Approach by HC111117012822

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									                                  VAT: input tax calculation
      Municipality:
      Date:
      Year end:                     30/06/2009
                                    Tool to demonstrate how to calculate input tax that can be claimed using
      Purpose:                      the turnover based method
      Prepared by:
      Reference:                    Approach

      Extracts out of VAT 404 - VAT guide for vendors:

      Generally the full amount of input tax may be claimed by a vendor who makes taxable supplies. However,
      where goods or services are imported or otherwise acquired for mixed purposes (taxable and other non-
      taxable purposes), input tax may only be claimed to the extent that they are for making taxable supplies in the
      course of your enterprise. Therefore, when you import or otherwise acquire goods and services which are not
      exclusively for taxable supplies, you will be required to determine the part that relates only to taxable supplies.
      This means that you will be required to attribute the VAT expense according to the intended purpose for
      which it will be utilised. Where the expense cannot be directly attributed to either taxable supplies or to
      exempt supplies (or private/other non-taxable use), the extent of input tax which may be claimed has to be
      calculated according to the apportionment percentage obtained, using an approved method.


      Remember that this calculation is only required where the input tax incurred is for both taxable
      supplies and other non-taxable purposes such as exempt supplies or private use. In other words, the
      calculation is required where the expense cannot be directly attributed to either taxable or non-taxable
      purposes, but is partially attributable to both types of supplies . This is sometimes referred to as an
      expense which is incurred for making “mixed supplies” or for “mixed purposes”.

      Note that if the expense is incurred wholly for taxable supplies, the full amount of input tax can be
      claimed, but if it is wholly for exempt supplies, no input tax can be claimed.

      In practice, it is often difficult to accurately determine the apportionment percentage according to the turnover
      based method in each and every tax period. It is therefore acceptable practice to calculate the estimated
      percentage using the turnover figures from the previous year’s financial statements, and to apply that
      percentage for claiming input tax in each individual tax period for that year. An adjustment is made annually to
      account for any shortfall or overestimation in the percentage used for the calculation when the audited
      financial statements for the current financial year are available and when the correct percentage can be
      calculated. This adjustment should be done within a period of 3 months after the financial year end.


      If the audited financial statements have not been completed within a period of 3 months after the financial
      year-end, an adjustment should be made using the year-end trial balance figures. This would be followed by a
      final adjustment when the audited financial statements for that year are eventually finalised.

      Where the vendor calculates the apportionment ratio according to the turnover based method or any other
      special method approved by the Commissioner and the resultant percentage is 95% or more, no
      apportionment is required as the full amount of input tax can be claimed. This is known as the de minimis rule.




ac82384d-3a4e-44ec-8f39-2998ae1550b3.xls Approach                                                                           1
                                  VAT: input tax calculation
      Municipality:
      Date:
      Year end:                    30/06/2009
                                   Tool to demonstrate how to calculate input tax that can be claimed using
      Purpose:                     the turnover based method
      Prepared by:
      Reference:                   Approach

      Extracts out of VAT 404 - VAT guide for vendors:

      The only approved method available to municipalities as mentioned above is the turnover based method
      which is shown below.

      Turnover based method formula:

      Total value of taxable supplies
                                                             X       VAT incurred         =        input VAT claim
      Total value of all supplies

      Notes:
      1. The term “value” excludes any VAT charged.
      2. The “total value of all supplies” consists of the “value” of all taxable supplies (1 & 2) (excluding VAT),
      exempt supplies (3) and non-supplies (4). Remember that a taxable supply includes a zero-rated supply (2)
      as well.
      3. Exclude capital goods from the calculation, unless they are supplied under a rental agreement / operating
      lease (i.e. not a finance lease or instalment sale agreement).
      4. Exclude any goods or services where the input tax was denied from the calculation (e.g. the purchase of a
      passenger vehicle).

      Examples from National Treasury GRAP Implemention Guide for Municipalities:

                                     (1) Examples of standard rated supplies - 14%:

      Electricity, gas, water, drainage, refuse removal           Disposal of sewerage or garbage
      Upgrading/building of roads                                 Hospitals as principal
      Abattoirs                                                   Farming
      Parking grounds and garages                                 Produce markets
      Township development                                        Letting of buildings e.g. halls, offices or shops
      Airports                                                    Quarries and sale of sand
      Cement-making                                               Caravan parks, pleasure and holiday resorts
      Nurseries/Hiking trails                                     Brickyards
      Liquor sales                                                Provision of computer services
      Game farms                                                  Dog tag fees
      Cattle pens and auction facilities                          Fee/refunds/commission received
      Royalties                                                   Library services
      Provision for bus/taxi shelters                             Fire Brigade services/fire fees
      Entrance fee to recreational facilities                     Issuing of licenses or permits as principal
      Letting of bus without a bus operator                       Public Transport enforcement (CCTV)
      Connection and reconnection fees                            Parks and recreational services
      Fees fro making copies of documents                         By products sales
      Meter reading fees                                          Inspection/re-inspection fees
      Trading fees                                                Signage fees
      Industrial effluent/Effluent sales                          Weighbridge fees




ac82384d-3a4e-44ec-8f39-2998ae1550b3.xls Approach                                                                     2
                                   VAT: input tax calculation
      Municipality:
      Date:
      Year end:                     30/06/2009
                                    Tool to demonstrate how to calculate input tax that can be claimed using
      Purpose:                      the turnover based method
      Prepared by:
      Reference:                    Approach

      Extracts out of VAT 404 - VAT guide for vendors:
      Recoveries of infrastructure maintenance                  Subdivisions/Zoning/re-zoning
      Encroachment fees                                         Removal of restrictions
      Filming fees                                              Burial fees/grave sales/cremation/cemetery fees
      Recoupment : telephone/parking from staff                 Informal trading levy/Trade licence
      Salvage items                                             Recoveries other
      Roadworthy application/certificate                        Advertising fees
      Boat registration                                         Fishing permits
      Duplicate certificates                                    Health: Licensing and regulation: Trading
      Street frontage administration fee                        Selling of animals, birds, fish
      Banana ripening                                           Towing fees
      The supply of accommodation in a hostel or                Fees for acting as collecting agents for Province
      boarding establishment                                    (e.g. motor licences)
      Services rendered by one municipality to another          Letting of commercial accommodation, e.g.
      municipality                                              hostels

          (2) Examples of zero-rated supplies - 0%:                    (3) Examples of exempt supplies:

                                                                The levying of interest on outstanding accounts
      Municipal property rates                                  receivable (section 12(a))
                                                                The supply of dwelling under an agreement of the
      Grants for purposes of taxable supplies                   letting and hiring thereof (section 12(c))
                                                                Public passenger transport in South Africa by bus
                                                                or by train (excluding the rental of a bus or train
      Supplies to a vendor in a customs controlled area         without an operator (section 12(g))
      Exports
      Housing subsidies

           (4) Examples of 'out of scope' supplies:

      Statutory fines and penalties. The imposition of
      statutory fines or penalties by the municipality falls
      outside the scope of VAT. Examples are speeding
      and parking fines, library fines for the late return of
      books, and building control and other fines.
      Any grants paid by public authorities to make 'out of
      scope' supplies
      Any unconditional gifts (donations) from charities or
      inheritance from individuals provided that there is no
      quid pro quo in terms of a supply of goods or
      services to that person or a connected person in
      return for the donation or inheritance




ac82384d-3a4e-44ec-8f39-2998ae1550b3.xls Approach                                                                     3

								
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