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Use this legal loophole to claim VAT on your clients' gifts

by , 09 February 2017
You probably buy your clients gifts during the year. But just before you submit your VAT return and miss out on a potential VAT saving, you need to read this first!

You're probably thinking... SARS sees gifts as entertainment and disallows input tax claims from the onset, right? Well... not quite...

During the FSPBusiness VAT Masterclass, I found a secret loophole that's totally legal. And no one's been using this, but it's such an easy way to get more cash in your bank!

Read on to discover what this secret loophole is about claiming VAT on gifts you give your clients.

How Pretoria East Motors' assessment was reduced from R5 million to R1 million
SARS raised an assessment of R5 million on Pretoria East Motors.
But SARS had made a mistake.
And if Pretoria East Motors didn't fight SARS, they would've paid 4 times what they had to!

Here's what you can learn from this recent top case law, so you can save yourself money!


Follow this general rule for input tax deductions

Before I tell you what the secret loophole is, you need to know the general rule.
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.
Now that you know the general rule, read on for the secret loophole…

What the VAT Act says about gifts

SARS will allow input tax on the acquisition of certain promotional gifts. For example, golf shirts, t-shirts, umbrellas, pens, calendars, desk pads, calculators etc. with your logo on it. These are gifts.

Joe Boss decides to give all new clients an umbrella bearing his company's logo. When acquiring the umbrellas, Joe Boss can claim the input tax. 
He wouldn't be liable to account for any output tax as he doesn't charge the clients for receiving the umbrella.
Before you say that's still entertainment…. If your gift has your logo on it, it is a promotional gift. So if you gave promotional gifts to your clients, claim the input tax on this!
Just remember, you won't levy output tax. This is because you do not charge or receive any payment for the supply(Section 10(23)).

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