Input VAT is the VAT that you pay on your purchases and which you can claim back from SARS.
SARS has increased their vigilance with verifying VAT returns. By following the next basic rules about input VAT you can avoid costly penalties levied on mistakes made when completing your VAT return.
1.You must hold a valid tax invoice for all purchases more than R50 on which you want to claim input VAT. The following information must be on the tax invoice:
- The words “Tax Invoice”
- The name and address of the supplier
- The VAT registration number of the supplier
- The date of the tax invoice
- A serial number
- A description of the goods or services
- The value, the amount of tax and the total
NB => where the supply is more than R5,000, the following additional information must also be on the tax invoice
- Your name and address =>this must be the name of your business that is registered for VAT
- Your VAT registration number
- The quantity or volume of goods/services supplied
If you have not yet received the tax invoice for a particular supply, you may only deduct the input tax in the tax period that you obtain the document. However, you must deduct the input tax within a period of five years from the date on which a tax invoice for that supply should have been issued.
2. You must make adjustments to input VAT claimed when the original invoiced amounts changed, for example when you receive discount for early payment or when the original price is increased or decreased.
- The supplier must issue a debit or credit note to you in the above situations. Debit and credit notes must contain similar information to tax invoices.
3. You must pay the supplier within 12 months from the date that you claimed the input VAT on the purchase. If you have not paid the supplier within 12 months, you must pay the input VAT back on the portion which you have not paid. This rule does not apply where there is a written contract which provides for the payment after twelve months. The contract date will then apply.
4. Never claim input VAT on the following purchases unless some special rule applies to you.
- Motor vehicles, station wagons, combis or double cab bakkies (including rentals)
- Subscriptions to sport clubs or other similar recreational clubs
- Rugby or cricket tickets, etc.
- Most entertainment expenses
- Tea, coffee and other refreshments for your staff
- Petrol or diesel (unless you’re a farmer or a fisherman qualifying for diesel refunds)
- Life insurance payments
5. You may claim VAT when you buy second-hand goods to be used in your business from a non-registered person. The following rules must be followed:
- The goods must be second-hand => the goods must have been used and owned by someone else before you bought it. Animals are not second-hand goods.
- You can only claim the input VAT on what you have actually paid. To calculate the input VAT that you may claim => 14/114 x payment
- You must have a copy of the VAT 264 form completed by the seller, to which must be attached a copy of the identity document of the seller (or registration details if the seller is a company, CC or trust) VAT Form 264
6. Remember to claim the input VAT on the following. Quite often our clients forget about these:
- Bank charges => your bank statement will in most instances comply with the requirement of a tax invoice
- Short term insurance payments for your business => make sure your policy contains all the relevant and correct information
- Other monthly debit orders on business expenses, such as payments to your alarm company => you must still hold a tax invoice; insist that they send it to you monthly.
- Bad debts written off => you may claim the input VAT when you write off debt as an adjustment to input VAT. Note that the debt must be written off in your books and you must stop trying to collect it, or you must have handed it over for collection.
For more information on the mechanics of VAT, we recommend you down load the latest version of the SARS Value-Added Tax Guide for Vendors on the SARS Website. Should you come across a complex transaction, or are uncertain about the VAT treatment, contact your tax specialist at NEWTONS.
Source: Lucha Greyling (Partner) Newtons Chartered Accountants.
