Don't claim input tax on these seven transactions!
If you get your input tax claims wrong, you'll incur SARS penalties and additional interest. Are you prepared to take that risk? Discover seven transactions you can't claim input tax on and three rules you need to follow when you do.
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Seven transactions you can't claim input tax on
The Practical Vat Loose Leaf Service outlines seven transactions your company can't claim input tax on:
Staff refreshments (coffees, teas, soups);
Staff canteens (where you don't recover the costs from your staff);
Municipal rates (these are zero-rated);
Your office Christmas year-end function;
Country club memberships; and
Now that you know the seven transactions you can't claim input tax on, make sure you stick to these three general rules for claiming input tax on your taxable transactions.
Three input tax rules you need to follow to the letter
Input tax general rule #1: You can claim input tax on any item or expense you use in the course of your Vat-registered business. This means your supplier must have charged Vat on the transaction.
Input tax general rule #2: You can claim input tax on second-hand goods you buy for your business. This is known as notional input tax.
But you'll need to keep a record of the details of the person who sold the goods to you, a description of the goods and the amount you paid for it. In this case, you must use the Vat 264 declaration form instead of a tax invoice.
Input tax general rule #3: If you've claimed input tax on a tax invoice and you haven't paid your supplier within 12 months of the date of that invoice, then you have to 'add back' the input tax.
This means you'll have to include that specific Vat amount as output tax in block 12 of the relevant Vat return.
There are five more general rules for input tax and practical examples of transactions you can't claim input tax on. You'll get all the info in the Practical Vat Loose Leaf Service. So be sure to check it out so you can get your input tax claims right and avoid SARS penalties.
PS: Errors in Vat invoices could cost you thousands!
Are there any inaccuracies in your Vat invoices? You may be charged a very high penalty!
Click here to find out how to make sure your Vat invoices are 100% legal.