Page 395 - Juta's Indirect Tax

IN 41 (3) VaLue-added tax act: InterPretatIOn nOtes IN 41 (3) in a consecutive 12-month period or under certain instances where such person has not reached the R50 000 threshold
but has met certain requirements, can voluntarily register as a vendor for VAT purposes.*
3.1.2 Output tax
Output tax refers to the tax levied by a vendor on the taxable supply of goods or services. The output tax is determined by applying the standard rate of VAT (currently 14%) to the value of a supply of goods or services. For example, if the value of supply is R500, the VAT will be R70 (R500 × 14%). Output tax on an amount charged (consideration) for the supply of goods or services which includes VAT at 14% is determined by applying the tax fraction (14/114) to the consideration. For example, if the charge including VAT is R500, output tax included in the amount is R61,40 (R500 × 14 / 114).
3.1.3 Deemed supplies
A vendor may sometimes be required to declare an amount of output tax even though it has not actually supplied any goods or services. Section 8 contains deeming provisions which widen the range of transactions subject to VAT and clarify the instances when certain transactions will be deemed to be taxable or not. Relevant to this Note is section 8(13) and (13A) which contains deeming provisions particular to the gambling industry.
Under section 8(13), where a person bets an amount on the outcome of any other event or occurrence, the person with whom the bet is placed is deemed to supply a service to the person placing the bet. As a result, the person with whom the bet is placed is required to account for output tax on the amount received.
In addition, section 8(13A) provides that a vendor, who makes supplies under section 8(13) and who receives a prize or winnings as a result of placing a bet with another vendor, is deemed to supply a service to the other vendor.
3.1.4 Input tax and deductions
The term ‘input tax’ as de ned in section 1(1) refers to the tax paid by a vendor on the acquisition of goods or services that are to be consumed, used or supplied by that vendor either wholly or partly in the course of making taxable supplies. The VAT incurred on goods or services that are acquired partly for the purpose of making taxable supplies and partly for some other purpose (for example, exempt or out-of-scope supplies or private use), quali es as input tax to the extent that the goods or services are acquired for the purpose of making taxable supplies. The apportionment method as contemplated in section 17(1) for determining the ratio is determined by the Commissioner in accordance with a ruling as contemplated in Chapter 7 of the Tax Administration Act, No. 28 of 2011 or section 41B. The VAT incurred in the course of making exempt or other non-taxable supplies does not fall within the de nition of the term ‘input tax’.
A vendor may deduct ‘input tax’ from the amount of tax payable in respect of a tax period under section 16(3)(a), subject to the requirements in sections 16, 17 and 20 being met.* However, the proviso to section 16(3)(a) speci cally excludes the deduction of input tax under this subsection on goods or services acquired by a vendor for the purposes of awarding such goods or services as a prize or winnings. In this regard, the vendor would only qualify for a deduction under section 16(3)(d), as discussed below.
Section 16(3) also makes provision for certain other deductions* to which a vendor is entitled in calculating the VAT payable or refundable for a speci c period. Deductions speci c to the gambling industry are contained in section 16(3) (d) and (e).
Section 16(3)(d) allows a deduction equal to the tax fraction of amounts paid by a supplier of betting services contemplated in section 8(13) as prizes or winnings to the recipient of the betting services.
Under section 16(3)(e), a vendor making the payment of betting tax may deduct an amount equal to the tax fraction of such payment.
3.1.5 Entertainment
The term ‘entertainment’ is de ned in section 1(1) as 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.
3.2 Horseracing industry
3.2.1 Racing operators
The principal activities of racing operators in SA are to –
• operate racecourses and training centres in South Africa for the bene t of the thoroughbred racing industry; and • operate wagering outlets to facilitate betting on horseracing and other sport activities.
In this regard, the racing operators conduct activities that fall within the ambit of an ‘enterprise’ as de ned in section 1(1). Accordingly, racing operators may be required to register as vendors under section 23. The supply of goods or services by racing operators, being vendors, in the course or furtherance of their enterprise is subject to VAT.
3.2.2 Racehorse owners
The racehorse owner makes available the ‘services’ of its racehorse to the racing operator for a consideration. Should this service be supplied on a continuous or regular basis, the racehorse owner will be conducting an enterprise for VAT purposes. Accordingly, the racehorse owner will be required to register as a vendor or may voluntarily register as a vendor, subject to the requirements in section 23 being met.
The services supplied will constitute taxable supplies if the racehorse owner is a vendor, and the owner may receive consideration from the racing operator for these services. The consideration payable by the racing operator is dependent on the success of the racehorse participating in the event staged by the racing operator.
* For more information regarding voluntary registration, see paragraph 2.5 of the VAT 404 – Guide for Vendors.
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