Two types of registrations

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1 VAT Basics Presented by: Mariëtte Muller [B Compt Hons, CTA, AGA (SA), Professional Accountant (SA), GTP (SA), CET, PCT] Presented by: Lynette Badenhorst CA (SA) and RA Two types of registrations Compulsory Voluntary Taxable turnover > R 1 mil in any 12 month period Include zero rated supplies, exclude exempt supplies Turnover < R 1 mil Turnover > R excluding welfare organisation, local authority, or share block company (commercial accommodation R ) SARS may not refuse Start up business with expectation of > R turnover Page 1 of 39

2 Registration: Amendments Compulsory registration Threshold of R1 million has been exceeded, or Total value of taxable supplies in terms of a contractual obligation in writing during the 12 month period calculated from the commencement of a given month will exceed R1 million Voluntary registration Current R threshold remains Small business with less than R taxable supplies in a 12 month period will be allowed to register only on the payment basis Switch-over to invoice basis permitted after R threshold is reached Can choose to remain on the payment basis up to taxable supplies of R 2.5 mil SARS may deregister the person of taxable supplies have not reached R after 12 months VAT registration of E-commerce suppliers Foreign suppliers of e-commerce services to SA customers not previously obliged to register as VAT vendors as they transact wholly over the internet and have no physical place of business in SA Place of supply rule introduced to ensure that foreign suppliers of electronically supplied services register for VAT in SA Enterprise to include the supply of electronically-supplied services by a person: To a resident of the Republic; or Where one or more payments to that person originates from SA bank Required to register at the end of any month where the total value of taxable supplies made has exceeded R E-commerce suppliers will be allowed to register on the payment basis Effective for supplies on or after 1 April 2014 Page 2 of 39

3 VAT registration of E-commerce suppliers (cont.) The registration requirements apply to any supply of electronic services in the course or furtherance of an enterprise carried on by a person in an export country where at least two of the following circumstances are present: a) The recipient of those electronic services is a resident of the Republic; or b) Any payment to that person in respect of such electronic services originates from a bank registered or authorised in terms of the Banks Act, 1990 (Act no. 94 of 1990); or c) The recipient of those electronic services has a business address, residential address or postal address in the Republic. VAT registration of enterprise supplying commercial accommodation Commercial accommodation means: lodging or board and lodging, together with domestic goods and services, in any house, flat, apartment, room, hotel, motel, inn, guest house, boarding house, residential establishment, holiday accommodation unit, chalet, tent, caravan, camping site, houseboat or similar establishment, which is regularly or systematically supplied, but excluding a dwelling supplied in terms of an agreement for the letting and hiring thereof. Where a person carries on or intends carrying on an enterprise or activity supplying commercial accommodation, and the total value of taxable supplies in the preceding period of 12 months or which it can reasonably be expected that that person will make in a period of 12 months, will not exceed R (previously R ) shall be deemed not to be the carrying on of that enterprise. Page 3 of 39

4 Home-owners associations The supply of services by a home owners association to any of its members will be an exempt supply Home owners associations that are currently on register and become liable to deregister for VAT may pay over the VAT liability in 6 monthly equal instalments Applies i.r.o the supply of services on or after 1 April 2014 Exempt supplies Sole supply of exempt goods or services Does not qualify as an enterprise No need to register Page 4 of 39

5 SARS may refuse registration SARS must provide reason No fixed business or residential address No proper accounting records No bank account Previously registered and failed to comply How to register Complete VAT 101 Signed by applicant Submit in person Use blue or black pen only Use block letters, one character per block Full and accurate disclosure Misrepresentation, neglect, false information could lead to prosecution Supporting documents to prove turnover Audited financial statements Awarded tender contracts Signed contracts Sale agreements Signed lease agreements No cashflow projections or business plans accepted Other supporting documents Copy of ID s Original cancelled cheque or original letter from bank Copies of bank statements for past 3 months Power of Attorney from practitioner Copy of municipal account and or lease agreement Copy of certificate of incorporation Page 5 of 39

