Is there a need for notional input tax?
Because the seller isn't a vendor, regular Vat isn't levied on secondhand goods. However, because the buyer is a Vat vendor, he'll have to charge Vat when he sells those goods.
To create some sense of fairness, the purchasing vendor is entitled to a 'notional input tax deduction' on the purchase of those goods – even though he'll not have a tax invoice to back up this specific input tax deduction.
But be warned, even though you don't need a tax invoice for a notional input tax deduction, it doesn't mean that you escape SARS scrutiny entirely.
The Vat Act lays down a whole list of requirements you must meet when it comes to notional input tax deductions.
Here's a checklist of the three legal requirements for notional input tax
Requirement #1: This concession only applies to secondhand goods.
Requirement #2: Secondhand goods are spelt out in the Vat Act as being:
But, secondhand goods are NOT:
Requirement #3: The Practical Vat Loose Leaf Service explains that the purchasing vendor must keep records relating to the purchase of the secondhand goods, if he pays more than R50 for the goods.
This record not only satisfies SARS, but the South African Police Service (SAPS) as well! The record must contain the following:
Well there you have it. Now that you know the three legal requirements for notional input tax, make sure you comply.
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