Page 516 - Juta's Indirect Tax

BGR 011 VALUE-ADDED TAX ACT: BinDing gEnErAL rULingS BGR 012
1. Purpose
This Binding General Ruling (BGR) prescribes the foreign exchange rate that must be used when issuing tax invoices as well as for determining the output tax due where the consideration for the standard rated supply is in a foreign currency.
2. Background
Vendors in some instances conclude contracts or issue tax invoices in respect of the taxable supply of goods and services which is taxable at the standard rate. In addition, such contracts or tax invoices, as the case may be, re ect the consideration in a foreign currency.
3. Issue
The issue under consideration is the exchange rate that should be applied to determine the consideration in Rands for purposes of complying with section 20(4) and (5) as well as for determining the vendor’s output tax liability.
4. The law and its application
For purposes of the Act, a supply of goods or services is deemed in terms of section 9, to take place when the time of supply occurs. A vendor is liable in terms of section 16(4) to account for output tax in respect of a supply in the tax period in which the supply is made. The value to be placed on the supply of goods or services is determined in accordance with the provisions of section 10.
Section 20(1) places an obligation on a supplier to issue a tax invoice within 21 days from the date of making a taxable supply. Section 20(4) and (5) requires a tax invoice to be in the currency of the Republic, unless the supply is zero-rated in terms of section 11.
5. Ruling
A vendor is required to issue a tax invoice that complies with section 20(4) or (5), in the currency of the Republic within 21 days of the date of the supply. In addition to the requirements as set out in section 20(4) or (5) as the case may be, the vendor must also re ect the consideration for the supply in a foreign currency as well as the relevant exchange rate on the tax invoice. In this regard, it will be acceptable to the Commissioner if vendors use the applicable daily exchange rate as published on the South African Reserve Bank website, at the time of supply, to determine the Rand equivalent of the consideration for the supply.
This BGR is issued in accordance with section 76P of the Income Tax Act, No. 58 of 1962, as made applicable to the VAT Act by section 41A. It is effective from 1 September 2012 and will apply for an inde nite period.
DATE: ACT: SECTION: SUBJECT:
Preamble
BINDING GENERAL RULING (VAT): NO. 12
22 March 2013
VALUE-ADDED TAX ACT 89 OF 1991 (the VAT Act)
SECTION 1 (1), DEFINITION OF ‘INPUT TAX’
INPUT TAX ON THE ACQUISITION OF A NON-TAXABLE SUPPLY OF SECOND-HAND MOTOR VEHICLES BY MOTOR DEALERS
For the purposes of this ruling –
• ‘BGR’ means a binding general ruling issued under section 89 of the TA Act; • ‘section’ means a section of the VAT Act unless otherwise stated;
• ‘TA Act’ means the Tax Administration Act 28 of 2011; and
• ‘the Guide’ means Value-Added Tax Guide for Motor Dealers (VAT 420).
1. Purpose
This BGR reproduces the statement in paragraph 7.3 of the Value Added Guide for Motor Dealers (VAT 420) under the heading ‘Over-allowances: Notional Input Tax and Open Market Value’, which comprises a BGR under section 89 of the TA Act.
2. Background
The Guide, issued during March 2009, deals with the VAT implications arising from the supply by motor dealers being vendors, of motor cars and other vehicles. This BGR updates references to section 76P of the Income Tax Act 58 of 1962 with references to the TA Act and incorporates subsequent amendments to sections of the VAT Act.
3. Ruling
Where a motor dealer pays an amount to a customer in excess of the generally accepted trade-in market value re ected in the Auto Dealer’s Guide of a second-hand motor vehicle, the difference between this value and the amount credited or paid to the customer is referred to as an ‘over-allowance’. The effect of paying an ‘over-allowance’ is that in terms of paragraph (b) of ‘input tax’ and ‘open market value’ as de ned in section 1 (1), the open market value is less than the consideration paid to the customer. Consequently, the notional input tax to which the dealer is entitled is limited to the tax fraction of the open market value of the vehicle traded-in.
In cases where the trade-in is an integral part of another transaction involving the supply of a new vehicle to the same customer by the same motor dealer, the overall position for the motor dealer is the same with regard to the VAT payable if –
508 Juta’s IndIrect tax 2016