6 Registration process No longer needed to fill in VAT101 Follow process on E-filing Still need to arrange an interview with SARS Remember supporting documents for interview Power of attorney for tax practitioner to register the client for VAT purposes (can be found on the SARS website) A letter of authorisation to do the interview at SARS A letter stating who will be the representative for the client at SARS if they have more than one member or director The most recent company documents CK/CoR Certified ID Copy of members or directors not less than three months old Original letter from bank not older than 1 month confirming bank account in the name of company with bank stamp (PLEASE NO COPY) (Cancelled check no longer allowed) Most recent bank statement (Not older than week) also with date stamp Supporting invoices/contracts/agreements to prove the revenue for VAT registration purposes Most recent proof of address for business (if this is not in the name of the business, but in the name of a director/member, then they need to complete a CRA01 form this can be found on the SARS website) Proof of residence of members/directors Separate registration Warning Sec 50A Three requirements for separate registration Same tax periods Same accounting basis, but separate accounting records Branches separately identifiable with reference to nature of activities or location International branches are excluded Each branch will have own VAT registration number to account for VAT separately Page 6 of 39

7 Failure to register Guilty of an offence Fines Imprisonment not > 24 months Interest and penalties 10% 200% additional tax (REPEALED) Interest at prevailing rate Liable for output tax No right of recovery Cancellation of registration SARS may cancel in the following circumstances Cancellation requests must be in writing Voluntary: < R By SARS: < R Ceases to carry on enterprise with no intention to conduct any business in next 12 months: Advise SARS within 21 days Form of a letter or VAT 123 form Exit tax. Lowest of cost or market value of all assets > R may pay over 6 months Migration to turnover tax Total value < R , no exit tax payable. May pay over 6 months Business is sold Page 7 of 39

8 Definition of a vendor Sec 1: Any person who is required to register Natural person Public authorities and municipalities Company or trust Any body of persons e.g. partnership Estate of deceased or insolvent person / Foreign donor funded project In the course of furtherance Transaction should constitute a supply of goods or services by a vendor in the course of furtherance of an enterprise Any enterprise or activity Carried on continuously or regularly In/partly in South Africa By any person In the course of furtherance Goods or services supplied for consideration (not only money e.g. barter transaction) Whether or not for a profit Page 8 of 39

9 Specifically included Anything in connection with commencement or terminations (selling the business) Activities of welfare organisations Share block companies (if they so select) Associations or clubs Independent contractors (Also when PAYE is deducted) Examples of enterprises Ordinary businesses Trade and professions Public authorities Non-profit bodies Foreign businesses Shops, contractors, manufacturers, wholesalers and hotels Builders, engineers, doctors, accountants, attorneys Municipalities Welfare organisations, societies, associations and sport clubs If they trade in South Africa (conferences, concerts etc.) Page 9 of 39

10 Excluded activities Excluded Director Commercial accommodation < R Private or recreational (Hobbies) Supply of exempt goods Road Accident Fund Services rendered by employee Local authorities Deemed to carry on enterprise Electricity Gas, drainage, sewerage and garbage VAT levied VAT is not levied on property taxes Page 10 of 39

11 Five categories of tax payers A & B C D Turnover in 12 month period < R 30 mil Account for VAT every second month A = Jan, Mar, May, Jul, Sep, Nov B = Feb, Apr, Jun, Aug, Oct, Dec Turnover > R 30 mil per annum Account for VAT monthly Inform SARS within 21 days Farmers, farming enterprises. Micro businesses and associations not for gain carrying on farming activities Turnover < R 1.5 mil in 12 month period Account for VAT every 6 months Feb and Aug Five categories of tax payers (cont.) E Letting of property, renting of movable goods to/ administration / management fees of companies which are connected persons All connected companies must be registered vendors Tax invoice only issued one a year Payment only due ay end of year of assessment Written application to SARS for approval Include type of business activity, written confirmation that supplies are only to connected persons Submit copy of agreement Use VAT 121 form on SARS website Page 11 of 39

12 Five categories of tax payers (cont.) Rules Always apply in writing Advise SARS immediately of any changes Inform SARS immediately if turnover > R 30 mil per 12 month period Change of category Make written application Not possible to back date Must use same period for 12 months Changes in VAT status Obliged to inform SARS of any changes Name, address, constitution or nature of principle enterprise Name of and address at which enterprise is carried on Turnover > R 30 mil in 12 month period Farmer where turnover > R 1.5 mil in 12 month period Turnover > R 2.5 mil on payment basis Composition of membership of partnership or joint venture.(not when shareholding in company changes) Appointment or resignation of representative vendor Inform SARS within 21 days from change Page 12 of 39

