HomeHome SearchSearch MenuMenu Our productsOur products

Important rules to follow for input tax deductions for gifts and awards

by , 02 June 2015
Thanks to SA laws, you can deduct input tax as long as it relates to the carrying on of your enterprise. In other words, if you pay Vat for services you need to run your business, you can claim back the input tax.

However, you should know that there are certain deductions SARS will deny from the onset. In this case, it isn't relevant if the cost you incur is in connection with your enterprise.

One such place is input tax deductions for gifts or awards as entertainment.

Today, we take a look at this issue more closely.


Here's the golden rule for Vat and awards


SARS views an input tax deduction for gifts or awards as entertainment and won't allow it!

But there's also an exception. Let's look at a few examples to see where you can claim and where you can't claim.

 *********** Recommended For You ***************

Do your Vat refund in ten simple steps

Calculate your Vat, submit your Vat return form and get your refund back from SARS without any delays when you follow this ten-step action plan.

Get your hands on this ten step action plan now to get your Vat refund when its due.


 ***************************************

Example: Joe Boss believes its good customer relationship building practice to give clients gifts for their birthdays.

This includes a bottle of expensive wine, a lunch voucher and gift voucher. He can't claim input tax on these gifts. Important: Gifts to clients such as liquor, chocolates, rugby tickets, holiday weekends, hunting trips, etc. don't qualify for input tax!

Example: At the Christmas party, Joe Boss recognises the hard work of several of his staff members. He rewards them with R500 cash each. He also thanks a staff member who has been with him for 30 years. He presents her with an engraved gold watch costing R4 800.

The watch qualifies as a long service award. It's not a fringe benefit for income tax purposes. So, Joe Boss can claim the Vat of R589 (R4 800 x 14/114) as input tax. No output tax is payable on the award. He can't claim input tax on the R500 cash awards.

Example: A rapid transport company transports hazardous chemicals for clients. A truck is involved in an accident and a worker pulls the driver out of the burning cab. The company gives the worker a TV set costing R5 000 as a reward for his bravery.

In this circumstance, the transport company can claim input tax on the TV set. SARS doesn't see awards or goods for bravery as fringe benefits.

Let's look at what the Vat Act says about promotional gifts and plants and flowers as gifts:

What the Vat Act says about promotional gifts:
SARS will allow input tax on the acquisition of certain promotional gifts. For example, golf shirts, t-shirts, umbrellas, pens, calendars, desk pads, calculators etc. These are gifts.

What the Vat Act says about plants and flowers:
If an employee has a child, is ill or there's a funeral and you send flowers, SARS will let you claim the input tax on these flowers as a deduction. This is a gift.


Related articles




Related articles



Related Products



Comments
0 comments


Recommended for You 

  Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance



Here are all the most interesting, thought-provoking and common tax questions
asked by our subscribers over the last tax year – everything from A to Z!

To download Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance click here now >>>
  Employees always sick? How to stop it today



Make sure you develop a leave policy to regulate sick leave in your company.

BONUS! You'll find an example of the leave policy and procedure in this report.

To download Employees always sick? How to stop it today click here now >>>
  Absenteeism: Little known ways to reduce absenteeism



This FREE e-report will tell you how you can reduce absenteeism in your workplace while avoiding the CCMA and without infringing your employees' labour rights.

To download Absenteeism: Little known ways to reduce absenteeism click here now >>>
  7 Health & safety strategies to save you thousands



Don't let a health and safety incident cost you one more cent. Implement these seven
strategies in your company today.

To download 7 Health & safety strategies to save you thousands click here now >>>