bank notes, drafts, telegraphic transfers, cash passport and travel insurance. The vendor earns commission and fees on the services it supplies, as well as an exchange rate margin on the sale and purchase of currency.

Question

Will the commission, fees and margin earned by the vendor’s two branches, located in the departure hall at an

International Airport (e.g. Johannesburg) be zero-rated?

Answer

The exchange of currency constitutes a financial service in terms of section 2(1)(a) of the Act. Accordingly, the margin or premium is a consideration for the supply of an exempt financial service in terms of section 12(a) of the Act. Therefore, the price for the underlying supply i.e. the exchange of currency, is exempt from VAT.

The issue, payment, collection or transfer of ownership of a cheque constitutes a financial service in terms of section 2(1)(b). Therefore, the underlying supply i.e. the payment of a cheque, is exempt from VAT in terms of section 12(a).

Any fee, commission or similar charge made by the authorised dealer for performing the financial services contemplated under section 2(1)(a) and (b) is not consideration for an exempt financial service and is therefore subject to VAT at the standard rate in terms of section 7(1)(a). Refer to proviso to section 2(1) of the Act.

The services rendered by branches situated in an international airport are rendered in the Republic and are subject to VAT at the standard rate in terms of section 7)1)(a), even if the branch is situated in the departure lounge on the air side of passport control. Section 11(2)(k) will only apply when the service is physically rendered outside the Republic.

Services supplied to a person ),who is not a resident in the Republic are zero-rated under section 11(2)( subject to certain conditions. Where the service is rendered to a non-resident who is in the Republic at the time of the service, the supply is subject to VAT at the standard rate under section 7(1)(a).

28/8/3 – 07/01/05

‌441

Directors fees Direkteursfooie

Scenario

Mr A is a director of various companies and receives director’s fees in this regard. He has to attend board

meetings and serves on various committees and also acts in an advisory capacity to the companies.

Question

Is Mr A carrying on an enterprise and will he be liable to register as a vendor?

Answer

Mr A is, as regards the earning of directors fees, not carrying on an enterprise as envisaged in paragraph (aa) of proviso (iii) to the definition of “enterprise” in section 1. Accordingly, Mr A will not be liable to register as a vendor for VAT purposes.

28/3/26 – 13 October 2004

‌442

Imported services – foreign bank charges Ingevoerde dienste – buitelandse bankkoste

Scenario

A South African resident invests monies abroad and incurs fees, charges and/or commissions from the foreign

financial institution or foreign agent on his investment.

Question

Is the South African resident liable to declare and pay VAT to SARS on the importation of services in terms of

section 7(1)(c)?

Answer

The fees, charges and/or commissions incurred by the South African resident in a foreign country are as a result of investments made abroad. The services received by the South African resident are consumed in the foreign country and are therefore not imported. Consequently, there is no VAT liability for the South African resident in terms of section 7(1)(c).

However, any RSA vendor charging a fee or commission to a person in the RSA to place or arrange an investment in a foreign country on behalf of the local investor must charge VAT at the standard rate as the services are provided in South Africa.

28/8/2 – 24 March 2005