13 Payment basis vs. invoice basis Payment basis Must apply in writing Sole traders or partnerships Turnover, R 2.5 mil in 12 month period From 1 July 2006: Public and local authorities not for gain e.g. water board and Eskom No limit on turnover VAT paid when payment is received or made Exclusions: Single transaction > R , installment credit agreements, and sale of fixed property. Invoice basis All other enterprises (Companies, trusts, CC s and other legal entities) Accounted for at earliest of time of payment or invoice Output VAT must be accounted for if invoice is not paid within 12 months Taxable supplies Standard rated 14% Supplies of goods and services made in SA Importation of certain goods and services Zero rated (0%) Can still claim input tax Exported goods where seller delivers in export country Certain foods Brown bread/ flour but not bran Disposal of enterprise as going concern Gold to reserve bank, SA mint and banks Supply of goods to a branch or main business in export country Petrol, diesel, paraffin To certain VAT registered farmers International transport Services physically rendered in export country Page 13 of 39

14 Exempt supplies Sec 12 No VAT is levied Not part of taxable supplies No need to register/ complete VAT returns No input tax may be claimed Mixed supplies: Apportion Financial services e.g. life insurance Association not for gain of supplying goods which were donated to it Rental of residential accommodation, including employee housing Sale or letting of land outside SA Educational services e.g. school fees Transport of passengers in SA Caring for children e.g. crèche Share block and body corporate levies (Excluding home owners associations) Trade union membership fees Time of supply Rules Connected persons Earlier of date of invoice or payment. Date of delivery or providing service not important Any payment will trigger VAT liability for full value, unless payment is in terms of an agreement (progressive supplies) Payment of deposit not regarded as payment until applied as part payment Goods to be removed: Time of removal of goods Goods not to be removed: When made available to recipient Services: When performed If invoice issued before date of return than general rule apply Page 14 of 39

15 Time of supply (cont.) Rental agreements Any agreement for letting of goods Excluding installment sale or finance lease Lessor remains responsible for risk of damage, repair or maintenance Supplied in terms of agreement: Earlier of date on which payment is due or received Supplied progressively or periodically: Earlier of payment received or invoice issued Consideration is the amount of the rental payment Time of supply (cont.) Instalment sale agreements Earlier of time of delivery or time of payment Suspensive sale agreements and finance leases Installment credit agreement factors: Goods sold for determinable amount at a determinable future date In whole or in installments over a period in future Total amount includes finance charges Total amount paid exceeds value of supply Purchaser does not become owner by virtue of delivery/use Consideration is the cash value Cost (including VAT) Page 15 of 39

16 Time of supply (cont.) Fixed property Earlier of date of registration or payment date Deposit is not treated as payment of any part of purchase price Installments: Claim in proportion to amount paid, irrespective of date of transfer Transfer duty is not payment for consideration Time of supply (cont.) Services supplied for contingent consideration Current rule applies to supply of goods Extended to: Services are supplied under an agreement and consideration is not determined at the time that the service are rendered or performed Supply is deemed to take place: When and to extent that any payment i.t.o agreement is due or received; Or an invoice relating to supply is issued; Whichever is the earliest Effective for services supplied on or after 1 April 2014 Page 16 of 39

17 Calculating the VAT liability Formula: The Basic VAT calculation is as follows: Output tax XXX Input tax (XXX) Add/Less Adjustments XXX/(XXX) =VAT payable/refundable XXX Input tax vs. output tax Input tax Output tax Tax payable by a vendor on supplies made to him For purposes of consumption (wholly or partly, use or supply in course of making taxable supplies VAT must have been charged at 14% No input VAT on salaries and wages Tax levied when vendor supplies goods and services in the course of conducting an enterprise Account for VAT on All taxable supplies of goods and services Standard rated or zero rated Page 17 of 39

