Page 401 - Juta's Indirect Tax

IN 41 (3) VaLue-added tax act: InterPretatIOn nOtes IN 41 (3)
Example 9 – VAT implications of a motor car acquired to be awarded as a prize
Facts:
Joe Soap’s Casino, on 1 February 2013, acquires 10 motor cars in an arm’s length transaction at 10% below the market value (that is, R205 200 each including VAT) for the purposes of awarding the motor cars as prizes to successful punters playing on its ‘Car Mania’ slot machines. The 10 motor cars are awarded as prizes on the following dates when the market value is R228 000:
Car 1 Car 3 Car 5 Car 7 Car 9
21 February 2013 10 March 2013
1 April 2013
27 April 2013
31 May 2013
Car 2 Car 4 Car 6 Car 8 Car 10
23 February 2013 25 March 2013 April 2013
1 May 2013
7 June 2013
Result:
Joe Soap’s Casino is, under section 16(3)(d), entitled to a deduction of R25 200 (that is, R205 200 × 14 /114) on each car which is limited to the amount paid for the motor cars in the following tax periods:
Car 1 Car 3 Car 5 Car 7 Car 9
February 2013 March 2013 April 2013 April 2013 May 2013
Car 2 Car 4 Car 6 Car 8 Car 10
February 2013 March 2013 April 2013 May 2013 June 2013
3.3.5 Wide Area Progressive Jackpots (WAPJ)
Under the WAPJ system, various casinos in the same group of companies will each allocate a xed percentage of their gross gaming revenue (GGR) earned from certain slot machines on its premises towards a provision for the WAPJ. Gaming legislation compels the casinos participating in the WAPJ to appoint either one casino or an outside party as the WAPJ administrator.
The WAPJ administrator collects the provisions of gross gaming revenue from each casino and deposits the money in a separate trust account. A punter can win the WAPJ by playing on the designated slot machines on the premises of any of the casinos participating in the WAPJ. The respective casinos will be interconnected electronically. The WAPJ, when won as a prize or winnings, will be paid out to the punter by the participating casino where the WAPJ is won. The WAPJ administrator will reimburse the casino making the pay-out from the pool of money allocated to the WAPJ.
For VAT purposes, the activities of the WAPJ administrator do not fall within the ambit of ‘enterprise’ as de ned in section 1(1). Accordingly, the WAPJ administrator cannot register as a ‘vendor’ for VAT purposes. The contributions paid by casinos (that is, which will ultimately be paid as a prize) to the WAPJ administrator will not have any VAT implications until such time that the WAPJ is paid out as a prize. Only once the WAPJ is paid out as a prize, will the respective casinos be entitled to a deduction under section 16(3)(d) limited to the tax fraction of the amount contributed to the WAPJ in the tax period when the WAPJ is paid out.
Example 10 – VAT implications of pay-out of winnings by WAPJ
Facts:
Casino 1, Casino 2 and Casino 3 are individual legal entities separately registered as vendors for VAT purposes. The three casinos enter into an agreement to operate a WAPJ. Under this agreement, the three entities are required to contribute a percentage of their revenue to the WAPJ pool. For the duration of this agreement, the contributions by each casino to the WAPJ pool are as follows:
Casino 1
Casino 2
Casino 3
On 1 December 2013, the WAPJ was won at Casino 3 and an amount of R1 938 000 was paid out to the successful punter.
Result:
There will be no VAT implications for the three casinos concerned on their contributions to the WAPJ pool until such time the WAPJ is won. When the WAPJ is won, each casino will be entitled to a deduction under section 16(3)(d) on their contributions to the WAPJ at the end of the tax period covering the date of 1 December 2013, as follows:
R570 000 R456 000 R912 000
Casino 1
Casino 2
Casino 3
Casino 3 will not be entitled to a deduction under section 16(3)(d) on the full amount of the WAPJ paid (that is, R1 938 000) to the successful punter.
R70 000 R56 000 R112 000
(R570 000 × 14 /114) (R456 000 × 14 / 114) (R912 000 × 14 /114)
Juta’s IndIrect tax 2016 393