Avoid penalties: Know WHEN and WHEN NOT to charge VAT upon selling your assets
If you're selling your business assets and you don't know when to charge VAT when selling them, you could very well end up with SARS penalties and harsh interest.
So to help you, here's when you MUST and MUSTN'T charge VAT on the sale of your fixed or movable assets...
When to charge VAT on the sale of your fixed or movable asset:
You must charge VAT on the selling price of your assets if:
· They form part of your business assets, even if they're used goods;
· The asset is part of the VAT registered business; and
· You could claim an input tax deduction on the asset at the time you purchased it.
It's important to note that because the sale of capital assets doesn't flow through the sales journal, it's very easy to them,
And when you don't declare output tax, you'll face heavy penalties.
Also, you mustn't think that you don't have to charge VAT when you sell assets.
Some businesses will argue that they sell assets in the everyday trade of their business, but the fact of the matter is that if you've charged the VAT, then you must charge it when you sell.
All it takes is just one mistake for SARS to deny your input tax claim and slap you with penalties and interest!
With the Input Tax 101 eReport, you'll be 100% sure of every input tax credit you can claim.
It's your complete guide to input tax, with information on:
When you mustn't charge VAT?
Nine items you can claim input tax on
10 Items you CAN claim input tax on, but didn't know about
Five exceptions to the rule against entertainment expenses
Eight Motor vehicles you can claim input tax on
And much, much more!
There are 2 situations when you mustn't charge VAT on the sale of your fixed or movable assets. They are…
1. Don't charge VAT if you sell assets that AREN'T part of your VAT-registered business. So, for example, don't if it's from your private home.
2. Don't charge VAT if you sell assets that SARS wouldn't allow you to claim an input tax deduction on when you bought them. For example, a car designed to carry passengers.
*So, there are some pointers on when to charge VAT when selling assets, and when NOT to.
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