18 Change in use calculations Definition Calculation that results in additional amount of output tax to be paid or input tax that may be claimed Circumstances Change the use of goods e.g. From business use to exempt supplies or private use From exempt supplies or private use to business use Important note If the change in use is less than 5% of total use, no adjustment needs to be made Change in use calculations (cont.) Output tax adjustments Acquired entirely for business purposes and input tax was claimed. Now used for private use or exempt supplies. Capital goods: Cost > R used only partially for taxable supplies with annual decrease of > 10% of taxable use Customs controlled area enterprise acquired goods or services where VAT is levied at 0% A going concern is acquired at zero rate and is subsequently applied for purposes other than making taxable supplies Input tax adjustments Acquired goods or services for nontaxable purposes, partially taxable, now used as taxable supplies Own capital goods with cost > R which are used only partially for taxable supplies with an annual increase of more than 10% of taxable use VAT was paid and no input tax was claimed Second hand goods purchased and no input tax was claimed Car was acquired and input tax was denied. Subsequently converted to game viewing vehicle or hearse (24 January 2005) Page 18 of 39

19 Output tax adjustments Output tax adjustment Capital goods used partially for taxable supplies 14/114 x lowest cost or open market value of goods = output tax amount due to SARS 14/114 x lowest of cost or open market value x (old use % less new used %) = output tax payable to SARS Customs controlled areas 14% x cost of goods or import value = output tax due to SARS Going concerns acquired at zero rate Cost/open market value x % intended non-taxable use x 14% SARS uses the tax fraction 14/114 rounded off to five decimal places: Input tax adjustments For change in use Capital goods used partially for taxable supplies Second hand goods purchased and no input tax was claimed Motor cars subsequently converted into hearses or game viewing vehicles 14/114 x lowest of cost or open market value x % taxable use = input tax deduction 14/114 x lowest of cost or open market value x (new use % less old use %) 14/114 x lowest of cost or open market value x % taxable use x % total consideration paid 14/114 x lowest of cost or open market value of car a day before the conversion Page 19 of 39

20 The VAT Declaration form Dynamic VAT Vendor Declaration form Landscape format with additional fields: Demographic information Declarant s signature Payment Reference Number (PRN) Tax practitioners details (Effective 2 December 2011) VAT fraction : 5 decimal places Requesting VAT 201 forms From 1 April 2011 Copies not accepted Failure to request timeously will result in penalties and interest Payment Reference Number 19 Digits Pre-populated Link actual payment to VAT form Will change each month Completing the VAT 201 return Supporting documentation Supporting documentation Important Retain all invoices and supporting documentation Do not submit until requested by SARS Direct data flow channel Even if there is no VAT liability or refund, if registered a return must still be submitted Keep for 5 years e@syfile VAT channel Go over calculations again and double check all entries Page 20 of 39

21 Payment of VAT Payment to SARS office Local branch between 8:00 and 15:00 on weekdays (From 1 May 2011 On or before 25 of month Use drop box in hall No cash accepted since April 2010 May not use SARS abbreviation Only cheques < R Payment by post Use with caution Must reach SARS on or before 25 th Only cheques < R Deposit at a bank SARS banking details are printed on return 19 digit reference number must be entered on deposit slip Absa, FNB, Nedbank or Standard Bank Payment of VAT (cont.) Payment by debit order Not allowed since 1 July 2011 May use for e- Filing purpose E-filing Free of charge Allowed to submit VAT 201 return and payment up to including the last business day Internet banking ABSA, CitiBank, FNB, Investec, Mercantile Bank, Nedbank and Standard Bank PRN required Page 21 of 39

22 Payment limits Electronic funds transfer Cheque R 5 mil R Abbreviation SARS will no longer be accepted E-filing No limit Penalties for late payments Penalties and interest Notify SARS in writing Automatically generated Penalty is 10% of outstanding VAT obligation Interest at prevailing rate Payment allocated first to settle penalty and then to pay for VAT Interest will be charged from the first day of the following month Exceptions If late payment was not intentional to avoid or postpone legitimate payment Interest only remitted if: circumstances beyond the vendor s control (from 1 April 2010) Page 22 of 39

23 Refunds Refunds SARS must refund within 21 days If not paid within 21 days interest must be paid Interest calculated after 21 st day of business Lodging of service complaint SARS must do audit within 21 days The vendor and documentation must be available Reasons for delays Outdated banking details Outstanding returns Outstanding payments to SARS Supporting documents outstanding Refunds (cont.) Payments by SARS From 1 January 2002 only direct electronic transfers No cheques will be issued Ensure SARS has correct banking details Nominee bank accounts Not allowed any more Page 23 of 39

