'The Vat consequences of betting are simple if you know the basic rules' says the Practical Vat Loose Leaf Service.
Businesses that accept bets are treated like any other business. This means if the annual turnover of your betting business exceeds R1 million, you must register as a Vat vendor.
Revealed: Two Vat consequences of betting
Output tax and betting: You see, where a person bets an amount on the outcome of a race or on any other event, for instance the name of the royal baby, the person with whom the bet is placed supplies a service to the person placing the bet. This means your betting business must declare output tax on bets received.
Remember, the Vat Act says that when you supply a service you must levy Vat!
Input tax and betting: The Vat Act clearly states how you must treatinput tax when bets are involved. This means the following deductions may be claimed:
Here's an example of how the Vat consequence works
Honest Joe is a bookmaker and receives R3 420 000 inbets during the March 2013 tax period. Joe pays outR2 280 000 in winnings and R684 000 in provincialbetting tax.
What is the output and input tax Honest Joe can claim back?
Bets received: R3 420 000 x Vat (14/114) = R420 000
Winnings paid out: R2 280 000 x Vat (14/114) = R280 000
Betting tax paid: R684 000 x Vat (14/114) = R84 000
Vat payable to SARS = R56 000
Remember, any amount of bets you place, or the amount of winnings you receive will include a Vat portion.
Knowing the Vat consequences of betting will help ensure your business is compliant.