Seven requirements to claim input tax on secondhand goods
Notional input tax is the Vat you can claim on secondhand goods as a vendor who has bought the goods for your business from a person who isn't a vendor. But before your company claims tax on these goods, there are seven requirements your company must meet. Read on to find out what they are...
According to the Vat Act, you can claim notional input tax for secondhand goods you've bought for your company.
But the Act lays down a list of requirements relating to notional input tax deductions that your company must meet. And this means SARS will scrutinise you if you get it wrong.
Claiming input tax on secondhand goods? Meet these seven requirements first
According to the Practical Vat Loose Leaf Service, your company must satisfy the following requirements to claim the input tax on secondhand goods:
The goods must be secondhand. This means they must have been previously owned and used. Note that animals, gold coins or 'old order' mining rights don't count as secondhand goods.
The supply may not be a taxable supply. The purchase must be from someone who isn't registered as a Vat vendor.
The supplier must be a South African resident.
The purchaser must have paid for the supply. Remember that 'input tax is only allowed to the extent that payment has been made,' says the Loose Leaf.
You must have kept all the records and details of the transaction.
You calculate the input tax by multiplying the tax fraction (14/114) by the amount of the consideration paid for the goods.
If the secondhand goods are fixed property, the amount of input tax you can claim on the sale is limited to the amount of the transfer duty. And you can only claim it once the transfer duty on the transaction has been paid.
Knowing what the requirements for claiming input tax on secondhand goods are will ensure you do it correctly.