Claiming input tax on entertainment-related expenses is a tricky area in VAT law because SARS will simply reject some entertainment-related claim.
But the fact of the matter is that you CAN claim input tax on entertainment-related expenses in certain circumstances.
Here are 5 circumstances in which you can claim input tax on entertainment expenses...
Circumstance#1: The core function of your business to provide entertainment
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This is for example, when you run a restaurant.
But this ONLY applies if you provide the services or entertainment with the objective of making a profit. And these prices cover the cost you paid for the entertainment.
NOTE: If you sometimes lose money on promotions, but the objective of your business is to still make a profit, then SARS won't deny you your input tax.
Circumstance#2: Personal subsistence with employees
If you pay for the personal subsistence of employees, then you can claim back the input tax.
But this is only if your employee incurs the expenses in the line of his work or duties.
Remember that the employee must be away from his usual residence and business place for at least one night to qualify for the input tax claim.
TIP: When it comes to personal subsistence, claim input tax on take aways and drinks.
Circumstance#3: Meals and refreshments included in your fee
If you claim input tax, your SARS VAT audit is impending
And when the SARS auditor comes knocking or sends a query, he'll check if:
· Your books and records comply with the requirements of Section 55 of the VAT Act;
· You didn't claim on exempt supplies;
· Any of your claims were for non-taxable supplies;
· You apportioned inputs correctly and at the right tax rate (Sections 16, 17 and 20
of the VAT Act);
· And more!
But the truth is, even if you're entitled to your claim, but don't have the valid documentation, he'll still reverse your deduction!
Here's everything you need to secure every input tax claim you submit.
If you provide meals and refreshments and they're part of the price of a ticket or entrance fee, you can claim the input tax.
For example, this could be when you a seminar and the refreshments are included in the fee.
*Do you want to see what the final 2 circumstances are? Then page over to chapter I03: Input Tax
in your Practical Tax Loose Leaf Service
handbook, or click here
if you don't already have it.