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VAT 1 Flashcards

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1
Q

Approach to doing a

question

A

Kill the VAT
Kill the normal tax
Kill the CGT

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2
Q

Types of Supply

A 
Types of Supply
– Taxable Supply
• Standard rated – 14%
• Zero rated – 0% (s11)
– Exempt Supply (s12)
– Non-supply (s8(14))
– Deemed Supply (ss 8, 8A & 18(3))
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3
Q 
Basic Calculations (s16)
• VAT payable or refundable =
A

VAT payable or refundable =
Output VAT xxx
Less: Input VAT (xx)
=Payable or refundable xxx

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4
Q

VAT calculation

A 
VAT calculation
Output VAT
- Input VAT
\+- Adjustments
= Amount owing to/due from SARS*
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5
Q

Using e-filing

A

on/ before the last working day of the following month of

the VAT period

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6
Q

Not e-filing=

A

on/before 25th of the following month of the VAT period

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7
Q

who is taxed on VAT?

A

the final consumer of a good or

service

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8
Q

When to levy output tax 7(1)(a)

A 
Output tax is levied under section 7(1)(a):
- on the supply
- by any vendor
- of goods or services
- in the course or furtherance of an
enterprise
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9
Q

Output tax is also levied under section

7(1)(b) on

A
  • importation
  • of goods
  • by any person
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10
Q

Output tax levied under section 7(1)(c) on:

A
  • supply
  • on imported services
  • by any person
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11
Q

Supply

A 
“supply” includes performance in terms
of a sale, rental agreement, instalment
credit agreement and all other forms of
supply, whether voluntary, compulsory or
by operation of law, irrespective of where
the supply is effected, and any derivative
of “supply” shall be construed
accordingly;
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12
Q

“goods” means

A

means corporeal movable things, fixed
property and any real right in any such thing or
fixed property, and electricity

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13
Q

Goods exclude

A

but excluding—
(a) money (as defined);
(b) any right under a mortgage bond or pledge
of any such thing or fixed property; and
(c) any stamp, form or card which has a money
value and has been sold or issued by the State
for the payment of any tax or duty levied under
any Act of Parliament, except when subsequent
to its original sale or issue it is disposed of or
imported as a collector’s piece or
investment article

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14
Q

“money” means –

A

(a) coins (other than coins made wholly or mainly
from a precious metal other than silver) which
the South African Reserve Bank has issued in
the Republic which remains in circulation, and
any paper currency which is a legal tender
(b) any coin (other than a coin made wholly or
mainly from a precious metal) or paper
currency of any country other than the Republic
which is used or circulated or is intended for
use or circulation as currency;

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15
Q

“money” means.. except

A

when disposed of or imported as a
collector’s piece, investment article or item of
numismatic interest

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16
Q

“services”

A 
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
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17
Q

“services” excludes

A

excluding a supply of
goods, money or any stamp, form or card
contemplated in paragraph (c) of the
definition of “goods”;

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18
Q

Enterprise

A 
In the case of a vendor
any enterprise or activity
carried on continuously or regularly
in South Africa or partly in South Africa
by any person (as defined in s1)
in the course or furtherance of which
goods or services are supplied
for a consideration (as defined in s1)
whether for profit or not
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19
Q

Enterprise

Specifically includes:

A

• Supplies by a public authority where the minister is satisfied and the
commissioner has notified that it is deemed to be in furtherance of
an enterprise (par b(i)).
• Activities of a share block company if they have registered as
vendor (par b(iii)
• The activities of a welfare organisation (par b(ii)) and foreign donor
funded project (par b(v))
• Supply of electronic services from a place in an export company
where at least two of the following are present (par b(vi):
– Recipient of services is a resident in the Republic
– Payment to that person in export country originates from a South African Bank
– Recipient of services has a business, residential OR postal address in the
Republic
• Anything done in connection with the commencement or
termination of an enterprise (proviso (i))

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20
Q

Enterprise

Specifically excludes:

A

• The supply of services by an employee to his
employer for remuneration (proviso iii)
• A hobby (private or recreational pursuit)
(proviso iv)
• Any activity to the extent that it makes exempt supplies (proviso v)
• Commercial accommodation (as def in s1) (see
later) not exceeding R60 000 for a period of
12months (R120 000 after 1 Apr ‘16) (prov. ix)
• Branches (proviso ii) (see later)

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21
Q

sale of exempt supplies in relation

A

Enterprise Specifically excludes this

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22
Q

Enterprise

Specifically excludes: in terms of accommodation

A

Commercial accommodation (as def in s1) (see later) not exceeding R60 000 for a period of
12months (R120 000 after 1 Apr ‘16) (prov. ix)
(ie Enterprise includes accommodation that exceeds 60 000)

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23
Q

Consideration

A
  • Any payment made or to be made
  • In relation to supply of goods or services
  • Including a deposit
  • In money or otherwise
  • Whether voluntary or not
  • Whether by that person or not
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24
Q

Does a Consideration include a deposit?

