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Can I claim input tax on car rental?

by , 15 September 2014
When it comes to business travel expenses, one question most vendors ask is whether or not they can claim input tax on car rental.

This question isn't surprising when you consider the high cost of business travel.

It makes sense for vendors to want to know such things. They want to recoup some of the travel related expenses by claiming every legal input tax deduction available.

If you're one of these Vat vendors, keep reading to find out if you can claim input tax on car rental.


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Bad news! You can't claim input tax on car rental


Vat is charged at 14% on car rental in South Africa. However, the bad news is you can't claim this as an input deduction.

According to the Practical Vat Loose Leaf Service, the reason for this is the same reason for disallowing the input deduction when you buy a motor car – it's a passenger vehicle.

SARS doesn't allow an input tax deduction on the purchase of a motor car or double cab vehicle.

The taxman's rationale behind this approach is that if it allows car rentals as an input deduction, companies would rent vehicles for staff rather than buying them.

But it's not all doom and gloom.

Even though SARS won't allow an input claim on the rental of a car, you can claim the Vat on the insurance, damage, excess and accident administration charge. So remember to claim these amounts on every car hire transaction.

Here's the bottom line: You can't claim input tax on car rental itself, but you can claim on other associated expenses.

If you want to know more about common business travel expenses and their Vat consequences and whether you can or can't claim input tax on them, check out the Practical Vat Loose Leaf Service.
 
PS. Here are 34 Input tax savings you could be missing out on…

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