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Have You Claimed All Your VAT Inputs?

Have you claimed all your business VAT inputs when you were first registered for VAT?

Did you know you could claim VAT on goods and services you held when you were VAT registered?

Have you ever heard of section 18(4) of the VAT Act?

Here is some advice if you answered NO to any of the above questions!

VAT ACT: Section 18(4)

In layman’s terms, Sec 18(4), of the South African VAT Act allows a VAT vendor to claim VAT on goods and services which they held on the date they were registered for VAT under the change of use section on the VAT201 return. All tax laws are very technical in nature, therefore, this is our attempt to simplify S 18(4) to enable newly registered VAT vendors to utlise this very important Input VAT credit that your business might be able to qualify for.

The following criteria is applicable to support your successful claim

  • The goods or services must be held on or after the 30 September 1991;
  • It had to be held for exempt, private or other nontaxable purposes initially;
  • It was then subsequently applied by the vendor to make taxable supplies;
  • The deduction is calculated applying the tax fraction (14/114) to the lesser of adjusted cost or open market value of goods and services. (currently –  will change to 15/115 from 01 April 2018 onwards)

In simple terms, it means that taxable supplies will result in output vat revenue to SARS, but these taxable supplies will be generated from goods and services purchased that the entity would have been entitled to an input VAT deduction. It is deemed that the business has purchased the goods and services on the date of VAT registration and can now claim the input VAT.

Be watchful! not all goods and services are allowable for an input VAT credit.

The deduction will not apply if the input tax is denied or would have been denied if it was acquired after the 30 September 1991, for example, you can not claim input VAT on double cab bakkie.

The value of the deduction is for the lesser of adjusted cost or open market value on the date of VAT registration.

No Adjustment is applicable were –

  • the vendor is public authority or constitution were the acquisition was made before 1 April 2005
  • the vendor is a municipality and the goods or services were acquired before 1 July 2006

Example – Change in use from private (non-taxable) to taxable purposes

A vendor purchases a single cab bakkie for private purposes on 1 March 2011. The bakkie costs R228 000 including VAT (excludes finance charges and any other charges incurred). The vendor then decides to use the bakkie exclusively in his business for delivery of goods to his/her customers with effect from 1 March 2015. At the time of introducing the bakkie into the business, it had an open market value of R205 200. Assuming the vendor is a Category B vendor, the vendor will in the April 2015 tax period, now be entitled to deduct, in addition to other input tax deductions, an amount of 14 / 114 × R205 200 = R25 200

South African VAT rate increases to 15% from 01 April 2018

The Minister of Finance announced an increase to the Value-Added Tax (VAT) rate from 14% to 15% in the recent Budget Speech delivered on 21st February 2018.

This increase will require an adjustment to the Output and Input VAT structures across all South African businesses.

Are your business and accounting system equipped to handle this change with ease? The Fun Accountant’s Sage One Online Accounting solution is taking care of this change with ease. Contact us or leave a comment for more information.