VAT Solutions 2022 (Complete) solutions for the questions added before PDF

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Download VAT Solutions 2022 (Complete) solutions for the questions added before PDF

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QUESTION 1 - SOLUTION

Marks

It is compulsory for a person to register for VAT, if the value of taxable supplies exceeded R1 000 000 in a 12 month period (S23(1)(a)) or if the taxable supplies in terms of a written contractual obligation for the following 12 months will exceed R1 000 000. (S23(1)(b))

1

In the given situation, the value of taxable supplies amount to: 600 000 89 000

0.5 0.5

(Include full R89 000 as it is a taxable supply. Only multiply by 60% when calculating actual output tax) Rental income earned from permanent lessee's (exempt) S12(c) 0 Créche fees earned (exempt) S12(j) 0 Value of sales by general dealer s7(1)(a) 300 000 989 000

0.5 0.5 0.5

Rental income for holiday goers that visit the lodge for ≤ 28 days Rental income for holiday goers that visit the lodge for > 28 days

Commercial accommodation will only be defined as carrying on of an enterprise if the income derived from it exceeds R120 000 (Paragraph ix of the defintion of 'enterprise in S1) . As the income derived is R689 000, Mr Rupert will qualify as carrying on an enterprise. Commercial accommodation constitutes a taxable supply.

1

Rental income earned from permanent leases is residential accommodation and therefore qualifies as an exempt supply (s12(c)) . Not included in taxable supplies

1

Créche fees earned qualify as an exempt supply (s12(j)). Not included in taxable supplies.

1

Conclusion VAT registration is not compulsory because the value of his taxable supplies (R989 000) does not exceed R1 000 000.

1

Mr. Rupert may voluntarily register for VAT, because the value of taxable supplies exceeds R120 000. (R50 000 if not commercial accommodation)

1

TOTAL MAX

8.5 6

QUESTION 2 - SOLUTION Marks Part A A Category C vendor's VAT tax period ends on the last day of every month of the 12 months in a calendar year (S27(1))

1

A person has to be a Category C vendor if their taxable supplies are more than R30 mil in a 12 month period (S27(3)(a)) OR those who have repeatedly been in default in terms of the VAT Act Act (S27(3)(c)) OR those who have applied in writing to be placed in this category gory (S27(3)(b))

1

Max

2

Output / (input)

Part B Kenya Customs value 10% Customs duty

S13(2)(a) 1 250 000 125 000 not BLNS country 60 000 Reverse Charge? 1 435 000 x 15% Pay to customs, claim input to the extent of making taxable supplies

-215 250.00

0.5 0.5 0.5 1

-750 000.00

1

Supply at standard rate (S7(1)(a))

-9 913.04

1

Supply at standard rate (S7(1)(a)) Transport costs R13 000 x 15/115 Fare paying passangers by rail = exempt supply (S12(g))

-1 695.65 -

1 1

Botswana BLNS country S13(2)(b) 5 000 000 x 15% Pay to customs, claim input to the extent of making taxable supplies Brass from Limpopo 76 000 x 15/115

Imported service (S7(1)( c) and S(14) VAT is only levied to the extent of making non-taxable supplies. Steinway makes 100% taxable supplies.

Interest Bank fees Electricity Diesel

20 000 6 000 x 15/115 267 000 x 15/115 38 000 x 0%

Financial service (S(2)(1)(f) & S(12)(a)), therefore exempt Supply at standard rate (S7(1)(a)) Supply at standard rate (S7(1)(a)) Zero rated supply S(11)(1)(h)

-

1 1 1 1

-

1 1 1

65 217.39

1

(S7(1)(a))

169 565.22

1

VAT receivable

-777 684.78

0.5

Supply at standard rate (S7(1)(a))

Local Sales - USA resident 1 300 000 x 15/115 Not exported, Supply at standard rate

1

-782.61 -34 826.09 0

European client Direct export of goods, 0% supply 600 000 x 0% (S(11)(1)(a)) Export of service, 0% supply 23 000 x 0% (S(11)(2)(k)) Flight ticket abroad = zero rated supply (S7(11)(2)(a)) (Air transport of passenger with one leg outside of SA = export of service) Local Sales (250 000 x 2) x 15/115

-

VAT 201 - Manually: submitted and paid by 25 May 2022, E-filing: submitted and paid by 31 May 2022 (S28(1)) Total

