Page 389 - Juta's Indirect Tax

IN 40 (2) VaLue-added tax act: InterPretatIOn nOtes IN 40 (2)
• The Supplying CCAE is required to issue a tax invoice to the Receiving CCAE and levy VAT at the zero rate in terms of s 11(2)(k).
• The Supplying CCAE must produce a job card or an order, together with an inventory of the movable goods and equipment which are required in order to perform the services where the services are to be performed in another CCA.
• The Supplying CCAE must complete a VAT267 form.
• The Supplying CCAE must obtain and retain the documentary proof required in terms of s 11(3), read with IN31.
5.26 Supply of xed property situated in a CCA to an IDZ Operator/CCAE
VAT implications for the IDZ Operator
As the vendor is supplying xed property situated in a CCA to an IDZ Operator/CCAE, the supply is subject to VAT
at the zero rate in terms of s 11(1)(mA).
In applying the zero rate the vendor must obtain and retain the relevant documentary proof as determined in terms of s 11(3), read with IN31.
VAT implications for the IDZ Operator/CCAE
There are no VAT implications for the IDZ Operator/CCAE where VAT was levied at the zero rate, unless the xed property is acquired for the purposes of which a deduction of input tax would have been denied in terms of s 17(2), or the xed property is not wholly for consumption, use or supply in the course of making taxable supplies. In this instance, the xed property is deemed to be supplied by the IDZ Operator/CCAE in terms of s 18(10). An output tax adjustment must be made in the same tax period in which the goods were acquired. See para 6.
6. Output tax adjustment to be made where movable goods, services or xed property are acquired by a CCAE/ IDZ Operator at the zero rate/exempt from VAT on importation and a deduction of input tax would have been denied in terms of s 17(2) on such acquisition – s 18(10)
In instances where a CCAE/IDZ Operator acquires movable goods, services or xed property at the zero rate or those goods or services are exempt from VAT on importation and a deduction of input tax would have been denied in terms of s 17(2), such movable goods, services or xed property are deemed to be supplied by the CCAE/IDZ Operator in terms of s 18(10). The CCAE/IDZ Operator must make an output tax adjustment in the same tax period in which such movable goods, services or xed property were acquired in accordance with the formula:
A ×B
in which formula—
‘A’ represents the rate of tax levied in terms of s 7(1); and ‘B’ represents—
a.
b.
or xed property where the provisions of s 17(2) are applicable.
the cost to the CCAE or IDZ Operator of the acquisition of those goods or services which were supplied to the CCAE or IDZ Operator in terms of sections 11(1)(c), 11(1)(m), 11(1)(mA) or 11(2)(k); or
the value to be placed on the importation of goods into the Republic as determined in terms of s 13(2).
The effect of the adjustment is to ensure that the standard rate of VAT is effectively levied on movable goods, services
Example 1 – Movable goods acquired at the zero rate and input tax denied
A CCAE purchases a microwave oven for R2 000 at the zero rate in terms of s 11(1)(m). The microwave oven was acquired by the CCAE for use by employees.
The microwave oven has been acquired for purposes for which a deduction of input tax would have been denied in terms of s 17(2). Therefore, the CCAE is liable to account for output tax on the cost of the acquisition of the microwave oven. The cost to the CCAE of the acquisition of the microwave oven is R2 000.
The output tax to be declared by the CCAE is calculated as follows:
A xB
With ‘A’ being the 14% VAT rate and ‘B’ being the R2 000 cost of the acquisition of the microwave oven—
14% x R2 000 = R280
The CCAE has to account for output tax amounting to R280 in the same tax period in which the microwave oven
was acquired.
Example 2 – Movable goods acquired exempt on importation and input tax denied
A CCAE imports a ‘motor car’ as de ned in s 1 for use in its business activities in a CCA. The customs value, including duty levied in terms of the Customs and Excise Act and the 10 percent upliftment, for the purposes of s 13(2) is R140 000.
As the motor car is being imported into a CCA, the importation is exempt from VAT in terms of s 13(3), read with Item 498.00 in para 8 of Schedule 1.
As the imported goods comprise a ‘motor car’ as de ned in s 1 and an input tax deduction is denied in terms of s 17(2), the CCAE is liable to account for output tax on the value placed on the importation as determined in terms of s 13(2). The value placed on the importation is in this case the customs value for the purposes of s 13(2) of R140 000.
The output tax to be declared by the CCAE is calculated as follows:
A xB
With ‘A’ being the 14% VAT rate and ‘B’ being the R140 000 value placed on the importation— 14% x R140 000 = R19 600
The CCAE has to account for output tax amounting to R19 600 in the same tax period in which the motor car was imported.
Juta’s IndIrect tax 2016 381