PART III
REGISTRATION
Author: admin_kmos
Section 22 (VAT) – Irrecoverable debts
22. Irrecoverable debts
(1) Subject to subsection (6), where a vendor-
[Words preceding paragraph (a) substituted by section 140 of Act 24 of 2011 with effect from 10 January 2012]
(a) has made a taxable supply for consideration in money; and
(b) has furnished a return in respect of the tax period for which the output tax on the supply was payable and has properly accounted for the output tax on that supply as required under this Act; and
(c) has written off so much of the said consideration as has become irrecoverable,
the vendor may make a deduction in terms of section 16(3) of that portion of the amount of tax charged in relation to that supply as bears to the full amount of such tax the same ratio as the amount of consideration so written off as irrecoverable bears to the total consideration for the supply, the deduction so made being deemed for the purposes of the said section to be input tax:
Provided that-
(i) where tax charged in respect of a supply of goods under an instalment credit agreement has become irrecoverable, any deduction in terms of section 16(3) as provided for in this section, shall be restricted to the tax content of the amount which has become irrecoverable in respect of the cash value of such supply, as applicable in respect of that agreement in terms of section 10(6);
(ii) the amount which has become irrecoverable in respect of such cash value shall be deemed to be an amount equal to the balance of the cash value remaining after deducting therefrom so much of the sum of the payments made by the debtor in terms of the said agreement as, on the basis of an apportionment in accordance with the rights and obligations of the parties to the said instalment credit agreement, may properly be regarded as having been made in respect of the cash value;
(iii) the said tax content shall be an amount calculated by applying the tax fraction, as applicable at the time the supply under the said instalment credit agreement was in terms of section 9(3)(c) deemed to have taken place, to the amount deemed as aforesaid to be irrecoverable in respect of such cash value;
[Paragraph (iii) substituted by section 27 of Act 136 of 1992]
(iv) a vendor who has transferred an account receivable at face value on a-
(aa) non-recourse basis to any other person, shall not make any deduction in respect of such transfer in terms of this subsection; or
(bb) recourse basis to any other person, may make a deduction in terms of this subsection only when such account receivable is transferred back to him and he has written off so much of the consideration as has become irrecoverable:
[Paragraph (iv) added by section 36 of Act 27 of 1997]
Provided further that the deduction provided for in this subsection shall not be made in terms of section 16(3)-
(i) in respect of any amount which has become irrecoverable in respect of an instalment credit agreement, if the vendor has repossessed or is obliged to take possession of the goods supplied in terms of that agreement; or
[Paragraph (i) substituted by section 177 of Act 31 of 2013 effective on 1 April 2014]
(ii) in the case of any vendor who is required to account for tax payable on a payments basis in terms of section 15, except in relation to any supply made by him to which section 9(2)(b) or section 9(3)(c) applies.
[Subsection (1) amended by section 33 of Act 136 of 1991]
(1A) Where a vendor-
(a) has made a taxable supply for consideration in money; and
(b) has furnished a return in respect of the tax period for which the output tax on the supply was payable (at the rate of tax referred to in section 7(1)) and has properly accounted for the output tax on that supply as required in terms of this Act; and
(c) has transferred the account receivable relating to such taxable supply at face value to another vendor (hereinafter referred to as the recipient) on a non-recourse basis on or after the date of promulgation of the Taxation Laws Amendment Act, 1997,
and any amount of the face value (excluding any amount of finance charges or collection costs) of such account receivable has been written off as irrecoverable by such recipient, such recipient may make a deduction in terms of section 16(3) of an amount equal to the tax fraction (being the tax fraction applicable at the time such taxable supply is deemed to have been made) of such face value (limited to the amount paid by the recipient in respect of such face value) written off by him, the deduction so made being deemed for the purposes of the said section to be input tax.
[Subsection (1A) inserted by section 36 of Act 27 of 1997]
(2) Where any amount in respect of which a deduction has been made in accordance with subsection (1) or (1A) is at any time wholly or partly recovered by the vendor, or becomes recoverable by him by virtue of the reassignment to him of the underlying debt, that portion of the amount of such deduction as bears to the full amount of such deduction the same ratio as the amount of the irrecoverable debt recovered or reassigned bears to the debt written off shall be deemed to be tax charged in relation to a taxable supply made during the tax period in which the debt is wholly or partly recovered or assigned to such vendor.
