Input tax is the VAT you pay your suppliers in the course of your business as well as VAT paid on goods you import.
SARS allows you to claim the input tax for your relevant tax period when you complete your VAT return. While this is the case, there are input tax claims you aren't allowed to make.
Read on below to find out what they are so you can comply with SARS and avoid penalties.
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NEVER claim input tax claims for these five transactions
#1: Renting or buying a new company car
If you don't run a car dealership or operate a car rental business, you aren't allowed to claim an input tax deduction when buying or renting cars.
SUVs, MPVs, station wagons, sport wagons, minibuses, kombis and double cabs fall under the definition of 'motor car' in Section 1 of the VAT Act and you won't be able to claim a tax deduction for buying them.
#2: Entertainment deductions are still a big NO!
You're not allowed to claim input tax deductions on entertainment. This includes, refreshments for your staff such as coffee, tea and cookies, boardroom lunches, customer entertainment, year-end parties and other functions.
On the other hand, you can claim the input tax on accommodation and meals for you and your staff when they're away on official business for at least one night. This also includes meals included in the price of air tickets and seminars.
Remember, 'if your business is to provide entertainment to clients and customers and your charge covers all costs or equals the open market value, you may claim back the input tax,' says the Practical VAT Handbook.
All it takes is just one mistake for SARS to deny your input tax claim and slap you with penalties and interest!
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#3: No invoice, no claim!
Don't claim VAT on any supply made to you and worth more than R50 if you don't have a valid tax invoice.
#4: No claim on pay cheques
Salaries, wages and allowances don't contain VAT, so you can't claim an input tax deduction when you pay your employees.
#5: Letting a home is VAT-exempt, so no deduction!
Letting your private home is exempt and this means you can't claim input tax. This also applies to accommodation you may supply to your employees.
For example, let's assume your company is based in Johannesburg and it buys a flat in Cape Town for staff to stay in when travelling to Cape Town on business. Even though the flat is owned by your company, you can't claim input tax, not even on the furnishings, the security, or any renovations.
Well there you have it. Unless you're looking for some unfriendly attention from SARS, don't even try claiming input tax on the above mentioned items.
I know you're a business finance savvy individual, so I'm sure you claim input tax credits back on goods and services you supply or buy... But are you 100% sure you're claiming all the input tax credits back available to you? Did you know you could be missing out on 19 input tax VAT savings? Here's how to claim all your input tax claims…