Page 487 - Juta's Indirect Tax

IN 82 VaLue-added tax act: InterPretatIOn nOtes IN 82
The aforementioned term ‘adjusted cost’ is de ned in section 1(1) as the cost of goods or services where VAT has been levied, or would have been levied if the VAT Act had been applicable before 30 September 1991, or if the vendor was or would have been entitled to deduct notional input tax on second-hand goods. The de nition of ‘adjusted cost’ read with sections 16(3)(h), 18(2), (4) and (5) has the effect of limiting the amount of input tax that may be deducted or output tax that must be accounted for as the result of an adjustment.
The de nition of ‘motor car’ was amended in 2004 to speci cally exclude vehicles permanently converted to game viewing vehicles and hearses. As a result, section 18(9) was introduced to allow vendors to deduct the input tax previously denied on the acquisition of the motor car converted to a game viewing vehicle or hearse. Prior to the amendment, a vendor was only allowed to claim the conversion costs under section 16(3).
4. Conclusion
This Note provides an analysis of the de nition of ‘motor car’ and the process to be followed in determining whether a particular vehicle constitutes a ‘motor car’.
A vendor is generally not entitled to deduct input tax on the acquisition of a motor car irrespective of whether it is applied for taxable purposes or not. An exception to this rule includes motor dealers that supply motor cars in the ordinary course of their business.
Input tax incurred on expenses relating to the repair, maintenance and insurance of a motor car may be deducted, subject to the provisions of sections 16, 17 and 20.
To the extent that this Note does not deal with a speci c scenario, vendors may apply for a VAT ruling or VAT class ruling in writing by sending an e-mail to VATRulings@sars.gov.za or by facsimile to 086 540 9390. The application should consist of a completed VAT301 form and must comply with the provisions of section 79 of the Tax Administration Act, 2011 excluding section 79(4)(f), (k) and (6).
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
Annexure A – The law Section 1(1) – De nitions
’motor car’ includes a motor car, station wagon, minibus, double cab light delivery vehicle and any other vehicle of a kind normally used on public roads, which has three or more wheels and is constructed or converted wholly or mainly for the carriage of passengers, but does not include—
(a) vehicles capable of accommodating only one person or suitable for carrying more than 16 persons, or
(b) vehicles of an unladen mass of 3 500 kilograms or more; or
(c) caravans and ambulances;
(d) vehicles constructed for a special purpose other than carriage of persons and having no accommodation for
carrying persons other than such as is incidental to that purpose;
(e) game viewing vehicles (other than sedans, station wagons, mini-buses or double cab light delivery vehicles)
constructed or permanently converted for the carriage of seven or more passengers for game viewing in national parks, game reserves, sanctuaries or safari areas and used exclusively for that purpose, other than use which is merely incidental and subordinate to that use; or
(f) vehicles, constructed as or permanently converted into hearses for the transport of deceased persons and used exclusively for that purpose;
‘input tax’, in relation to a vendor, means—
(a) tax charged under section 7 and payable in terms of that section by—
(i) a supplier on the supply of goods or services made by that supplier to the vendor; or (ii) the vendor on the importation of goods by him; or
(iii) the vendor under the provisions of section 7(3);
(b) an amount equal to the tax fraction (being the tax fraction applicable at the time the supply is deemed to
have taken place) of the lesser of any consideration in money given by the vendor for or the open market value of the supply (not being a taxable supply) to him by way of a sale on or after the commencement date by a resident of the Republic (other than a person or diplomatic or consular mission of a foreign country established in the Republic that was granted relief, by way of a refund of tax as contemplated in section 68) of any second-hand goods situated in the Republic; and
(c) an amount equal to the tax fraction of the consideration in money deemed by section 10(16) to be for the supply (not being a taxable supply) by a debtor to the vendor of goods repossessed under an instalment credit agreement: Provided that the tax fraction applicable under this paragraph shall be the tax fraction applicable at the time of supply of the goods to the debtor under such agreement as contemplated in section 9(3)(c),
where the goods or services concerned are acquired by the vendor wholly for the purpose of consumption, use or supply in the course of making taxable supplies or, where the goods or services are acquired by the vendor partly for such purpose, to the extent (as determined in accordance with the provisions of section 17) that the goods or services concerned are acquired by the vendor for such purpose;
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