[Subsection (2) substituted by section 27(b) of Act 136 of 1992 and by section 49(1) of Act 42 of 2024 effective on 1 April, 2025]
(3) Subject to subsection (3A), where a vendor who is required to account for tax payable on an invoice basis in terms of section 15–
[Words preceding paragraph (a) substituted by section 140 of Act 24 of 2011 with effect from 10 January 2012]
(a) has made a deduction of input tax in terms of section 16(3) in respect of a taxable supply of goods or services made to him; and
(b) has, within a period of 12 months after the expiry of the tax period within which such deduction was made, not paid the full consideration in respect of such supply,
[Paragraph (b) substituted by section 95 of Act 30 of 1998]
an amount equal to the tax fraction, as applicable at the time of such deduction, of that portion of the consideration which has not been paid shall be deemed to be tax charged in respect of a taxable supply made in the tax period following the expiry of the period of 12 months: Provided that-
(i) the period of 12 months shall, if any contract in writing in terms of which such supply was made provides for the payment of consideration or any portion thereof to take place after the expiry of the tax period within which such deduction was made, in respect of such consideration or portion be calculated as from the end of the month within which such consideration or portion was payable in terms of that contract;
[Subparagraph (ii) amended by section 86 of Act 20 of 2006]
(ii) where-
(aa) the estate of a vendor is sequestrated, whether voluntarily or compulsorily;
(bb) the vendor is declared insolvent;
(cc) the vendor has entered into a compromise in terms of section 155 of the Companies Act, 2008 (Act No. 71 of 2008), or a similar arrangement with creditors; or
[Subparagraph (cc) substituted by section 177 of Act 31 of 2013 effective on 1 April 2014]
(dd) the vendor ceases to be a vendor as contemplated in section 8(2),
within 12 months after the expiry of the tax period within which that deduction was made, not paid the full consideration, the vendor must account for output tax in terms of this section equal to the tax fraction at the rate applicable at the time of such deduction of that portion of the consideration which has not been paid—
(AA) at the time of sequestration, declaration of insolvency or the date on which the compromise or the arrangement or similar arrangement was entered into; or
(BB) immediately before the vendor ceased to be a vendor as contemplated in section 8(2); or
[Paragraph (ii) substituted by section 86(c) of Act 20 of 2006 and amended by section 66(1) of Act 23 of 2020 effective on 1 April, 2021]
(iii) paragraph (ii) shall not be applicable where a vendor has already accounted for tax payable in accordance with this subsection
[Subparagraph (iii) inserted by section 86 of Act 20 of 2006 and substituted by section 140 of Act 24 of 2011 with effect from 10 January 2012]
[Subsection (3) added by section 25 of Act 37 of 1996 and amended by section 36 of Act 27 of 1997, section 110 of Act 31 of 2005 and section 86 of Act 20 of 2006]
(3A) Subject to subsection (6)(a), subsection (3) shall not be applicable in respect of a taxable supply made by a vendor which is a member of a group of companies, to another vendor which is a member of the same group of companies for as long as both vendors are members of the same group of companies.
[Subsection (3A) inserted by section 140 of Act 24 of 2011 with effect from 10 January 2012]
(4) If a vendor who has accounted for tax payable in accordance with subsection (3) at any time thereafter pays any portion of the consideration in respect of the supply in question, he may in terms of section 16(3) make a deduction of input tax of an amount equal to the tax fraction, as applicable at the time of the deduction contemplated in paragraph (a) of the said subsection (3), of that portion of the consideration so paid.
[Subsection (4) added by section 25 of Act 37 of 1996]
(5) ……….
[Subsection (5) added by section 25 of Act 37 of 1996 and deleted by section 177 of Act 45 of 2003]
(6)
(a) Where a vendor which is a member of a group of companies makes a taxable supply to another vendor which is a member of the same group of companies, the vendor who made the taxable supply may not make a deduction in terms of subsection (1) read with section 16(3) of any amount of tax that has become irrecoverable for as long as both vendors are members of the same group of companies.
(b) For the purposes of paragraph (a) and subsection (3A), a ‘group of companies’ means a group of companies as defined in section 1 of the Income Tax Act if any other company would be part of the same group of companies as that company if the expression ‘at least 70 per cent of the equity shares of’ in paragraphs (a) and (b) of that definition were replaced by the expression ‘100 per cent of the equity shares of.
[Subsection (6) added by section 140 of Act 24 of 2011 with effect from 10 January 2012]
(7) For purposes of this section, “face value” means the amount of the account receivable at the time of transfer less the amount written off by the seller, after adjustments have been made for debit and credit notes and amounts already written off as irrecoverable by the vendor.
[Subsection (7) added by section 91(1) of Act 23 of 2018 effective on 1 April, 2019]
Section 21 (VAT) – Credit and debit notes
21. Credit and debit notes
(1) This section shall apply where, in relation to the supply of goods or services by any registered vendor-
(a) that supply has been cancelled; or
(b) the nature of that supply has been fundamentally varied or altered; or
(c) the previously agreed consideration for that supply has been altered by agreement with the recipient, whether due to the offer of a discount or for any other reason; or
(d) the goods or services or part of the goods or services supplied have been returned to the supplier, including the return to—
(i) a vendor of a returnable container, the vendor in such case being deemed for the purposes of this Act to have made the supply of the container in respect of which the deposit was charged, whether the supply was made by him or any other person; or
(ii) a vendor, where a supply of an enterprise as a going concern, contemplated in section 11(1)(e) or section 8(25) of this Act, was made to that vendor, the vendor in such case being deemed for purposes of this Act to have made the supply of the goods or services to the recipient, whether the supply was made by him or the other vendor that made the supply of that enterprise as a going concern;
[Paragraph (d) substituted by section 26(1)(a) of Act 136 of 1992, amended by section 150(1)(a) of Act 22 of 2012 and substituted by section 8 of Act 22 of 2018. Subparagraph (ii) substituted by section 44(1) of Act 5 of 2026 effective on 1 April, 2026]
(e) an error has occurred in stipulating the amount of consideration agreed upon for that supply; or
[Paragraph (e) added by section 150(1)(b) of Act 22 of 2012 and substituted by section 51(1)(a) of Act 17 of 2023 effective on 1 April, 2024]
(f) prepaid vouchers contemplated in section 10(19) have been issued by any registered vendor that is an “electronic communications service licensee” as defined in section 1 of the Electronic Communications Act, 2005 (Act 36 of 2005), and the nature of the supply specified on such voucher has been fundamentally varied or altered,
[Paragraph (f) added by section 51(1)(b) of Act 17 of 2023 effective on 1 April, 2024]
and the supplier has-
(i) provided a tax invoice in relation to that supply and the amount shown therein as tax charged on that supply is incorrect in relation to the amount properly chargeable on that supply as a result of the occurrence of any one or more of the above-mentioned events; or
(ii) furnished a return in relation to the tax period in respect of which output tax on that supply is attributable, and has accounted for an incorrect amount of output tax on that supply in relation to the amount properly chargeable on that supply as a result of the occurrence of any one or more of the above-mentioned events.
