Page 475 - Juta's Indirect Tax

IN 70 VaLue-added tax act: InterPretatIOn nOtes IN 81 (2)
can thus be claimed as an input tax credit. In so far as any payment is made for the supply of the goods or clothing,
tax would be leviable on the amount of the payment.
(b) State subsidies granted to welfare organisations are, in terms of clause 11 (2) (n), subject to tax at the rate of zero per
cent. In terms of this clause the services deemed by clause 8 (5) to be supplied to a public authority or local authority are subject to tax at the rate of zero per cent if the services are supplied by a vendor which is a welfare organisation and the subsidy is received in respect of those activities of such organisation which amount to the carrying on of an enterprise as contemplated in paragraph (b) (ii) of the de nition of ‘enterprise’ in clause 1.
The implication of this is that the welfare organisation does not have to pay output tax in respect of any state subsidies but is nevertheless entitled to claim an input tax credit in respect of goods or services acquired for carrying on its welfare activities.
15.5.2 Compulsory registration
Although registration would normally be advantageous for a welfare organisation, especially as far as the recovery of input tax paid is concerned, registration requires that all the usual obligations of a vendor, such as the furnishing of returns and the levying of tax in respect of any taxable supplies made, be met by the welfare organisation. A welfare organisation is not, according to general principles, obliged to register as a vendor, unless the total annual value of its taxable supplies exceed R150 000.
As already stated, any subsidies paid by public authorities or local authorities to a welfare organisation are subject to tax at the zero rate. The proviso to clause 23 (6) provides that in the case of a welfare organisation the value of such zero rated supplies need not be taken into account in determining the R150 000 registration limit.
A welfare organisation whose inputs, for example the acquisition of food, clothing and blankets, are chie y nanced by state subsidies or other unconditional gifts, will thus not be obliged to register if the total annual value of its taxable supplies exceeds R150 000 solely as a result of state subsidies it receives.
15.5.3 Other activities carried on by welfare organisations
In so far as a welfare organisation’s activities do not comprise the provision of food, meals etc. to underprivileged persons, as contemplated in the de nition of a welfare organisation, it does not qualify as a ‘welfare organisation’ for VAT purposes. The payment of any state subsidy to such an organisation, in respect of the activities which do not comprise the carrying on of an enterprise, is subject to tax at the prescribed tax rate.
Where an organisation or association’s activities can be divided between a pro t-making division (e.g. a clothing factory) and a non-pro t-making division (e.g. a welfare organisation), it will be treated as an ‘association not for gain’ or ‘welfare organisation’ only in so far as it complies with the requirements of the Bill in these regards. The normal principles in regard to registration and taxable supplies are applicable to the activities which amount to a pro t-making organisation.
Interpretation Note: No. 81 (Issue 2)
DATE: ACT: SECTIONS: SUBJECT:
Preamble
9 April 2015
VALUE-ADDED TAX ACT 89 OF 1991
SECTIONS 7 (1) (a), 11 (1) (a) AND 11 (2) (l)
THE SUPPLY OF GOODS AND SERVICES BY PROFESSIONAL HUNTERS AND TAXIDERMISTS TO NON-RESIDENTS
In this Note unless the context indicates otherwise –
• ‘dip and pack’ means the initial treatment or raw preparation of the trophy as explained in the de nition of the ‘Dip
and Pack (Dip and Ship) Facility’ in the Veterinary Procedural Notice* (the VPN) issued by the Director: Veterinary
Services;
• ‘export regulation’ means Regulation 316 published in Government Gazette No. 37580 dated 2 May 2014;
• ‘foreign hunter’ means a hunter who is not a resident of the Republic and who physically resides in an export country.
A foreign hunter is neither registered nor required to be registered as a vendor;
• ‘hunting out tter’ means –†
– a resident of the Republic;
– who is a registered vendor; and
– who represents or organises the hunting of wild or exotic animals for payment or reward.
• ‘hunting safari package’ means a tour package supplied to a foreign hunter, which may include the supply of a trophy, accommodation, meals, tracker, guide, professional hunter or transport;
• ‘professional hunter’ means –
– a resident of the Republic;
– who is quali ed to escort a foreign hunter for payment or reward in order to enable the latter to hunt a wild or exotic
animal;
• ‘section’ means a section of the VAT Act;
• ‘taxidermist’ means a registered vendor supplying taxidermy services;
* VPN/00/2008-1 Compilation of de nitions applicable to the various veterinary procedural notices.
† Draft Norms and Standards for the Regulation of the Hunting Industry in South Africa published as Notice 1614 of 2009 in Government Gazette No. 32798 dated 11 December 2009.
Juta’s IndIrect tax 2016 467