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Revealed: Three general rules that apply when claiming input tax

by , 21 June 2013
South Africans have showered Former President Nelson Mandela with get well messages, cards and flowers. According to media reports, handmade cards in different shapes, an assortment of flowers, balloons and even flags adorn the entrance to the hospital where Mandela is being treated for a recurring lung infection. It's heartening that the 94 year old, who was hospitalised in the early hours of 8 June, is responding well to treatment. If you have a staff member in hospital and want to wish her a speedy recovery, it's good to know that when it comes to SARS, flowers are a 'gift that keeps on giving'. That's right. Flowers form part of the items your company can claim input tax on. But before you claim, here are some general rules you need to abide by to...

According to the Practical Vat Loose Leaf Service, many vendors think they can't claim the input tax on goods they can eat, enjoy or take home.

Wrong!

There are some items that fall into these categories that you can claim input tax on. These include:

  • Plants for the office.
  • Flowers for the office.
  • Flowers sent to sick staff.
  • Wreaths sent to staff whose family members have passed away.

In reality, many businesses are still unsure as to what transactions input tax can be claimed on. As a result, you may be missing your chance to claim all the input tax due to you.

But you can avoid this mistake by understanding the general rules and tips that apply to input tax so you can use it to boost your company's cash flow.

Follow these rules when it comes to claiming your company's input tax

Before you try to claim, it's important you know that input taxis the Vat you pay to your suppliers in the course of carrying on your business or enterprise.

That's means you can claim input tax on any item you purchase or any expense you have, as long as it's used in the course of your Vat registered business. For you to claim, your suppliers must have been charged Vat on the transaction.

If your transaction applies, you can then use these four rules to ensure SARS pays your input tax back to you.

Input tax general rule #1: If you've claimed input tax on a tax invoice and you haven't paid your supplier within 12 months of the date of that invoice, you have to 'add back' the input tax. 'You will have to include that specific Vat amount as output tax in block 12 of the relevant Vat return,' says the Loose Leaf.

Input tax general rule #2: If you discover you haven't claimed Vat back on some back invoices, you can still do so but it must be within five years of the date of that invoice.

Input tax general rule #3: You can claim input tax on second-hand goods you buy for your business. This is known as notional input tax. 'You will, however, need to keep a record of the details of the person who sold the goods to you, a description of the goods and the amount you paid for it. The Vat 264 declaration takes the place of a tax invoice,' explains the Loose Leaf.

Following these general rules when it comes to claiming your company's input tax will ensure you know how to apply them to boost your company's cash flow.

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