(2) Where a supplier has accounted for an incorrect amount of output tax as contemplated in subsection (1), that supplier shall make an adjustment in calculating the tax payable by the supplier in the return for the tax period during which it has become apparent that the output tax is incorrect, and if-
(a) the output tax properly chargeable in relation to that supply exceeds the output tax actually accounted for by the supplier, the amount of that excess shall be deemed to be tax charged by that supplier in relation to a taxable supply attributable to the tax period in which the adjustment is to be made, and shall not be attributable to any prior tax period; or
(b) the output tax actually accounted for exceeds the output tax properly chargeable in relation to that supply, that supplier shall either make a deduction in terms of section 16(3) in respect of the amount of that excess (such amount being deemed for the purposes of that section to be input tax), or reduce the amount of output tax attributable to the said tax period in terms of section 16 (4) by the amount of that excess: Provided that the said deduction shall not be made where the excess tax has been borne by a recipient of goods or services supplied by the supplier and the recipient is not a vendor, unless the amount of the excess tax has been repaid by the supplier to the recipient, whether in cash or by way of a credit against any amount owing to the supplier by the recipient.
[Paragraph (b) amended by section 34 of Act 97 of 1993]
(3) Subject to this section, where a tax invoice has been provided as contemplated in subsection (1) (i), and-
(a) the amount shown as tax charged in that tax invoice exceeds the actual tax charged in respect of the supply concerned, the supplier shall provide the recipient with a credit note, containing the following particulars:
(i) the words “credit note”;
[Subparagraph (i) substituted by section 27 of Act 23 of 2015 effective on 8 January 2016]
(ii) the name, address and VAT registration number of the vendor;
[Subparagraph (ii) substituted by section 48 of Act 16 of 2004]
(iii) the name, address and, where the recipient is a registered vendor, the VAT registration number of the recipient, except where the credit note relates to a supply in respect of which a tax invoice contemplated in section 20(5) was issued;
[Subparagraph (iii) substituted by section 26 of Act 136 of 1992, section 176 of Act 45 of 2003 and section 48 of Act 16 of 2004]
(iv) the date on which the credit note was issued;
(v) either-
(aa) the amount by which the value of the said supply shown on the tax invoice has been reduced and the amount of the excess tax; or
(bb) where the tax charged in respect of the supply is calculated by applying the tax fraction to the consideration, the amount by which the consideration has been reduced and either the amount of the excess tax or a statement that the reduction includes an amount of tax and the rate of the tax included;
[Subparagraph (v) substituted by section 26 of Act 136 of 1992]
(vi) a brief explanation of the circumstances giving rise to the issuing of the credit note;
(vii) information sufficient to identify the transaction to which the credit note refers;
(b) the actual tax charged in respect of the supply concerned exceeds the tax shown in the tax invoice as charged, the supplier shall provide the recipient with a debit note, containing the following particulars:
(i) the words “debit note”;
[Subparagraph (i) substituted by section 27 of Act 23 of 2015 effective on 8 January 2016]
(ii) the name, address and VAT registration number of the vendor;
[Subparagraph (ii) substituted by section 48 of Act 16 of 2004]
(iii) the name, address and, where the recipient is a registered vendor, the VAT registration number of the recipient, except where the debit note relates to a supply of goods in respect of which a tax invoice contemplated in section 20(5) was issued.
[Subparagraph (iii) substituted by section 26 of Act 136 of 1992, section 176 of Act 45 of 2003 and section 48 of Act 16 of 2004]
(iv) the date on which the debit note was issued;
(v) either-
(aa) the amount by which the value of the said supply shown on the tax invoice has been increased and the amount of the additional tax; or
(bb) where the tax charged in respect of the supply is calculated by applying the tax fraction to the consideration, the amount by which the consideration has been increased and either the amount of the additional tax or a statement that the increase includes an amount of tax and the rate of the tax included;
[Subparagraph (v) substituted by section 26 of Act 136 of 1992]
(vi) a brief explanation of the circumstances giving rise to the issuing of the debit note;
(vii) information sufficient to identify the transaction to which the debit note refers:
Provided that-
(A) it shall not be lawful to issue more than one credit note or debit note for the amount of the excess;
(B) if any registered vendor claims to have lost the original credit note or debit note, the supplier or recipient, as the case may be, may provide a copy clearly marked “copy”;
(C) a supplier shall not be required to provide a recipient with a credit note contemplated in paragraph (a) of this subsection in any case where and to the extent that the amount of the excess referred to in that paragraph arises as a result of the recipient taking up a prompt payment discount offered by the supplier, if the terms of the prompt payment discount offer are clearly stated on the face of the tax invoice.
