A common question that keeps coming up on the Accounting and Tax Club is 'can you claim input tax on gifts you give to employees?'
Most probably you'd think no, right? You'd argue, employee gifts fall under entertainment, which you can't claim on! But... have you stopped to ask yourself if maybe they fall under promotional items, which you can claim on?
Read on and I'll show you exactly what gifts you can and can't claim input tax on so you're compliant with the Tax Act, Vat Act and Tax Administration Act.
You could be missing out on 34 input tax Vat savings...
Are you sure you've claimed input tax on these five office expenses?
Plants for the office;
Flowers sent to sick staff;
Promotional gifts; and
Stationary orders for the office?
Follow this general rule for input tax deductions
You can deduct input tax as long as it relates to the carrying on of your enterprise. This means if you pay Vat for services that you need to run your business, you can claim back the input tax.
But, there are certain deductions SARS will deny from the onset. In this case, it isn't relevant if the cost you had to incur was in connection with your enterprise.
For example, SARS views an input tax deduction for gifts or awards as entertainment and won't allow it!
But, there's actually an exception. Read on to find out what it is so you can take advantage of it too…
Can you really claim input tax on gifts you give your employees?
It only takes one oversight… One unaccounted invoice… One incorrectly claimed receipt – and SARS will be all over you like a rash
Even if you're certain you've done everything you can to keep your Vat claims above board, it's so easy for something to slip through the cracks.
The safest and smartest thing you can do to avoid a SARS audit – and avoid crippling penalties of up to 210% on top of what you owe – is to make absolutely sure your business is fully compliant with current Vat legislation.
Easier said than done, right?
There's a simple way to make sure your business is compliant with all its Vat obligations – BEFORE the SARS pays you a visit…
Click here to find out...
Let's say Joe Boss decides to give his employees a bottle of expensive wine, a lunch voucher and a gift voucher for their birthdays. Can he claim the input tax on it?
Sadly… no. Gifts such as liquor, chocolates, rugby tickets, holiday weekends, hunting trips etc., don't qualify for input tax.
But then Joe decides to give all his employees an umbrella bearing his company's logo. And one of his employees gives birth and he sends her flowers in hospital.
The good news… Joe can claim the input tax on both of these. And, he doesn't have to account for any output tax as he doesn't charge his employees for receiving the gifts!
SARS will allow input tax on the acquisition of certain promotional gifts, such as t-shirts, umbrellas, pens, calendars, desk pads, calculators etc. And it will allow you to send flowers and plants to ill employees or if there's a death in the family. These are gifts!
There you have it. Now you know what employee gifts and awards you can claim input tax on. But don't miss out another input tax saving. You could claim back on certain employee awards too. Find out which ones qualify in the Practical Vat Loose Leaf Service.
Did you know SARS amended the principal Vat Act 94 times in the last year? And this includes your input tax claims. Don't open yourself up to an audit because you didn't know! Attend the Vat Masterclass and find out how all these changes affect your business. Click here
to register now.