Page 397 - Juta's Indirect Tax

IN 41 (3) VaLue-added tax act: InterPretatIOn nOtes
IN 41 (3)
Amount paid to punter (R110 – R6)
Amount paid to Provincial Revenue Fund Deduction under section 16(3)(d) – R110 × 14 / 114 Total amount paid / cost to Bookmaker A
3.2.6 Payment of betting taxes
Punter is liable for the tax
–104,00 –6,00 +13,51 –87,72
Generally, under certain provincial statutes, the punter is liable for a provincial betting tax. In these provinces, the bookmaker is required to deduct the provincial betting tax on a winning bet and pay this to the PRF. This payment is made by the bookmaker for and on behalf of the punter. It therefore follows, that in the aforementioned example, the tax fraction applied to the payment of the R6 betting tax by the bookmaker to the PRF is not deductible under section 16(3) (e) in the hands of the bookmaker, as the betting tax is borne by the punter and not the bookmaker.
Bookmaker is liable for the tax
Under certain provincial statutes, the bookmaker is liable for betting taxes. In these instances, the bookmaker is liable to pay the betting taxes as principal and may, under section 16(3)(e), deduct an amount equal to the tax fraction of the amount of the tax on totalizator transactions or tax on betting levied and paid for the bene t of any PRF.
This can be illustrated as follows:
Description of transaction Deductible (–)
X places a bet of R10
Winning paid out by Bookmaker A is R110 Bookmaker A pays PRF R6
for the tax imposed by the PRF
Total VAT payable (+) / refundable (–)
Section
Tax payable (+) / R
+ 1,23
–13,51
–12,28
8(13) 16(3)(d)
16(3)(e)
3.2.7 Bookmaker-to-bookmaker transactions
In some instances, the bookmaker is of the view that the bets it has received are too much of a risk for the bookmaker to bear (that is, there is a good possibility of the bets being successful). In order to minimise the risk and exposure of large payouts to punters, the bookmaker will pass on either the whole bet or part of it to another bookmaker. This is common practice in the betting industry and is referred to as take back bets.
When a bookmaker (1st Bookmaker) places a take back bet with another bookmaker (2nd Bookmaker) and both bookmakers are registered vendors for VAT purposes, the 1st Bookmaker is entitled to deduct input tax on the amount placed with the 2nd Bookmaker under section 16(3)(a). This implies that the 2nd Bookmaker must issue a tax invoice to the 1st Bookmaker. The 2nd Bookmaker is under section 8(13) liable to account for output tax on the amount received from the 1st Bookmaker.
In the event that this take back bet is successful, the 2nd Bookmaker is entitled to deduct an amount equal to the tax fraction of any amount paid as a prize or winnings to the 1st Bookmaker being the recipient of such services.
The 1st Bookmaker is, under section 8(13A), deemed to supply services to the 2nd Bookmaker. Therefore, the 1st Bookmaker is liable to account for output tax on the amount received from the 2nd Bookmaker.
Example 2 – VAT implications of a take back bet
Facts:
1st Bookmaker places a take back bet of R100 with 2nd Bookmaker. In the event of the bet being successful, 1st Bookmaker will receive R1 100 as winnings from 2nd Bookmaker. In this regard, 1st Bookmaker’s bet was successful, and received a total payment of R1 100 from 2nd Bookmaker.
Result:
1st Bookmaker
On the assumption that the VAT201 return has been submitted and this was the only transaction for that tax period, the following net cash ow of the 1st Bookmaker (for this speci c transaction) will con rm the VAT liability of that bookmaker:
Description of transaction Section Tax payable (+) / Deductible (–)
RR
1st Bookmaker places a bet of R100 16(3)(a) - 12,28 2nd Bookmaker pays R1 100 8(13A) + 135,09
Total VAT payable (+) / refundable (–) +122,81
Juta’s IndIrect tax 2016 389