Page 396 - Juta's Indirect Tax

IN 41 (3) VaLue-added tax act: InterPretatIOn nOtes IN 41 (3)
Under section 11(2)(x), the abovementioned services supplied to the racing operator are zero-rated for VAT purposes, to the extent of any consideration paid by the racing operator to the racehorse owner as a result of the successful participation of that horse in an event. The racehorse owner will, therefore, be liable to declare the zero-rated supply on the VAT201 return. There is no VAT incurred or deductible by the racing operator for these supplies as VAT is charged at the zero rate. The provisions of section 11(2)(x) do not apply to payments received by jockeys, managers and trainers from the racing operator.
3.2.3 The manager and/or trainer
The manager and/or trainer of the racehorses supplies a service to the racehorse owner in that the manager and/or trainer is responsible for the stabling, training and well-being of the racehorses. These services may vary according to the agreement between both parties. If the services are supplied on a continuous or regular basis for a consideration, the manager and/or trainer will be conducting an enterprise for VAT purposes and will be required to register as a vendor or may voluntarily register as a vendor, subject to the requirements in section 23 being met.
A manager and/or trainer who is a vendor, is liable to levy VAT at the standard rate of 14% on the service supplied to the racehorse owner. The manager and/or trainer must account for output tax, while the racehorse owner being a vendor, will be entitled to an input tax deduction for the consideration paid to the VAT-registered manager and/or trainer (subject to the provisions of sections 16, 17 and 20 being met).
3.2.4 Bookmakers
A bookmaker operates a business of accepting and paying off bets on the outcome of sports contests, especially horse races or any other events or contingencies. In this regard, the bookmaker conducts activities that fall within the ambit of an ‘enterprise’ as de ned in section 1(1). Accordingly, the bookmaker may be required to register as a vendor or may voluntarily register as a vendor, subject to the relevant requirements in section 23 being met. The supply of goods or services by bookmakers, being vendors, in the course or furtherance of their enterprises is subject to VAT.
3.2.5 Betting transactions
The racing operator or bookmaker receiving a bet for the deemed supply contemplated in section 8(13) (see 3.1.3) is required to account for output tax on the amount received (that is, applying the tax fraction to the amount received for the bet). In the event that the bet, under section 8(13) is successful, the racing operator or bookmaker is, under section 16(3)(d) read with section 16(2), entitled to an input tax deduction (refer to 3.1.4).
In addition, racing operators or bookmakers in certain provinces are, under provincial statute, liable for the payment of betting taxes on all betting transactions to the Provincial Revenue Fund (PRF).* A racing operator or bookmaker who makes the payment to the PRF as principal, will be entitled to a deduction under section 16(3)(e) (refer to 3.1.4).
Example 1 – VAT implications of a successful bet
Facts:
X places a bet of R10 with Bookmaker A. In the event of the bet being successful, X will receive R110 as winnings from Bookmaker A. In this regard, X’s bet was successful, and he received a total payment of R104 (that is, the R110 as a winning less the deduction of the provincial tax of R6 payable by X) from Bookmaker A.
Result:
Description of transaction
Section
Tax payable (+) /
Deductible (–)
X places a bet of R10
8(13)
+ 1,23
Winnings paid out by Bookmaker A is R110
16(3)(d)
–13,51
Total VAT payable (+) / refundable (–)
–12,28
Note: The deduction under section 16(3)(e) is not applicable, as the provincial tax is paid by X.
On the assumption that the VAT201 return has been submitted and the aforementioned example was the only transaction for that tax period, the following net cash ow of the bookmaker (for this speci c transaction) will con rm the VAT liability of the bookmaker:
R
Bet received + 10,00 Output tax payable under section 8(13) – R10 × 14 / 114 –1,23
* The PRF is not required to register as a vendor for VAT purposes as it forms part of the provincial Department
of Finance and is a ‘public authority’ as de ned in section 1(1). Accordingly, the taxes imposed under the Provincial Ordinances, which accrues for the bene t of the Provincial Revenue, will not have any VAT consequences in the hands of the PRF.
388 Juta’s IndIrect tax 2016