A

Yes

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25
Consideration (cont.): | • But does not include:
• Donations • Deposits which have not been applied as consideration or forfeited
26
NB! Exam Tip!!! Consideration = typically includes or excludes VAT? Value of supply = includes or excludes VAT.?
Consideration = typically includes VAT | Value of supply = excludes VAT
27
Vendor
Definition of vendor simply states a person that is or has to be registered in terms of the VAT act
28
Compulsory registration: at END of the month where total taxable supplies for PREVIOUS 12 months
exceed R1mill
29
Compulsory registration: at BEGINNING of a month where total taxable supplies for NEXT 12 months
exceed R1mill
30
Compulsory registration: at END of the month where supply of imported electronic services
exceed R 50 k for PREVIOUS 12 months
31
Voluntary Registration: total taxable supplies for PREVIOUS 12 months
exceed R 50 k
32
Voluntary Registration:total taxable supplies for NEXT 12 months after date of registration
exceed R 50 k
33
Voluntary Registration: going concern
intends to carry on enterprise from supply of going concern of which taxable supplies from going concern exceed R5k in 12 months preceding
34
How are Branches & Divisions (s50) treated as vat vendor
``` - Own independent accounting records AND - Separately identified in terms of location or activities = Separate VAT vendor -Not compulsory – choice of the Vendor -All taxable supplies must be added together for R1m determination ```
35
Accounting Basis (s15)
Invoice basis or Payment basis
36
INVOICE BASIS General rule
Earlier of Invoicing; or Receipt of payment
37
Deposit deemed to be consideration if:
It immediately reduces liability (it’s applied) | OR when the deposit is forfeited
38
Exception to the general rule is you are | registered on the payment basis:
Output tax is accounted for, in general, when payments are received and the input tax is accounted for when payments are made.
39
PAYMENT BASIS The following persons may apply (s15(2)):
- Public Authority - Water board - Municipal entity that supplies gas, water or electricity or services consisting of drainage, sewage and garbage disposal or removal. - Municipality - Association not for gain - Person supplying imported electronic services - SABC
40
When can a natural person or partnership apply for PAYMENT BASIS
``` Natural Person or Partnership where: - Total value of taxable supplies for 12 month period was ```
41
``` A person who has voluntarily registered before having made taxable supplies of R50,000 must use which basis? ```
PAYMENT BASIS
42
Where a vendor (other than a public authority or municipality) makes a supply of which consideration is R100,000 or more
such vendor such account for the transaction on an invoice basis.
43
A person who has voluntarily registered before having made taxable supplies of R50,000, but expects to make such taxable supplies in the next 12 months must use the (a)_____basis, but then has to revert to the (b)_____basis once taxable supplies exceeds R50,000, unless they are a Natural Person who applies in writing to stay on (C)______ basis.
a payment b invoice c payment
44
If consideration | = money ; what value ?
Rand value
45
If consideration | ≠ money; use what value
• Open market value
46
A :VAT periods (s27)
Taxable supplies ≤ R30 000 000 Farmers > R1 500 000 2 monthly Jan, March, May…(odd number months)
47
B :VAT periods (s27)
Taxable supplies ≤ R30 000 000 Farmers > R1 500 000 2 monthly Feb, April, June…(even number months)
48
C :VAT periods (s27)
Taxable supplies > R30 000 000 OR specific application OR repeated default 1 monthly
49
D :VAT periods (s27)
Farmers ≤ R1 500 000 Micro businesses (Module 1) Bi-annually February, August
50
E :VAT periods (s27)
Annually (very specific)
51
VAT periods (s27) Taxable supply: R30 mill
Taxable supply: | R30 mill C
52
``` VAT periods (s27) If farmer? ```
Farmers > R1 500 000 A or B | Farmers ≤ R1 500 000 D
53
If repeated default which time period?
C
54
Standard Supply
Every supply that is not zero rated or exempt supply will be at the standard VAT rate @14%.
55
example : Timber Merchant (Pty) Ltd (a VAT vendor) sells timber to a furniture manufacturer for R114 (including R14 VAT). Timber merchant: The timber merchant makes no purchases Manufacturer: The manufacturer uses the timber to make a table, which it sells to a furniture retailer for R342 (including R42 VAT) Retailer: The retailer then sells the table to a consumer for R798 (including R98 VAT) Retailer sells to client
