You can't claim input tax on these three 'second-hand' items
According to Section 1 of the Vat Act, second-hand goods are previously-owned and used goods.
When it comes to second-hand goods you can claim notional input tax.
Notional input tax is simply the Vat you, as a vendor, can claim on a non-taxable purchase of second-hand goods for your business.
What we've noticed is that second-hand goods cause a lot of confusion for most Vat vendors. This confusion often leads vendors to claim input tax even on items that don't qualify as second-hand goods.
The good news is you can avoid this costly mistake.
Read on to discover three items you can't claim notional input tax on so you can avoid SARS penalties.
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Do you know how to:
Avoid a Vat Audit?
Claim every input tax credit?
Get your refund from SARS quicker?
You should. And you can. 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.
You can't claim input tax on these three items! They don't fall within the definition of secondhand goods
According to the Practical Vat Loose Leaf Service
, you can't claim input tax on:
If, for example,
you run a dairy farm and decide to buy three cows from a neighboring farmer. You can't claim Vat on these as second-hand goods
#2: Gold coins issued by the Reserve Bank
Let's say, you're a precious metals dealer and you decide to buy Kruger Rands from a client in need of cash. You can't claim notional input tax on these because they were supplied at the zero-rate and they aren't second-hand goods.
#3: Certain mining rights
For example, you're a farmer and with a piece of land you buy, comes the right to prospect granted in terms of Section 17 of the Mineral and Petroleum Resources Development Act, 2002. The prospecting right isn't second-hand goods and you can't claim notional input tax.
Here's the bottom line: The items above don't fall within the definition of second-hand goods. So the Vat rules that apply to the purchase of second-hand goods don't apply to them. This means you can't claim input tax back on these items.
For three more items you can't claim notional input tax
on, checkout the Practical Vat Loose Leaf Service