1 18

QUESTION 3 - SOLUTION

Marks

Cans purchased for year-end function The input tax is denied on goods or services acquired to the extent that such goods or services are acquired for the purposes of entertainment (section 17(2) of the VAT Act) Cost per can = R3 192 / 700 = R4.56 300 cans given to employees The 300 cans given to the employees will constitute entertainment (definition of entertainment in S1) and the input tax will therefore be denied. 200 cans sold to employees at R4 per can Section 17(2)(a)(i)(bb) states that input tax can be claimed on the supply of entertainment to employees to the extent that such supplies are made for a charge which covers all direct and indirect costs The supply does not cover all direct or indirect costs as the purchase price of the cans is R4.56 per can. Input tax will be denied on the purchase of these 200 cans

1

1 1

Cans purchased for the team building weekend In terms of section 17(2)(a)(ii) input tax on the supply of entertainment may be claimed if those goods supplied are acquired by the vendor for the consumption of an employee if that employee is by reason of his/her duties obliged to spend at least one night away from his/her usual residence and working place.

1

The supply of the cans on the team building weekend constitutes entertainment. The cans will however be supplied to employees while spending a weekend away from their usual residence and work place

1

Input tax of R59.48 (4.56 x 100 x 15/115) may therefore be claimed on the purchase of these cans

1

Cans to be sold in the companies vending machine These cans are sold at a market related price to employees. The supply of these cans will constitute entertainment as defined in section 1. Input tax will however not be denied in terms of section 17(2) as section 17(2)(a)(i)(bb) is applicable (see above). The supply covers all direct and indirect costs and input tax of R59.48 (4.56 x 100 x 15/115) may be claimed on the purchase of these cans

3

Output tax will not be levied in terms of section 18(3) as the supply of these cans does not constitute a fringe benefit. Output tax of R123.91 (9.50 x 100 x 15/115) will however be levied in terms of section 7(1)(a). The time of supply will be when the money is retrieved from the vending machine (consideration)

2

QUESTION 4 - SOLUTION PART A Transaction 1

Marks

Purchase of the furniture from deceased estate The antique furniture is purchased from a non-vendor and it qualifies as second hand goods (Definition in S1). Thus, although no VAT was paid when the furniture was purchased, FF can claim a notional / deemed input VAT

1

Value of supply: (Defintion of 'input tax' in S1) A notional / deemed input of R39 130.43 (R300 000 X 15/115)) can therefore be claimed.

1

Time of supply: (S16(3)(a)(ii)(aa) ) To the extent which payment has been made 50% of the payment made on 2 May 2022, therefore claim input R39 130.43 /2 = R19 565.22 (or 50%) in the April / May 2022 tax period And R39 130.43 /2 = R19 565.22 (or 50%) in the June / July 2022 tax period

1 1

Supply of goods to customer in Kenya Furniture directly exported, normally qualifies as a zero-rated supply. However, as it is movable second hand goods on which a notional input has been claimed which is exported; the zero rating is not applicable (Proviso to S11(1))

1

Value of supply (S10(12)) The value of supply will equal to the original purchase price , thus R200 000. Output equal to R26 086.96 (R200 000 x 15/115) or Alternative (R39 130.43 notional input x R200 000 / R300 000) Time of supply (s9(1)) Earlier of issue of an invoice (10 June 2022) or the receipt of any consideration (August 2022, therefore when invoice is issued (10 June 2022), included in June/July tax period.

1 1

1

Transaction 2: The rendering of transport services to passengers or goods is zero-rated if the transportation is from a place inside South Africa to a place in an export country. (s11(2)(a)). The business class ticket and the SAA Cargo are paid for the transportation of Harvey Norman (passenger) and personal belongings (goods) from South Africa to an export country (India) and will therefore be zero-rated

2

The flight insurance (ancillary services) of R600 paid for Harvey Norman (passenger) will also be zero rated in terms of s11(2)(d).

1

Therefore no input VAT can thus be claimed on these amounts as VAT was charged at 0% (Rnil).

Part B Email 1 In order to register voluntarily as a vendor, Tukkies Stay (Pty) Ltd must be in terms of s23(3)(b): ·

Be carrying on an enterprise

· Making taxable supplies of >R50 000 in the preceding 12 month period or · Taxable supplies do not exceed R50 000 but can reasonably be expected to exceed this amount within 12 months from the date of VAT registration.