(4) Where a recipient, being a registered vendor, creates a document containing the particulars specified in this section and purporting to be a credit note or a debit note in respect of a supply of goods or services made to the recipient by a supplier, being a registered vendor, the document shall be deemed to be a credit note or, as the case may be, a debit note provided by the supplier under subsection (3) where-
(a) the Commissioner has granted prior approval for the issue of such documents by a recipient or recipients of a specified class in relation to the supplies or supplies of a specified category to which the documents relate; and
(b) the supplier and the recipient agree that the supplier shall not issue a credit note or, as the case may be, a debit note in respect of any supply to which this subsection applies; and
(c) a copy of any such document is provided to the supplier and another copy is retained by the recipient:
Provided that-
(i) where a credit note is issued in accordance with this subsection, any credit note issued by the supplier in respect of that supply shall be deemed not to be a credit note for the purposes of this Act;
(ii) where a debit note is issued in accordance with this subsection, any debit note issued by the supplier in respect of that supply shall be deemed not to be a debit note for the purposes of this Act.
(5) Where the Commissioner is satisfied that there are or will be sufficient records available to establish the particulars of any supply or category of supplies and that it would be impractical to require that a full credit note or debit note be issued in terms of this section, the Commissioner may, subject to any conditions that the Commissioner may consider necessary, direct-
(a) that any one or more of the particulars specified in paragraph (a) or, as the case may be, paragraph (b) of subsection (3) shall not be contained in a credit note or, as the case may be, a debit note; or
(b) that a credit note or, as the case may be, a debit note is not required to be issued.
(6) Where any recipient, being a registered vendor, has been issued with a credit note in terms of subsection (3)(a), or has written or other notice or otherwise knows that any tax invoice which the vendor holds is incorrect as a result of any one or more of the events specified in any of paragraphs (a), (b), (c), (d) or (e) of subsection (1) and has made a deduction of any amount of input tax in any tax period in respect of the supply of goods or services to which the credit note or that notice or other knowledge, as the case may be, relates, either the amount of the excess referred to in subsection (3)(a) shall be deemed to be tax charged in relation to a taxable supply made by the recipient attributable to the tax period in which the credit note was issued, or that notice or, as the case may be, other knowledge was received, or the amount of input tax deducted in terms of section 16(3) in the last-mentioned tax period shall be reduced by the amount of the said excess, to the extent that the input tax deducted in the first-mentioned tax period exceeds the output tax properly charged.
[Subsection (6) substituted by section 34 of Act 97 of 1993 and section 136 of Act 25 of 2015 effective on 1 April 2016]
(7) Where any recipient, being a registered vendor, has been issued with a debit note in terms of subsection (3) (b) and has made a deduction of any amount of input tax in any tax period in respect of the supply of goods or services to which that debit note relates, the recipient may, subject to the provisions of section 17, make a deduction of input tax in terms of section 16(3) in respect of the amount of the excess referred to in subsection (3) (b) in the tax period in which the debit note is issued, to the extent that the output tax properly charged exceeds the input tax deducted.
(8) Notwithstanding anything to the contrary in subsection (3), where a vendor acquires an enterprise from another vendor and as a result of that acquisition, the supplying vendor immediately ceases to be a vendor, and the purchasing vendor, within a period of six months from the date of acquisition, issues or receives a credit note or debit note, as the case may be, in respect of the acquired enterprise, that credit note or debit note may reflect the name, address and VAT registration number of the supplying vendor.
[Subsection (8) added by section 36 of Act 18 of 2009]
Section 20 (VAT) – Tax invoices
20. Tax invoices
(1) Except as otherwise provided in this section, a supplier, being a registered vendor, making a taxable supply (other than a supply contemplated in section 8(10)) to a recipient, must within 21 days of the date of that supply issue a tax invoice containing such particulars as are specified in this section: Provided that-
(i) it shall not be lawful to issue more than one tax invoice for each taxable supply;
(ii) if a vendor claims to have lost the original tax invoice, the supplier or the recipient, as the case may be, may provide a copy clearly marked “copy”.
[Subsection (1) amended by section 91 of Act 53 of 1999 and section 104 of Act 32 of 2004]
(1A) ……….
