Page 398 - Juta's Indirect Tax

IN 41 (2) VaLue-added tax act: InterPretatIOn nOtes IN 41 (3)
Bet placed
Input tax on bet placed under section 16(3)(a) Amount received from 2nd Bookmaker Output tax payable under section 8(13A) Total amount receivable
R
–100,00 + 12,28 + 1 100,00 – 135,09 + 877,19
2nd 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 2nd bookmaker (for this speci c transaction) will con rm the VAT liability of that bookmaker:
Description of transaction Deductible (–)
1st Bookmaker places a bet of R100 Amount paid to 1st Bookmaker of R1 100 Total VAT payable (+) / refundable (–)
Section
8(13) 16(3)(d)
Tax payable (+) / R
+ 12,28 – 135,09 – 122,81
Bet received
Output tax payable under section 8(13) Amount paid to punter (1st Bookmaker) Deduction under section 16(3)(d)
Total amount paid / Cost to Bookmaker A
R
+ 100,00 –12,28 – 1 100,00 + 135,09 – 877,19
3.3 Casinos
3.3.1 Calculation of VAT
Under section 16(4), a vendor must determine the output tax charged for all supplies made during the tax period. This calculation of the output tax attributable to the tax period is to be done by reference to the accounting basis which has been used during that period.
The amount of tax payable is calculated by deducting from the amount of output tax referred to above, certain amounts of input tax and other deductions contemplated under section 16(3) (refer to 3.1.4).
The casino industry is under section 9(3)(e) required to account for output tax when payment is received for the supplies of betting transactions. All other supplies by the casino will follow the normal time of supply rules (that is, the earlier of an invoice being issued or payment being received for the supply).
The nature of betting transactions, especially the table game of chance (for example, Roulette, Poker), makes it dif cult to separate bets placed by and winnings paid to punters. It therefore follows that casinos experience practical dif culties re ecting output tax under section 8(13), separately from the amount deducted under section 16(3)(d). As a result, an arrangement has been made in Binding General Ruling (VAT) No. 13 (Issue 2) (BGR 13) as indicated below.
Binding General Ruling (VAT) No. 13 (Issue 2)
An arrangement is made under section 72 whereby casinos are permitted to account for VAT by applying the tax fraction to the net amount resulting from betting transactions, that is, the amount remaining after winnings paid out have been deducted from the bets placed (known as the ‘net drop method’). This could result in either the casino showing a net liability payable to SARS or a refund due to it. In addition, the casino will –
• not be entitled to any deductions under section 16(3)(d), on any amount paid during the tax period by the casino as a prize or winnings to the recipient of services contemplated in section 8(13), if such amount has been included in calculating the ‘net drop method’; and
• be required to maintain adequate records to enable SARS to verify the validity and accuracy of the tax liability calculated under this method.
3.3.2 Deductions by casinos
Casinos are not entitled to an input tax deduction under section 16(3)(a) for any prize or winnings to any person who has placed a bet with such vendor. Casinos will however be entitled, under section 16(3)(d), to deduct from the output tax, an amount equal to the tax fraction of any amount paid as a prize or winnings in relation to the deemed supply made.
In addition, casinos are, under a provincial statute, liable for the payment of betting taxes to the PRF, on all betting transactions received. In this regard, the casino makes the payment to the PRF as principal. The casino is entitled to a deduction equal to the tax fraction of such payment under section 16(3)(e).
390 Juta’s IndIrect tax 2016