Page 497 - Juta's Indirect Tax

IN 84 VaLue-added tax act: InterPretatIOn nOtes IN 84 3. The law
The relevant sections of the VAT Act are quoted in the Annexure.
4. Application of the law
4.1 Supply of betting services
The supply of betting transactions in South Africa by a vendor is subject to VAT. In this regard, section 8(13) deems a vendor to supply a service to any person who places a bet with such vendor on the outcome of a race or on any other event or occurrence.
The supply of betting services by a vendor is, under section 9(3)(e), deemed to take place to the extent that payment of any amount for the bet is received. In the event that there are multiple payments received in relation to the supply of the bet, the supply of the betting services will be deemed to take place each time a payment is received. Output tax must therefore be declared to the extent that payment is received.
The value to be placed on this supply is, under section 10(17), the consideration in money received for the bet. The above can be summarised as follows:
• Betting services are taxable supplies and output tax must be accounted for when payment is received.
• A supply is deemed to take place when and to the extent payment for the betting service is received and if multiple
payments are received, then each payment is consideration received for a separate supply of betting services. • The value to be placed on the supply of betting services is the amount of money received for that supply.
• Output tax payable on a bet is calculated by applying the tax fraction (14/114) to the amount received.
4.2 Deductions on prizes and winnings
The vendor is under section 16(3)(d) entitled to deduct an amount, calculated by applying the tax fraction to any amount of money paid as a prize or winnings in relation to a supply of betting services. In respect of goods or services awarded as a prize or winnings, the proviso to section 16(3)(d) limits the deduction to the input tax on the initial cost of acquiring these goods or services.
A vendor is not permitted to deduct input tax on goods or services acquired as a prize or winnings under the provisions of section 16(3)(a). The deduction for such goods or services is only permissible under section 16(3)(d).
4.3 Other governing legislation
The ordinary meaning of a ‘bet’* is the act of risking a sum of money to predict the outcome of an event. Importantly, in the South African context, there are statutes that govern betting transactions. For the purpose of contextualising the use of the term ‘bet’ in section 8(13), consideration must be given to these statutes.
4.3.1 The Lotteries Act and the National Gambling Act
The Lotteries Act No. 57 of 1997 (Lotteries Act) and the National Gambling Act No. 7 of 2004 (Gambling Act) regulate betting or gambling transactions in South Africa. Effectively, every betting transaction conducted in South Africa must comply with either of these acts. Accordingly, any amount paid for betting transactions falling within these acts will be regarded as a bet for purposes of section 8(13).
4.3.2 The Consumer Protection Act
Promotional competition
The ordinary meaning of ‘competition’† is any event in which people compete, which would generally be in the form of a game of skill or a contest to be chosen as a lucky winner. Promotional competitions are regulated under section 36 of the Consumer Protection Act No. 68 of 2008 (CPA). Section 36 of the CPA de nes ‘promotional competition’ as –
‘any competition, game, scheme, arrangement, system, plan or device for distributing prizes by lot or chance if— (a) it is conducted in the ordinary course of business for the purpose of promoting a producer, distributor, supplier, or
association of any such persons, or the sale of any goods or services; and
(b) any prize offered exceeds the threshold prescribed in terms of subsection (11),
irrespective of whether a participant is required to demonstrate any skill or ability before being awarded a prize’.
Under section 36(3)(a) of the CPA, a promoter of a promotional competition must not require any consideration to be paid by a participant exceeding that of the reasonable cost of posting or otherwise transmitting an entry form. Section 36(4) of the CPA provides clarity of when consideration received is regarded as reasonable, but without limiting the generality of the requirement, of when a promoter is regarded as having received consideration –
‘(a) a participant is required to pay any consideration, directly or indirectly, for the opportunity to participate in the promotional competition, for access to the competition or for any device by which a person may participate in the competition; or
(b) participation in the promotional competition requires the purchase of any goods or services, and the price charged for those goods or services is more than the price, excluding discounts, ordinarily charged for those or similar goods or services without the opportunity of taking part in a promotional competition’.
Further clarity regarding the reasonable cost of electronically transmitted entries is provided in regulation 11(1) to the CPA published in GNR 293 of 1 April 2011 in Government Gazette No. 34180, which currently limits it to R1,50 (one rand and fty cents) for promotional competitions.
* www.oxforddictionaries.com [Accessed 25 March 2015]. † www.oxforddictionaries.com [Accessed 25 March 2015].
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