[Subsection (1A) inserted by section 157 of Act 60 of 2001 and deleted by section 104 of Act 32 of 2004]
(1B) Where a tax invoice contains an error in the particulars listed in subsection (4) or (5) and the circumstances contemplated in section 21(1)(a) to (e) of this Act are not applicable, the supplier must—
(i) correct that tax invoice with the correct particulars, within 21 days from the date of the request to correct it: Provided that the time of supply contemplated in section 9 of this Act remains unaltered; and
(ii) obtain and retain information sufficient to identify the transaction to which that tax invoice and the corrected tax invoice
[Subsection (1B) inserted by section 7 of Act 22 of 2018]
(2) Where a recipient, being a registered vendor, creates a document containing the particulars specified in this section and purporting to be a tax invoice in respect of a taxable supply of goods or services made to the recipient by a supplier, being a registered vendor, that document shall be deemed to be a tax invoice provided by the supplier under subsection (1) of this section where-
(a) the Commissioner has granted prior approval for the issue of such documents by a recipient or recipients of a specified class in relation to the taxable supplies or taxable supplies of a specified category to which the documents relate; and
(b) the supplier and the recipient agree that the supplier shall not issue a tax invoice in respect of any taxable supply to which this subsection applies; and
(c) such document is provided to the supplier and a copy thereof is retained by the recipient:
Provided that where a tax invoice is issued in accordance with this subsection, any tax invoice issued by the supplier in respect of that taxable supply shall be deemed not to be a tax invoice for the purposes of this Act.
(3) Where a supply of goods is deemed by section 8(10) to be made and both the recipient and the supplier in relation to that supply are registered vendors, the recipient shall, within 21 days after the day on which such supply is deemed by section 9(8) to be made, create and furnish to the supplier a document which contains the particulars specified in this section, and such document shall for the purposes of this Act be deemed to be a tax invoice provided by the supplier under subsection (1) of this section.
(4) Except as the Commissioner may otherwise allow, and subject to this section, a tax invoice (full tax invoice) shall be in the currency of the Republic and shall contain the following particulars:
(a) The words “tax invoice”, “VAT invoice” or “invoice”;
[Paragraph (a) substituted by section 26 of Act 23 of 2015 effective on 8 January 2016]
(b) the name, address and VAT registration number of the supplier;
[Paragraph (b) substituted by section 47 of Act 16 of 2004]
(c) the name, address and where the recipient is a registered vendor, the VAT registration number of the recipient.
[Paragraph (c) substituted by section 175 of Act 45 of 2003 and section 47 of Act 16 of 2004]
(d) an individual serialized number and the date upon which the tax invoice is issued;
(e) full and proper description of the goods (indicating, where applicable, that the goods are second-hand goods) or services supplied;
[Paragraph (e) substituted by section 157 of Act 60 of 2001 and section 104 of Act 32 of 2004]
(f) the quantity or volume of the goods or services supplied;
(g) either-
(i) the value of the supply, the amount of tax charged and the consideration for the supply; or
(ii) where the amount of tax charged is calculated by applying the tax fraction to the consideration, the consideration for the supply and either the amount of the tax charged, or a statement that it includes a charge in respect of the tax and the rate at which the tax was charged:
[Paragraph (g) substituted by GN 2695 of 1991 and section 25 of Act 136 of 1992]
Provided that the requirement that the consideration or the value of the supply, as the case may be, shall be in the currency of the Republic shall not apply to a supply that is charged with tax under section 11.
[Subsection (4) amended by section 94 of Act 30 of 1998 and section 157 of Act 60 of 2001]
(5) Notwithstanding anything in subsection (4), where the consideration in money for a supply does not exceed R5 000, a tax invoice (abridged tax invoice) shall be in the currency of the Republic and shall contain the particulars specified in that subsection or the following particulars:
[Words preceding paragraph (a) substituted by section 29 of Act 21 of 2012 effective on 20 December 2012]
(a) The words “tax invoice”, “VAT invoice” or “invoice”;
[Paragraph (a) substituted by section 26 of Act 23 of 2015 effective on 8 January 2016]
(b) the name, address and VAT registration number of the supplier;
[Paragraph (b) substituted by section 47 of Act 16 of 2004]
(c) an individual serialized number and the date upon which the tax invoice is issued;
(d) a description of the goods (indicating, where applicable, that the goods are second-hand goods) or services supplied;
[Paragraph (d) substituted by section 104 of Act 32 of 2004]
(e) either-
(i) the value of the supply, the amount of tax charged and the consideration for the supply; or
(ii) where the amount of tax charged is calculated by applying the tax fraction to the consideration, the consideration for the supply and either the amount of the tax charged, or a statement that it includes a charge in respect of the tax and the rate at which the tax was charged:
[Paragraph (e) substituted by GN 2695 of 1991 and section 25 of Act 136 of 1992]
Provided that this subsection shall not apply to a supply that is charged with tax under section 11.
[Subsection (5) amended by section 33 of Act 97 of 1993, section 94 of Act 30 of 1998, section 157 of Act 60 of 2001, section 104 of Act 32 of 2004 and section 14 of Act 9 of 2007]
(5A) Notwithstanding anything to the contrary in subsections (4) and (5), where a vendor acquires an enterprise from another vendor and as a result of that acquisition, the supplying vendor immediately ceases to be a vendor, and the purchasing vendor, within a period of six months from the date of the acquisition, issues or receives a tax invoice in respect of the acquired enterprise, that tax invoice may reflect the name, address and VAT registration number of the supplying vendor.