0.5 0.5

Carrying on an enterprise: Tukkie Stay will supply residential accommodation by letting townhouses on an ongoing basis; however, the supply of the residential accommodation is an exempt supply (S12(c)) and therefore do not form part of an enterprise (Paragraph (v) of the proviso to the definition of 'enterprise' in S(1))

1

The supply of commercial accommodation (taxable supply, lodging and domestic goods and services(1) , will only form part of the enterprise if the total value of taxable supplies exceeds R120 000(1) in a 12 month period (Paragraph (ix) of the proviso to the definition of 'enterprise' in S(1))

2

Thus, only if the turnover of the bed-and-breakfast exceeds R120 000 in a 12 month period, then Tukkie Stay (Pty) Ltd can register voluntarily.

1

Total for email 1

5

Email 2 (S14 & S(7)(1)( c) ) Importation of services: VAT is only levied to the extent of making nontaxable supplies

1

Since you make 100% taxable supplies, VAT will never be levied on services which you import, and since you will not pay VAT on these transactions, you will also not be able to claim an input.

1

Total for email 2

2

QUESTION 5.1 - SOLUTION Marks Section (a) OUTPUTS Training fees: At Centurion premises - SA residents At Centurion premises - German residents

Training in Switzerland Guest House: Delegates attending short courses German delegates

(R273 600 x 15/115)

35 687

1

S(7)(1)(a)

Not an export of services - services performed in SA to non-residents who were also in SA (R136 800 x 15/115)

17 843

1

S11(2)(l)(iii)

-

1

S11(2)(k)

8 357

1

S7(1)(a)

20 246

2

S10(10)

Export of service - zero rated

(R64 068 x 15/115) (R224 960 x 60% x 15% >28 days, therefore VAT levied on 60% of supply. No VAT levied on 40% of supply (OR VAT only levied on 60% of supply). The R224 960 excluded VAT.

Sale of cars: In South Africa In Europe

(R652 422 x 15/115) Direct export of goods - zero rated

Interest

Financial service - exempt supply

1

85 099 -

-

1 1

S7(1)(a) S(11)(1)(a)

1

S2(1)(f) & S12(a)

INPUTS Goods purchased from South Africa Goods imported from America VAT on goods

VAT levied in terms of s7(1)(b) Goods imported from Botswana VAT on goods VAT levied in terms of s7(1)(b)

Salaries

(R77 795 x 15/115)

No VAT levied in terms of s7(1)(a) as overseas supplier will not be a vendor

(R480 000 + R48 000 + R42 500) x 15%

No VAT levied in terms of s7(1)(a) as R250 000 x 15%

Employees' are not carrying on an enterprise

Tax due by Speedy Instruction (Pty) Ltd

(b) Speedy Instruction will need to complete a VAT 201. This needs to be submitted by the 25th of March (for manual submission) or by the 31st of March (for e-filing)

1

S17(1)

B

Par (a)(ii) of 'input tax defintion

2

-1 if shown as an output

B

Par (a)(ii) of

1

-1 if shown as an output

-

1

Paragraph (iii) (aa) of the definition of enterprise in S1

34 010

1 16

-10 147

-85 575

-37 500

1 2 3

S28(1)

(c) A penalty of 10% on the amount due will be levied. Interest at the prescribed rate will be charged from 1 April 2022 TOTAL

1 1 2 21

S39(1) S39(8)

QUESTION 5.2 - SOLUTION

Marks

The payment is an import of services. In terms of section 7(1)(c) VAT is levied on the supply of any “imported services” by any person.

1

VAT is payable to the extent that the services are used in South Africa for the purposes of making non-taxable supplies. s1 "imported services"

1

The service of the architect will be used for the making of exempt supplies (residential accommodation is an exempt supply in terms of S12(c)). Thus VAT is payable on this supply.

1

The value of the supply is the greater of (S14(3)) The value of the consideration for the supply The open market value of the supply VAT = R85 000 x 15% x 50%(only SA portion)

1

R85 000 R77 000 = R6 375

PropRes, being a VAT vendor, will not be allowed to claim this VAT on importation as an input tax credit as it relates to non-taxable supplies.

