Page 482 - Juta's Indirect Tax

IN 82 VaLue-added tax act: InterPretatIOn nOtes IN 82
The dedicated loading space is the area that is constructed solely for a purpose other than the carriage of passengers. There are vehicles constructed with an area within the vehicle that serves a dual purpose of providing both loading and passenger space (that is, fold-up seats that provide a loading area when folded up). Due to the fact that this area can be used to accommodate passengers, the entire area will be regarded as a space designed for the seating of passengers.
Once it is established that the vehicle has three or more wheels, is of a kind normally used on public roads and has been designed and constructed wholly or mainly for the carriage of passengers, the vehicle falls within the fth category of the de nition of ‘motor car’.
Vehicles such as club cabs, extended cabs and panel vans do not fall squarely within the rst four categories listed in the de nition of ‘motor car’ and therefore the objective test must be applied to these vehicles in order to determine whether such vehicles fall within the last category. These vehicles must not be construed as an exhaustive list of vehicles that are subject to the objective test.
3.2.1 Club cabs and extended cabs
Motor vehicle manufacturers use a variety of terms to describe a pick-up truck, which in South Africa is commonly called a ‘bakkie’. A ‘club cab’ is one of several terms used to describe a bakkie that has rear seats.
For purposes of this Note, a club cab has two traditional full-sized doors and extra space behind the driver’s seat that houses two ‘jump seats’, a full bench or fold up seats (rear seats). Alternatively the club cab may have a toolbox or storage compartment tted behind the driver’s seat. The seating or storage area is accessed by tilting the front seat forward.
An extended cab is a club cab as described above with two traditional full-sized doors and two smaller-sized rear doors (suicide doors) on one or both sides of the vehicle. Club cabs and extended cabs are generally used on public roads, have three or more wheels and are designed for carrying both passengers and goods.
The objective test must therefore be applied to determine whether these vehicles are in fact constructed or converted wholly or mainly for the carriage of passengers.
For the purpose of applying the objective test, as discussed in 3.2, the entire passenger cabin (enclosed passenger seating area excluding the engine) is regarded as the area available to passengers irrespective of whether or not there are fold up seats. In the case where there is a toolbox or storage compartment tted behind the driver’s seat incapable of accommodating passengers, such area will be regarded as the dedicated loading space within the passenger cabin.
It follows that if the length of the passenger cabin or the area available to passengers within the passenger cabin measures more than the dedicated load area, the vehicle is designed mainly for the carriage of passengers and falls within the ambit of the de nition of ‘motor car’. Alternatively, if the dedicated load area of the club or extended cab is larger than the passenger cabin, the vehicle is constructed or converted mainly for carrying goods rather than passengers (that is, it is not a ‘motor car’ as de ned).
3.2.2 Panel vans
A panel van is a small enclosed delivery vehicle that generally consists of a single row of seats, two front doors, a rear door or two, no rear side windows and may contain rear or fold up seats.
In terms of the rst step in determining whether a panel van is a motor car, it is apparent that it does not fall within any one of the rst four categories and it is therefore necessary to determine whether it falls within the fth category. It is clear that a panel van meets the rst two requirements contained in the fth category as it is normally used on a public road and it has more than three wheels. The objective test must then be applied in order to con rm whether the vehicle has been constructed mainly for the carriage of passengers.
In applying the objective test, if the dedicated load area exceeds the area available to passengers, a panel van would not be constructed or converted mainly for the carriage of passengers and therefore would not fall within the fth category. As a result, such panel van is not a ‘motor car’ as de ned.
Certain panel vans have a partition or gate behind the last row of seats thereby separating the passenger area from the dedicated loading area. For purposes of applying the objective test, the area in front of the screen (housing the driver and passenger seats but excluding the engine) is regarded as the area constructed exclusively for passengers and must be measured in relation to the dedicated loading space.
3.2.3 Criteria for determining whether a vehicle is a ‘motor car’ as de ned
Having regard to the aforementioned, the following is a summary of how to determine whether a vehicle is in fact a ‘motor car’ as de ned:
• Determine whether the vehicle falls within any one of the rst four categories referred to in 3.1.
• If the vehicle does not fall within any one of the rst four categories, determine whether it complies with all the
requirements in the fth category. This category requires the vehicle to be of a kind normally used on public roads, have three or more wheels, and be constructed wholly or mainly for the carriage of passengers. The objective test must then be applied to establish, if the vehicle is constructed or converted mainly (that is, more than 50%) for the carriage of passengers, in which case the vehicle will fall within the fth category.
• Once the vehicle has been allocated a category, determine whether any of the exclusions listed in paragraph (a) to (f) of the de nition are applicable.
3.3 Permissible deduction of input tax on the acquisition of motor cars and the subsequent sale of such motor cars
The term ‘input tax’ is de ned, in section 1(1) to mean, amongst others, the VAT paid by a vendor on a taxable supply of goods or services acquired for the purpose of consumption, use or supply in the course of making taxable supplies. In the case of goods or services being acquired partly for the purpose of making taxable supplies and partly for other purposes
474 Juta’s IndIrect tax 2016