[Subsection (5A) inserted by section 35 of Act 18 of 2009]
(5B) Notwithstanding any other provision of this Act, if the supply by a vendor relates to any enterprise contemplated in paragraphs (b)(vi) and (b)(vii) of the definition of “enterprise” in section 1, the vendor shall be required to provide a tax invoice containing such particulars as must be prescribed by the Commissioner by notice in the Gazette.
[Subsection (5B) inserted by section 176(1)(a) of Act 31 of 2013 and substituted by section 99(1) of Act 43 of 2014 and by section 19 of Act 33 of 2019]
(6) Notwithstanding any other provision of this Act, a supplier shall not be required to provide a tax invoice if the total consideration for a supply is in money and does not exceed R50: Provided that the supplier shall provide the recipient with a document as is acceptable to the Commissioner.
[Subsection (6) amended by section 157 of Act 60 of 2001 and substituted by section 30 of Act 8 of 2010 effective on 2 November 2010]
(7) Where the Commissioner is satisfied that there are or will be sufficient records available to establish the particulars of any supply or category of supplies, and that it would be impractical to require that a full tax invoice be issued in terms of this section, the Commissioner may, subject to such conditions as the Commissioner may consider necessary, direct-
(a) that any one or more of the particulars specified in subsection (4) or (5) shall not be contained in a tax invoice; or
(b) that a tax invoice is not required to be issued; or
(c) that the particulars specified in subsection (4) or (5) be furnished in any other manner.
[Paragraph (c) added by section 91 of Act 53 of 1999]
(8) Notwithstanding anything in this section, where a supplier makes a supply (not being a taxable supply) of second-hand goods to a recipient, being a registered vendor, the recipient shall in the form as the Commissioner may prescribe, maintain a declaration by the supplier stating whether the supply is a taxable supply or not and shall further maintain sufficient records to enable the following particulars to be ascertained:
(a)
(i) The name of the supplier and-
(aa) where the supplier is a natural person, his identity number; or
(bb) where the supplier is not a natural person, the name and identity number of the natural person representing the supplier in respect of the supply and any legally allocated registration number of the supplier:
Provided that the recipient-
(A) shall verify such name and identity number of any such natural person with reference to his identity card, as contemplated in section 1 of the Identification Act, 1997 (Act 68 of 1997), and retain a photocopy of such name and identity number appearing in such identity card; or
[Paragraph (A) substituted by section 20 of Act 24 of 2020]
(B) shall verify such name and registration number of any supplier other than a natural person with reference to its business letterhead or other similar document and retain a photocopy of such name and registration number appearing on such letterhead or document; and
(ii) the address of the supplier;
(b) the date upon which the second-hand goods were acquired;
[Paragraph (b) substituted by section 176(1)(b) of Act 31 of 2013 and by section 31(1)(b) of Act 20 of 2022 effective on 1 January, 2023]
(c) a description of the goods;
(d) the quantity or volume of the goods;
(e) the consideration for the supply; and
(f) proof and date of payment.
[Subsection (8) amended by section 35 of Act 27 of 1997, by section 94(e) of Act 30 of 1998, by section 91(c) of Act 53 of 1999, by section 104(1)(f) of Act 32 of 2004 and by section 38 of Act 21 of 2006, substituted by section 30(b) of Act 8 of 2010 and amended by section 31(1)(a) of Act 20 of 2022 effective on 1 January, 2023]
(8A) Notwithstanding anything in this section, where a supplier makes a deemed supply (not being a taxable supply) of goods contemplated in section 8(10) to a recipient, being a registered vendor, the recipient shall maintain sufficient records to enable the following particulars to be ascertained:
(a) The date upon which the goods were repossessed or surrendered, as the case may be;
(b) particulars referred to in paragraphs (a), (c), (d) and (e) of subsection (8); and
(c) further particulars in the form and manner as the Commissioner may prescribe.
[Subsection (8A) added by section 31(1)(c) of Act 20 of 2022 effective on 1 January, 2023]
Section 19 (VAT) – Goods or services acquired before incorporation
19. Goods or services acquired before incorporation
Any company, being a vendor, shall, where any amount of tax has been charged in terms of section 7 in relation to the acquisition of goods or services for or on behalf of that company or in connection with the incorporation of that company, and those goods or services were acquired prior to incorporation by a person who-
(a) was reimbursed by the company for the whole amount of the consideration paid for the goods or services; and
(b) acquired those goods or services for the purpose of an enterprise to be carried on by the company and has not used those goods or services for any purpose other than carrying on such enterprise,
be deemed to be the recipient of the goods or services and to have paid the tax so charged as if the supply or the payment of the tax had been made during the tax period in which the reimbursement referred to in paragraph (a) is made: Provided that this section shall not apply in relation to any goods or services where-
(i) the supply of those goods or services by that person to the company is a taxable supply, or is a supply of second-hand goods not being a taxable supply; or
(ii) those goods or services were so acquired more than six months prior to the date of incorporation of the company; or
(iii) the company does not hold sufficient records to establish the particulars relating to the deduction to be made.
Section 18B (VAT) – Temporary letting of residential fixed property
18B. Temporary letting of residential fixed property (ceases to apply on 1 January 2018)
(1) For the purposes of this section “developer” means a vendor who continuously or regularly constructs, extends or substantially improves fixed property consisting of any dwelling or continuously or regularly constructs, extends or substantially improves parts of that fixed property for the purpose of disposing of that fixed property after the construction, extension or improvement.
