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Sending your employee on a business trip? Don't forget about these Vat implications

by , 01 December 2014
Sending your employees on business trips can be a costly exercise. What makes it worse, is that you have to pay Vat as well.

But the trouble comes in when you have to pay Vat on certain travel expenses, but can't claim the input tax back.

And on top of all that, if you claim input tax on the wrong expenses, SARS will slap you with a 200% penalty.

Suddenly, your employees' two day business trip is costing you double, even triple, what it should've.

We don't want this to happen to you. That's why today, I'm explaining all the Vat implications of sending your employee on a business trip...

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Your employee's business trip has the following six Vat implications

1. You can claim back the Vat on your employees' or directors' or partners' domestic air travel. This air travel has a standard Vat rate of 14%. 
2. If you send your employee on an overseas or foreign business trip (international air travel is zero-rated), or a domestic trip using rail or road, you can't claim input tax. This is because these are either zero-rated or exempt supplies. 
3. You can claim back the Vat on an employee's accommodation and meal expenses from the business trips, but he must be away for at least one night. And remember residential accommodation is an exempt supply. (This is when you rent the accommodation by way of a lease). This means you can't claim input tax on it. 
Holiday accommodation, on the other hand, is standard-rated and you pay 14% Vat on it (This is any accommodation you pay for so your employee can take a holiday). Commercial accommodation is also standard-rated, but if your employee has an extended stay of over 28 days, you pay Vat on 60% of the cost of your employee's stay. Commercial accommodation is accommodation together with either one or all of the following services: cleaning, electricity, air conditioning, telephone, TV, furniture or meals, in:
Any house, flat, apartment
A hotel, motel, inn, guesthouse or B&B
A chalet, tent, caravan or camping site or
5. When it comes to car hire, you can't claim back the Vat on the cost of renting a car on a business trip. The only exception is if the car is a single cab bakkie.
6. Local public passenger transport by rail or road, where you pay a fare for the transport, is exempt from Vat. This means if you send your employee to another office on the other side of the city for a week, you can't claim input tax on the cost of his transport. 
As you can see, you can claim back the input tax on some of the expenses from your employee's business trip, but you have to meet certain strict requirements first.
And if you want to claim input tax on certain expenses remember to get this one document.
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I'd like to tell you how I saved R75 327 in Vat this year. No tricks. No evasion. Just two little things I didn't know I could claim.
By reading this letter, it will tell you how to avoid costly Vat mistakes, save you money, time and be your CEOs favourite person when you save the company R1 000s of Rands in Vat refunds this year.

Don't forget to keep this document from your employee's business trip so you can claim input tax

Don't forget to keep the tax invoice for any expenses you paid Vat on. This applies to supplies with the zero Vat rating as well because you can still claim input tax on those.
Always check the tax invoice has: 
- The name, address and Vat number of the supplier;
- Your name and address;
- The word 'tax invoice'; 
- The date the supplier issued you with the invoice;
- A description of the service (e.g. local or domestic flight to which destination); and
- The value of the supply and the amount of Vat charged (14% or 0%).
There you have it. Now that you know the Vat implications of business trips, ensure you deal with them correctly. 
For more information on the Vat implications of travel and accommodations, check out the Practical Vat Loose Leaf Service

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