1

1

Section refrence

QUESTION 6 - SOLUTION Travel Line (Pty) Limited Output tax

Fares from transporting goods is a taxable supply (R798 000 × 15 / 115)

Marks

AMOUNT R 104 087 S7(1)(a)

0.5

Fares from transporting passengers is an exempt supply (section 12( g ))

0 S12(g)

0.5

Interest levied on overdue accounts (an exempt supply being a financial service (section 12(a )))

S12(a) & 0 S2(1)(f)

0.5

Indemnity award (R15 960 × 15 / 115 × 75%) – because Travel Line (Pty) Limited would have claimed an input tax deduction to the extent of 75% when it purchased this original notebook computer, the calculation of the output tax on the deemed supply that arises from this indemnity payment is limited to 75%. ‘Company car’ fringe benefit (R230 000 × 0,3% × 15 / 115 × 75% × 2 months) – the output tax on the deemed supply that arises from the Seventh Schedule benefit provided to the managing director is limited to 75% being the extent of the taxable supplies made by Travel Line (Pty) Limited (section 18(3))). Total output tax

1 561 S8(8) S18(3) + Rules and Regulati 135 ons

1

2

105 783

Input tax Bad debts (R23 940 × 15 / 115) – the input tax deduction for bad debts is not apportioned since the bad debts relate solely to its taxable supplies (transporting goods). Bank charges (R1 368 × 15 / 115 × 75%) Depreciation – depreciation has no vat implications.

3 123 S22(1)

0.5

134 S17(1)

1

0

0.5

Purchase of notebook computer (R20 520 × 15 / 115 × 75%)

2 007 S17(1)

1

Insurance premiums (R17 328 × 15 / 115 × 75%)

1 695 S17(1)

1

Maintenance (R19 950 × 15 / 115 × 75%)

1 952 S17(1)

1

Salaries (not in the furtherance of an enterprise)

0 (iii)(aa) of

0.5

Employees subsistence – no input tax deduction is available on the employees subsistence expenses as these comprise the -supply of ‘entertainment’ (section 17(2)(a ))

0 S17(2)(a)

0.5

Petrol (a zero-rated supply (section 11(1)( h )))

0 S11(1)(h)

0.5

Total input tax Net amount of vat due to the Commissioner (R105 783 – R8 911)

8 911 96 872

0.5

QUESTION 7 - SOLUTION OUTPUT TAX Commercial rentals Residential rentals Interest on overdue accounts Insurance award

Fringe benefit

Taxable supply R849 300 x 15/115= R159 600 x 0/100 = Residential accommodation - exempt supply Financial service - exempt supply Deemed supply; although total reinstatement Prop R136 800 x 15/115 x 74%= Holding was entitled to input tax credit on acquisition (not 'motor car' as defined). As only 74% of the input tax credits were claimed for the insurance premiums, the output tax is also apportioned to the extent of 74%.

110 778 Nil Nil 13 204

S7(1)(a) S12(c ) S12(a) S8(8)

1 0.5 0.5 1.5

Due to the fact that the overseas air tickets are zerorated, no fringe benefit arises for VAT // There are no VAT implications on the coffee given to employees as this comprises entertainment

Nil

S18(3)

1

INPUT TAX Two town houses Bank charges

Residential accommodation - exempt supply Apportion; partly used for making of taxable supplies R1 254 x 15/115 x 74%=

Nil (121) S17(1)

1 1

Audit fees

Apportion; partly used for making of taxable supplies R14 250 x 15/115 x 74%=

(1 375) S17(1)

1

Salaries and wages

Employees are excluded from the definition of an 'enterprise'

Nil

1

Double cab light delivery vehicle The double cab light delivery vehicle is a 'motor car' as defined in S1 and therefore input is denied on acquisition. Not a 'supply' Depreciation

Nil

Nil

Par (iii)(aa) of the proviso to the defintion of 'enterprise' in S1 S17(2)(c )

1

1

Maintenance

Petrol Interest on mortgage bonds

To factory - no apportionment, wholly for taxable supplies Remaining - apportion as partly for taxable supplies Zero-rated supply Financial service - exempt supply

Office equipment rentals

Apportion as partly for making of taxable supplies

Bad debts Hotel accommodation and meals

Overseas air tickets

R34 200 x 15/115 x 100%=

(4 461) S17(1)

R16 416x 15/115 x 74%= R12 830 x 0% x 74%=

(1 585) S11(1)(h) Nil Nil S2(1)(f) & S12(a) (890) S17(1)

(R10 244 - R1 026) x 15/115 x 74%= OR (R6 736 + R2 482) x 15/115 x 74%=

Coffee machine - used for 'entertainment (defined in S1)' - input denied R9 804 x 15/115 x 100%= Commercial tenants: taxable supply Residential tenants - exempt supply An input credit is available as the entertainment R12 508 x 15/115 x 100%= expenditure has been incurred for the personal subsistence of an employee of Prop Holding while he was obliged to be away for at least 1 night from his usual place of residence and from his work-place by reason of the duties ...