(2) Notwithstanding the provisions of section 18(1), where goods being fixed property consisting of any dwelling-
(a) is developed by a vendor who is a developer wholly for the purpose of making taxable supplies or is held or applied for that purpose; and
(b) is subsequently temporarily applied by that vendor for supplying accommodation in a dwelling under an agreement for the letting and hiring thereof,
the supply of such fixed property shall, subject to subsection (3), be deemed not to be a taxable supply in the course or furtherance of that vendor’s enterprise.
(3) The fixed property contemplated in subsection (2) shall be deemed to have been supplied by that vendor by way of a taxable supply for a consideration as contemplated in section 10(7) in the course or furtherance of that vendor’s enterprise at the earlier of-
(a) a period of 36 months after the conclusion of the agreement contemplated in subsection (2)(b); or
(b) the date that the vendor applies that fixed property permanently for a purpose other than that of making taxable supplies.
(4) ……….
[Subsection (4) deleted by section 174 of Act 31 of 2013 effective on 10 January 2012]
[Section 18B inserted by section 139 of Act 24 of 2011 with effect from 10 January 2012 and ceases to apply on 1 January 2018 – date of cessation in section 139 of Act 24 of 2011, as substituted by section 111 of Act 43 of 2014]
Section 18A (VAT) – Adjustments in consequence of acquisition of going concern wholly or partly for purposes other than making taxable supplies
18A. Adjustments in consequence of acquisition of going concern wholly or partly for purposes other than making taxable supplies
(1) Where-
(a) an enterprise or part of an enterprise has been supplied to any vendor; and
(b) the supply of such enterprise or part was charged with tax at the rate of zero per cent in terms of section 11(1)(e); and
(c) such enterprise or part, as the case may be, or any goods or services which formed part of such enterprise or part are acquired by such vendor wholly or partly for a purpose other than for consumption, use or supply in the course of making taxable supplies,
such enterprise, part, goods or services, as the case may be, shall be deemed to have been supplied by him by way of a taxable supply by him in the course of his enterprise: Provided that where the intended use of such enterprise, part, goods or services, as the case may be, in the course of making taxable supplies is equal to not less than 95 per cent of the total intended use of such enterprise, part, goods or services, as the case may be, the enterprise, part, goods or services concerned may for the purposes of this Act be regarded as having been acquired wholly for the purpose of consumption, use or supply in the course of making taxable supplies.
[Subsection (1) amended by section 19 of Act 20 of 1994 and section 90 of Act 53 of 1999]
(2) Notwithstanding anything in this Act, the value of the supply deemed by subsection (1) to have been made by the vendor, shall be the full cost to such vendor of acquiring such enterprise, part, goods or services, as the case may be, reduced by an amount which bears to the amount of such full cost the same ratio as the intended use or application of the enterprise, part, goods or services in the course of making taxable supplies bears to the total intended use or application of the enterprise, part, goods or services: Provided that-
(i) the cost to such vendor of acquiring such enterprise, part, goods or services may be reduced by any amount which represents an appropriate allocation of such full cost to the acquisition of any goods or services which form part of such enterprise or part of an enterprise and in respect of the acquisition of which by the vendor a deduction of input tax would be denied in terms of section 17(2); or
(ii) where such enterprise, part, goods or services were acquired-
(aa) by means of a supply made by a vendor for no consideration or for a consideration in money which is less than the open market value of the supply; and
(bb) in circumstances where the supplier and the recipient are connected persons,
the cost of such enterprise, part, goods or services shall be deemed to be the open market value of the supply of such enterprise, part, goods or services.
[Subsection (2) amended by section 24 of Act 37 of 1996]
(3) Notwithstanding anything in this Act, the supply deemed by subsection (1) to have been made by the vendor shall be deemed to be made in the tax period in which the supply of the enterprise or part of an enterprise is made.
(4) For the purposes of this section and sections 10(9), 18(4) and (5), the cost to the vendor of any goods or services acquired by a vendor in the circumstances contemplated in subsection (1) shall be deemed to be an amount equal to the aggregate of an amount which represents an appropriate allocation of the full cost to the vendor of the enterprise or part of an enterprise to those specific goods or services and an amount determined by applying the rate of tax applicable at the time of supply contemplated in subsection (3) to the amount of such appropriate allocation.
[Section 18A inserted by section 24 of Act 136 of 1992]
Section 18 (VAT) – Change in use adjustments
18. Change in use adjustments
[Heading substituted by section 103 of Act 32 of 2004]
(1) Subject to the provisions of section 8(2), where-
(a) goods or services have been supplied to or imported by a vendor; or
(b) goods have been manufactured, assembled, constructed or produced by him; or
(c) goods or services were deemed by subsection (4) to have been supplied to him,
(excluding goods or services to the extent that, in respect of the acquisition of which by the vendor a deduction of input tax was denied by section 17(2) or would have been denied if that section had been applicable prior to the commencement date) and such goods or services were acquired, manufactured, assembled, constructed or produced by such vendor wholly or partly for the purpose of consumption, use or supply in the course of making taxable supplies or such goods were held or applied for that purpose, such goods or services shall-
(i) if they are subsequently applied by him (otherwise than in the circumstances contemplated in section 8(9)) wholly for a purpose other than the said purpose; or
(ii) if they are subsequently applied by him wholly for a purpose in respect of which, if such goods or services had been acquired by him at the time of such application, a deduction of input tax would have been denied in terms of section 17(2)(a) or (c),
be deemed to have been supplied by him by way of a taxable supply by him in the course of his enterprise.