24 Tax invoices Invoice Tax invoice Document that notifies a person of his/her obligation to make payment Special document which is required in terms of VAT Act To enable a person to claim an input tax credit i.r.o taxable supplies made Issue to recipient within 21 days Always denominated in SA currency Full tax invoice for zero rated supplies Type of tax invoices Transactions below R 50: No tax invoice Retain some kind of documentary evidence Consideration > R 50 but < R 5000: Abbreviated tax invoice: Consideration (VAT included) > R 5000: Full and proper tax invoice Page 24 of 39

25 Valid tax invoice Requirement for valid tax invoice The words tax invoice, VAT invoice, or invoice Name, address and VAT number of supplier Name and address of the purchaser + VAT number Serial number of invoice Date Description and quantity of goods Amount of VAT, or statement that VAT is included in the price and the rate Electronic invoices Rules for issuing electronic invoices Can issue electronic invoices, credit notes and debit notes Same rule apply as for hard copy invoices Recipient must confirm in writing that they are willing to receive electronic tax invoices Keep written confirmation for 5 years Encrypted with 128-bit encryption technology Hard copies printed must bear the words computer generated copy tax invoice No other tax invoice may be issued unless marked copy Page 25 of 39

26 Second hand goods Name, address and identity number of the supplier, confirmed by the person s identity document or passport. (If the value of the supply is equal to or greater than R1 000, a copy of this document must be retained by the purchaser. If the nonvendor is a juristic person, a letterhead or similar document stating the name and registration number of the juristic person is required) Date of acquisition Quantity or volume of goods Description of the goods Total consideration paid for the supply Declaration by the supplier stating that the supply is not a taxable supply Copies and Photostats Rules May only issue one original tax invoice Copies must clearly indicate that they are copies Page 26 of 39

27 Record keeping What records to keep a record of all goods and services supplied, received and imported details of any agents acting on your behalf and transactions concluded through agents of the applicable rate of tax on all supplies made and received the accounting instruction manuals and the system and programme documentation tax invoices bank deposit slips and bank statements invoices, receipts and cash register tapes (z-readings) data in any electronic form, including computer printouts ledgers, cash books and journals and all other books of account/ accounting charts, access codes, program documentation & system instruction manuals debit and credit notes Record keeping (cont.) What records to keep cont. contracts/sale agreements paid cheques and cheque books stock sheets and control lists documentary proof to apply the zero rate (including export documentation) debtors and creditors lists (in respect of a change in accounting basis) records of all importations and the customs documents relating thereto any other documents which would be considered necessary to verify transactions Page 27 of 39

28 Record keeping (cont.) Format of documentation Keep originals of all documentation Hard copy or paper form Apply to SARS to use microfilm copies or computer tape records, laser or CD s Electronic copies A proper audit trail must be maintained Equipment to reproduce paper copies of the scanned document Paper copies of scanned document must be marked as copy Maintain effective index of scanned documents Database must not permit any alteration or manipulation Good quality and allow for easy reading Second-hand goods Notional input tax Requirements Excluded VAT that can be claimed on the purchase of second-hand goods bought from non-vendors Concession only applies to second-hand goods and not services Goods must be previously owned or used The goods must be situated in SA The seller must be a resident of SA Animals Gold coins From 1 April 2015, gold and goods containing gold Prospecting/mining and explorations rights Page 28 of 39

29 Second hand goods (cont.) VAT 264 Records Examples of business Keep records for all purchases > R 50 Name and Id number of the seller Copy of sellers ID If company: name and ID of person representing the company, company registration number, copy of company letterhead, Address of the seller Date off the purchase/transaction Description of the goods Quantity or volume Amount paid Scrap metal dealers Motor vehicle dealers Pawn shops Accommodation Residential Flats, apartments, houses etc. Rental income exempt from VAT Do not register Commercial Rental income attracts VAT at 14% Commercial accommodation Hotel, flats, guesthouse, caravan park attracts VAT at 14% Cleaning, electricity, air conditioning, telephone, TV, furniture and meals attracts VAT at 14% if charged separately Page 29 of 39

