Page 480 - Juta's Indirect Tax

IN 82
3.2 3.2.1 3.2.2 3.2.3 3.3 3.4 3.4.1 3.4.2 3.5 3.6 3.6.1 3.6.2 3.7 3.7.1
VaLue-added tax act: InterPretatIOn nOtes IN 82
Vehicles constructed or converted wholly or mainly for the carriage of passengers Club cabs and extended cabs
Panel vans
Criteria for determining whether a vehicle is a ‘motor car’ as de ned
Permissible deduction of input tax on the acquisition of motor cars and the subsequent sale of such motor cars Accessories
Accessories regarded as part of the standard structure of a motor car at the time of purchase
Accessories not forming part of the standard structure of a motor car
Modi cations made to a motor vehicles
Converting a vehicle
Converted before the supply of the vehicle
Converted after the supply of the vehicle
VAT paid on expenses relating to the running and upkeep of a motor car
Adjustment on running expenses in respect of a motor car initially acquired for a taxable purpose and subsequently applied for an exempt or private purpose
3.8
3.8.1
3.8.2
3.8.3
3.9
3.10
3.10.1
3.10.2
3.10.3
4.
Annexure A – The law
Annexure B – Government Gazette No. 13651
The exceptions under the provisos to section 17(2)(c) Motor dealers
Demonstration vehicles
Motor cars awarded as prizes
Concession for foreign donor funded projects
Change in use adjustments
Change in use from a taxable to a non-taxable purposes [section 18(1)] Change in use from a non-taxable to taxable purpose [section 18(4)] Motor cars converted to game viewing vehicles and hearses [section 18(9)] Conclusion
Preamble
In this Note unless the context indicates otherwise –
• ‘section’ means a section of the VAT Act;
• ‘VAT’ means value-added tax;
• ‘VAT Act’ means the Value-Added Tax Act No. 89 of 1991; and
• any other word or expression bears the meaning ascribed to it in the VAT Act.
1. Purpose
This Note sets out the –
• interpretation of the de nition of ‘motor car’;
• general principle that VAT incurred on the acquisition of a motor car is not permissible as an input tax deduction;
• exceptions to the general principle, that is, when an input tax deduction is allowed on the acquisition of a motor car;
• instances when input tax may be deducted on the acquisition of accessories, modi cations and conversions to motor
cars; and
• application of change in use adjustments to motor cars.
2. The law
The relevant sections of the VAT Act are quoted in the Annexure.
3. Application of the law
3.1 De nition of motor car
The de nition of ‘motor car’ contains the following ve categories: • Motor car.
• Station wagon.
• Minibus.
• Double cab light delivery vehicle. • Any other motor vehicle that –
– is normally used on public roads;
– has three or more wheels; and
– is constructed or converted wholly or mainly for the carriage of passengers
The aforementioned ve categories are explained below:
• In Mincer Motors Ltd v Commissioner of Customs* the court con rmed that ‘an essential connotation of the idea of
a ‘motor car’ is that it is a vehicle that is designed for carrying passengers as distinct from goods’. In light of this,
* 1958 1 SA 652 (T).
472 Juta’s IndIrect tax 2016