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Revealed: 20 deemed supplies you must pay output tax on

by , 20 December 2016
Revealed: 20 deemed supplies you must pay output tax onIf you thought output tax only applies to standard-rated, zero-rated and exempt supplies, you're wrong. It's also applies to deemed supplies. Here are the 20 deemed supplies you must pay output tax on.

According to the Practical Vat Loose Leaf Service, although the words 'deemed supply' aren't defined in Vat Law, Section 8 lists certain supplies as deemed to have been made.

Essentially, a deemed supply is a transaction or event on which you have to pay output tax, even if you haven't actually sold any goods or services. The transaction or event is regarded as a taxable supply.

You must pay output tax on these 20 deemed supplies

Here's a checklist of common deemed supplies:

  1. Any goods or services you take from your business for your own use;
  2. Sale in execution of a vendor's goods (i.e. to settle debt);
  3. Goods sold according to the lay-by system are deemed to be supplied at the time the buyer pays for them in full;
  4. Certain payments public authorities and municipalities make to designated entities;
  5. Grants public authorities, municipalities or constitutional institutions pay vendors who aren't designated entities;
  6. Payments you receive from foreign donor-funded projects;
  7. Certain fringe benefits that you provide your staff (except housing);
  8. If you retain assets from your business at the time you deregister as a Vat vendor, SARS will regard this as a deemed supply and will expect you to pay Vat of 14% on the lower of the cost or the current value of those assets;
  9. Short-term insurance claims paid to your business. For example, if you receive an insurance payout for a claim for damaged stock, this payout is a deemed supply and you'll have to pay Vat at the standard rate on the value of the payout;
  10. Goods bought by a vendor under installment credit agreements that a financier repossesses are deemed to be supplied by the vendor;
  11. Rights to use goods (the right is a supply);
  12. Bets you place and winning you receive;
  13. Shares and loan obligations of Share Block Companies;
  14. Local supplies made by agents representing foreign importers;
  15. Expropriation of fixed property where it forms part of the enterprise's assets;
  16. Housing subsidy scheme payments received;
  17. Goods that you temporarily remove from Customs Controlled Areas and don't return within 30 days;
  18. Company formation, amalgamations, intra group transactions and liquidation distributions. Please note that this isn't deemed a supply if SARS approves the scheme for income tax purposes.
  19. Services you supply a foreign warrantor under a warranty agreement; and
  20. Excess payments that you haven't refunded within four months. The recipient of the excess payment must do an output tax calculation on this.

The Loose Leaf Service recommends you make a note of these deemed supplies, as at sometime or other, at least one event will pop up in your business and you'll need to ensure YOU account for the Vat correctly.

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Revealed: 20 deemed supplies you must pay output tax on
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