30 Accommodation (cont.) Long term stay Longer than 28 days Only 60% of all inclusive charge will be subject to VAT Voluntary registration between R and R 1 mil Domestic goods and services Meals, furniture, fittings, telephone, television, radio, cleaning, maintenance, electricity, gas, air conditioning, laundry, heating Foreign tourists Don t get any concessions for goods or services consumed in South Africa Can claim VAT back from the VAT Refund Administrator Bad debts Rules for claiming back VAT on bad debts Only allowed if registered on invoice basis Claim back output VAT relating to bad debt as input VAT in the VAT period during which the debt was written- off Cannot claim on provision. Debt must be written- off No VAT on interest charged Bad debts recovered Pay VAT recovered to SARS in period in which amount is recovered Page 30 of 39

31 Business travel Condition Employee must have spent at least one night away from his usual residence and place of business, in the line of his duties Air travel Domestic. Claim input VAT Foreign: Zero rated. No input VAT Car rental Cannot claim on rental Claim on insurance Meals Claim input tax when bill forms part/does not form part of accommodation e.g. person eats in the hotel (New sec 17(2)(a)(ii)) When clients are taken to dinner no input tax can be claimed Cannot claim for spouses travelling with Club subscriptions Subscriptions not allowed Country club memberships Amateur sporting association like gymnastics Holiday clubs Tea clubs Stokvel savings clubs Professional subscriptions Can claim if paid to professional organisation relating to business SAICA, IRBA Only if legal obligation exists in terms of employment contract Magazines and trade journals Can claim if related to enterprise Page 31 of 39

32 Inter-company loans Where a vendor acquired goods or services on credit and has not made payment for such goods or services within a period of 12 months, the vendor is obliged to account for output tax in respect of the unpaid consideration for the supplies. This also applies to group companies where there is often a group services company that acquires and on- supplies goods or services to group companies on loan account. It is proposed that the 12 month claw back period be repealed for intra-group debt, until the debt is either cancelled or the debtor no longer forms part of the same group of companies as the creditor. The creditor will further only be entitled to claim bad debt relief if the creditor can substantiate that the debtor paid the VAT to the SARS. No provision is made for the situation where the group company debtor has already made an adjustment in respect of past transactions older than 12 months. Insurance The payment of short term insurance premiums to insure premises, assets or stock against theft, damages or fire is a common business expense and part of running the business. The VAT on the premiums can be claimed as input tax. Please note: In the event where payment is received from the insurance company for a claim, output VAT on the amount received must be accounted for and paid over to SARS. The calculation will be the amount received multiplied by 14/114. No output tax calculation is necessary if the insurance company only replaces the goods. Input VAT can only be claimed on the premiums paid on short term insurance and not on the premiums paid for long term insurance. Long term insurance is seen as an exempt financial service. This means that no VAT will be levied and therefore no input VAT may be claimed. Please note: If commission is paid to a broker for the administration of long term and short term insurance the commission will be subject to 14% VAT. Input tax can be claimed on commission paid. Page 32 of 39

33 Motor vehicles Motor cars Motor car, kombi, double cab, bakkie or station wagon: Cannot claim input tax Three or more wheels Mainly for carriage of passengers If you sell one of these don t account for output tax Excluded from definition Can carry only 1 person/more than 16 people Unladen mass of 3500kg or more Caravans and ambulances Constructed for specific purposes Game viewing vehicles Hearses Motor vehicles (cont.) Commercial vehicles Bakkie, panel van, bus that seats more than 16, game viewing: Can claim input tax Other expenses Insurance, tyres, repairs, services, toll fees: Claim VAT Licenses and traffic fines: Cannot claim Petrol and diesel: Zero-rated: Cannot claim Question: A taxpayer purchased a Ford Figo (classified as a motor-car in terms of the VAT Act). The taxpayer converts the car into a panel van which is used for delivery purposes. May input tax be claimed? Page 33 of 39

34 Fringe benefits Motor car Bakkies Meals to staff World cup 0.3% of VAT exclusive cash cost per month Interest is excluded 0.6% of VAT exclusive cash cost per month Interest is excluded Meals and refreshments to staff: Declare output tax Nil value before 11 July 2011 T-shirts, soccer jerseys and match tickets Entertainment Entertainment Expense seen as entertainment are denied Definition of entertainment The provision of any food, beverages, accommodation, entertainment, amusement, recreation or hospitality of any kind by a vendor whether directly or indirectly to anyone in connection with an enterprise carried on by him Page 34 of 39