``` Timber merchant : Output R14 Input R0 Payable R14 Manufacturer: Output R42 Input (R14) Payable R28 Retailer Output R98 Input (R42) Payable R56 Client Pays R98 Claimable R0 ```
56
Zero-rated Supplies: Export of movable goods (ss(1)(a)(i)&(ii))
a) Consigned or delivered by the vendor to the recipient at an address in export country, which has documentary proof b) Delivered by vendor to owner or charterer of a foreign-going ship or foreign-going aircraft going to a destination in an export country (includes goods used or consumed on such ship or aircraft) c) Removed by the republic by the recipient or agent of the recipient, however: a) Where such supplier has supplied the good in the republic they may not zero-rate the supply, but b) The tax paid will be refunded when the goods are removed from the republic.
57
Zero-rated Supplies | Export of services (s11(2))
- Transportation - Ancillary services to exported goods - E.g. Insurance on transported goods - Services rendered outside South Africa: - Where a resident physically leaves the country to render the service in the export country. - Services to non-residents: - Must be directly rendered to non-resident - Non-resident must not be in South Africa when services are rendered
58
Zero-rated Supplies Export of services (s11(2)) Services rendered outside SA -who, where
Services rendered outside South Africa: | - Where a resident physically leaves the country to render the service in the export country.
59
``` Zero-rated Supplies Export of services (s11(2)) Services to non-residents: -directly/indirectly - to who, by whom, where ```
- Services to non-residents: - Must be directly rendered to non-resident - Non-resident must not be in South Africa when services are rendered
60
Example: Mr. Smith is a non-resident who is in SA on holiday in the Knysna region. He bought himself an ornament made entirely out of sea shells from a local curio shop. He paid R114 for the ornament. Two weeks later he departs from SA to his home in New York. Explain the VAT consequences for • Mr. Smith; • The curio shop; and • SARS
Mr. Smith • Pays VAT of R14 when buying the ornament from the curio shop • R14 VAT is paid back to Mr. Smith when he “indirectly exports” the ornament to the USA Curio shop Levies VAT on all sales and therefore receives output VAT of R14 that is paid over to SARS SARS Receives R14 output VAT from the curio shop’s sale to Mr. Smith Subsequently pays R14 back to Mr. Smith when he “indirectly exports” the ornament to the USA
61
``` Pentravel (a registered vendor) sells safari packages to Americans for commercial accommodation in the Kruger Park. What are the VAT consequences? A. VAT at standard rate B. VAT at zero rate C. No VAT ```
A The packages would still be services rendered and the non-residents would be physically in the country
62
ABC Accounting Services (Pty) Ltd renders accounting services to Stars & Stripes, an SA branch of an American company. What are the VAT consequences? A. VAT at standard rate B. VAT at zero rate C. No VAT
A Service has to be rendered to Non-Resident OUTSIDE of SA before it can be zero-rated.
63
Easy Tax CC provides a tax opinion to Problems LLC, an entity operating only in the UK. Services are typically delivered via email. What are the VAT consequences? A. VAT at standard rate B. VAT at zero rate C. No VAT
B Services rendered to non-resident who is outside of the country.
64
Other zero rated supply
- Property rates and taxes s11(2)(w) | - Water and electricity
65
Exempt supply
- Financial Services (s2) | - Residential Accommodation (s12(c))
66
``` Financial Services: which are exempt? Issue of share Issue of debt Issue of cheque book Bank charges ```
Issue of share -exempt Issue of debt -exempt Issue of cheque book- Standard-rated Bank charges-- Standard-rated
67
A ‘dwelling’ is defined as
• any building, premises, structure or other place or part thereof • that is intended for use predominantly as a place of residence or abode of any natural person, • including fixtures and fittings belonging thereto and enjoyed therewith,
68
A dwelling excludes
where it is used in the supply of commercial | accommodation.
69
Exempt Supply: Residential Accommodation (s12(c)) excludes
Excluding hostels or hotels

Tax (7 decks)

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