Page 498 - Juta's Indirect Tax

IN 84 VaLue-added tax act: InterPretatIOn nOtes IN 84
Based on the abovementioned, any payment made to cover the cost of posting or otherwise transmitting an entry form for entry into promotional competitions that are governed under section 36 of the CPA does not constitute a bet for purposes of section 8(13). The charge, currently up to a maximum of R1,50 received, for electronic submissions, for entry into such competition, is in compliance with the reasonable cost set out in the CPA and its regulations. The payment is consideration for the supply of the administration services supplied by the promoter of these promotional competitions to cover the cost of operating the competitions. The administration service is a supply for VAT purposes and output tax must be levied and accounted for by the promoter under section 7(1)(a) if the promoter is a vendor.
Promotional competitions for which an amount is charged in excess of the reasonable cost contemplated in the CPA and its regulations, are not promotional competitions as governed by section 36 of the CPA. This amount charged should be classi ed in order to determine the VAT treatment, that is, whether such amount is paid for a betting transaction falling within the Lotteries or Gambling Acts. Having regard to the ndings in the case of the National Lotteries Board v Bruss NO and others* case, the total charged can be regarded as consideration for a betting service and if this is the case then 4.3.1 is applicable.
5. Conclusion
Amounts paid or received for a betting service falling within the Lotteries or Gambling Acts will be regarded as a bet for purposes of section 8(13). In this instance the vendor receiving the amount is deemed to supply a service to the person placing such bet. As a result the vendor would be required to account for output tax as the supply would be subject to VAT under section 7(1)(a). The vendor would, under section 16(3)(d), consequently be entitled to a deduction on a prize or winnings awarded. If such prize or winnings constitutes goods or services, the input tax deduction would be limited to the input tax on the initial cost of acquiring those goods or services.
Consideration charged (that is, charges to cover the cost of posting or otherwise transmitting an entry form) for entrance into promotional competitions falling within section 36 of the CPA, is not a bet as envisaged by section 8(13). The consideration charged will be payment received for the supply of the administration services supplied by the promoter of these promotional competitions which services are taxable under section 7(1)(a).
Competitions that do not qualify as promotional competitions (including competitions where the promoter charges costs in excess of the reasonable costs contemplated in the CPA) may fall within the ambit of the Lotteries or Gambling Acts in which case, the vendor receiving the bet is supplying a betting service contemplated in section 8(13).
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
Annexure – The law Section 1(1) – De nitions
’consideration’, in relation to the supply of goods or services to any person, includes any payment made or to be made (including any deposit on any returnable container and tax), whether in money or otherwise, or any act or forbearance, whether or not voluntary, in respect of, in response to, or for the inducement of, the supply of any goods or services, whether by that person or by any other person, but does not include any payment made by any person as a donation to any association not for gain: Provided that a deposit (other than a deposit on a returnable container), whether refundable or not, given in respect of a supply of goods or services shall not be considered as payment made for the supply unless and until the supplier applies the deposit as consideration for the supply or such deposit is forfeited;
‘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;
Section 7 – Imposition of value-added tax
(1) Subject to the exemptions, exceptions, deductions and adjustments provided for in this Act, there shall be levied and paid for the bene t of the National Revenue Fund a tax, to be known as the value-added tax—
* (730/2007) [2009] ZASCA (1 December 2009).
490 Juta’s IndIrect tax 2016