35 Entertainment Not allowed Refreshments Canteens (no recovery) Gifts for staff Traffic fines Office Christmas function (meals, venues, band, entertainer) Other office parties Country club memberships Team building expenses Golf days Lunch or dinner bills for clients Equipment / furniture or utensil used in kitchen or canteen Capital purchases (holiday homes, yachts) Allowed Flowers to staff who are in hospital or sick or at funerals (VAT ruling 43) Staff canteens if recovered Vendors whose business is provision of entertainment Expenses incurred by welfare organisations Sport and recreational facilities provided by local authorities Prohibited input tax on entertainment Prohibition n/a where meals and refreshments are provided to passengers/crew by a vendor in conjunction with taxable transport services Entertainment such as movies and electronic games supplied on-board a plane or ship falls under entertainment and is ancillary to the trip Amendment allows input tax deductions for a vendor supplying entertainment if: The entertainment is ancillary to air or sea travel, and It is provided at no additional charge All entertainment supplied by a vendor on board a ship or aircraft will be allowed as a deduction for input tax purposes Applies to all supplies made on or after 1 April 2014 Page 35 of 39

36 Gifts and awards to employees Promotional gifts Input tax is allowed VAT ruling 92 Where it is given to clients no output tax is levied because no consideration is charged Rewards Cannot claim input tax Sale of business as going concern Requirements The whole business, or a separate part that can be run as a stand-alone business, must be sold All the assets necessary to run the business must be sold The business must be operational and income earning at the time it is sold The sale agreement must state that the business is sold as a going concern at a zero rate The sale agreement must be in writing A non-vendor can t sell any property as a going concern Both parties must be VAT vendors Page 36 of 39

37 Club subscriptions Subscriptions not allowed Country club memberships Amateur sporting association like gymnastics Holiday clubs Tea clubs Stokvel savings clubs Professional subscriptions Can claim if paid to professional organisation relating to business SAICA, IRBA Only if legal obligation exists in terms of employment contract Magazines and trade journals Can claim if related to enterprise Offences and penalties Fine or imprisonment of 24 months Non-compliance or contraventions Failure to register as a VAT vendor if the turnover exceeds R Advertising prices and issuing quotes exclusive of VAT Refusing to furnish, produce or make available any information or document if so requested by SARS Failure to reply to questions truly and fully Hindering, obstructing or assaulting any SARS officer Failure to notify SARS within 21 days of a change in status of the vendor e.g. change in address Issuing more than one tax invoice for the same supply Not supplying a recipient with a tax invoice, credit note or debit note Using an electronic or digital signature of any other person in any electronic communication to SARS for any purpose, without the consent and authority of such person Page 37 of 39

38 Offences and penalties (cont.) Fine or imprisonment of 60 months VAT evasion offences Making a false statement or entry on the VAT return Sign any statement or return without reasonable grounds for believing it to be true Give any false answer, whether verbally or in writing, to any SARS request for information Falsification of any records Making of a false statement for the purpose of obtaining a refund Knowingly issue a tax invoice for a fictitious supply Questions? Probeta Tel: +27(11) Fax: +27(86) info@probetatraining.co.za Page 38 of 39

39 2017, Copyright, ProBeta Training (Pty) Ltd This work and any seminar related thereto are protected by copyright laws and international treaties. This work includes, but is not limited to, seminar content, images, illustrations, designs, icons, photographs, audio clips, video clips, articles, documents, plans and other materials and is the exclusive property of ProBeta Training (Pty) ltd. You may not copy, reproduce, republish, upload, display, prepare derivative works, report, post, transmit, or distribute materials in any form, whether electronic or otherwise without ProBeta Training (Pty) Ltd s prior written consent. A party infringing such copyright may be liable to a civil claim and/or criminal proceedings in certain circumstances. Disclaimer This work or the seminars related thereto are not intended to constitute professional advise. The views expressed are those of the auditor and the presenter. While reasonable care has been taken to ensure the accuracy of this publication and the presentation thereof, the author and the presenter expressly disclaim liability to any person relating to anything done or omitted to be done, or to the consequences thereof, in reliance upon this work or the views expressed by the presenter. Seminar material is for the sole use of the participant and is the copyright of ProBeta Training (Pty) Ltd. Page 39 of 39