Master these five exceptions to claim input tax on entertainment
We all know that claiming input tax is limited on entertainment expenses. Yet, this remains an area often conveniently overlooked by those new to the game. Sometimes, even experienced operators forget.
Here's an easy-to-use reference guide so you don't make input tax mistakes with your entertainment expenses again.
Can you really afford not to be 100% sure about every input tax claim you submit?
Claiming less money than you should; or
Claiming more money than you should, and getting a black mark from SARS plus penalties and interest!
Make sure you're 100% sure.
Exception #1: Make it your business to entertain
If you make entertainment-related taxable supplies in the ordinary course of your business, claim input tax under two sub-categories:
You provide entertainment continuously (or even regularly) to your clients or customers. Your charges then cover all direct or indirect costs or they're equal to the open market value of the entertainment.
But, you can still claim when you don't charge, as long as your costs are for genuine promotion purposes; or you acquire the goods or services to make taxable supplies to clients or customers.
You provide entertainment to an employee, office holder or any connected person. You must charge them and this must cover all direct and indirect costs of the entertainment.
Exception #2: Why you should spend nights away
You can claim input tax on entertainment expenses if you spend nights away on business. If work requires you (or an employee) to spend a night away from home, claim the input tax on the goods you consume and services you enjoy.
Claim the input tax on your meals, refreshment and accommodation.
Read on for the next three input tax exemptions…
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Errors in VAT invoices could cost you thousands!
Are there any inaccuracies in your VAT invoices? You may be charged a very high penalty!
The truth is brutal! Even if it wasn't you who made the mistake, it may be you who will bear the consequences. If SARS has found inaccuracies, you will be assessed, held liable to penalties and interest and possibly even additional tax! You may even be prosecuted!
To be continued here
Three more input tax exemptions
Exception #3: It pays to feed your customers en route
Number three on the list of nine exceptions applies to operating a transport service that qualifies as a taxable supply.
When you provide meals or refreshments to your passengers or crew while you're transporting them, claim the input tax on the entertainment-related expenses.
Exception #4: It pays to feed the mind
Claim your input tax on entertainment expenses when you run seminars. You must cover the cost of meals and refreshments in your charges.
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Exception #5: Local authorities benefit from providing public amenities
Input tax can be claimed for goods or services acquired by a municipality. These must be used to provide sporting or recreational facilities or amenities to the public.
There are another four exceptions to claim input tax on entertainment discussed in detail in the Practical VAT Handbook. If you don't have your loose leaf yet, click here now to get a copy.
P.S. For a checklist on 19 other little-known items you can claim an input tax deduction on, get your copy of the Practical VAT Handbook.