[Subsection (1) amended by section 32 of Act 136 of 1991 and section 34 of Act 27 of 1997]
(2) Where-
(a) capital goods or services have been supplied to or imported by a vendor; or
[Paragraph (a) substituted by section 23 of Act 136 of 1992]
(b) capital goods have been manufactured, assembled, constructed or produced by him; or
[Paragraph (b) substituted by section 23 of Act 136 of 1992]
(c) capital goods or services were deemed by subsection (4) to have been supplied to him,
[Paragraph (c) substituted by section 23 of Act 136 of 1992]
(excluding goods or services to the extent that, in respect of the acquisition of which by the vendor a deduction of input tax was denied by section 17(2) or would have been denied if that section had been applicable prior to the commencement date) and such goods or services were acquired, manufactured, assembled, constructed or produced by such vendor wholly or partly for the purpose of consumption, use or supply in the course of making taxable supplies or such goods were held or applied for that purpose, such goods or services shall, if the extent of the application or use of such goods or services in the course of making taxable supplies (in respect of which, if such goods or services had been acquired at the time of such application or use, a deduction of input tax would not have been denied in terms of section 17(2)(a)) is subsequently reduced in relation to their total application or use, be deemed to have been supplied by him by way of a taxable supply by him in the course of his enterprise at the time at which such reduction is deemed by subsection (6) to take place:
Provided that this subsection does not apply to –
(i) capital goods or services which have an adjusted cost of less than R40 000 (excluding tax) or where such goods or services were deemed to be supplied to the vendor by subsection (4) if the amount which was represented by ‘B’ in the formula contemplated in that subsection was less than R40 000 when such goods or services were deemed to be supplied to such vendor;
[Paragraph (i) amended by section 49 of Act 9 of 2006]
(ii) capital goods or services acquired by a public authority or public entity listed in Part A or C of Schedule 3 to the Public Finance Management Act, 1999 (Act No. 1 of 1999), if the goods or services were acquired prior to 1 April 2005 or if an input tax deduction in respect thereof was denied under proviso (iv) to section 18(4); or
[Paragraph (ii) amended by section 49 of Act 9 of 2006]
(iii) capital goods or services acquired by a municipality, if the goods or services were acquired prior to 1 July 2006 or if an input tax deduction in respect thereof was denied in terms of paragraph (v) of the proviso to section 18(4).
[Paragraph (iii) added by section 49 of Act 9 of 2006]
[Subsection (2) amended by section 32 of Act 136 of 1991, section 34 of Act 27 of 1997, section 174 of Act 45 of 2003 and section 109 of Act 31 of 2005 effective on 1 April 2005]
(3) Notwithstanding anything in this section, to the extent that any vendor has or is deemed to have granted a benefit or advantage to an employee or the holder of any office as contemplated in paragraph (i) of the definition of “gross income” in section 1 of the Income Tax Act, read with the Seventh Schedule to that Act, and such benefit or advantage consists of a supply of goods or services, the granting of that benefit or advantage shall be deemed to be a supply of goods or services made by the vendor in the course of an enterprise carried on by the vendor: Provided that this subsection shall not apply to any such benefit or advantage to the extent that it has arisen by virtue of any supply of goods or services which is an exempt supply in terms of section 12 of this Act or is a supply which is charged with tax at the rate of zero per cent in terms of section 11 of this Act or is a supply of entertainment: Provided further that this subsection shall not apply to any such benefit or advantage to the extent that it is granted by the vendor in the course of making exempt supplies.
[Subsection (3) substituted by section 32 of Act 136 of 1991]
(4) Where-
(a)
(i) goods or services have been supplied to or imported by a person prior to the commencement date; or
(ii) goods have been manufactured, assembled, constructed or produced by him prior to the commencement date,
and such goods or services were acquired, manufactured, assembled, constructed or produced or applied by such person wholly for purposes other than that of consumption, use or supply in the course of making supplies in the course of an activity which was an enterprise or would have been an enterprise if section 1 had been applicable prior to the date of promulgation of this Act or for a purpose in respect of which a deduction of input tax in respect of such goods or services would have been denied in terms of section 17(2) if that section had been applicable prior to the commencement date; or
[Paragraph (a) amended by section 34 of Act 27 of 1997]
(b)
(i) goods or services have been supplied to or imported by a person on or after the commencement date and tax has been charged in respect of such supply or importation; or
[Subparagraph (i) substituted by section 18 of Act 20 of 1994]
(ii) goods have been manufactured, assembled, constructed or produced by him on or after the commencement date and tax has been charged in respect of the supply of goods or services acquired by him for the purpose of such manufacturing, assembling, construction or production; or
[Subparagraph (ii) substituted by section 18 of Act 20 of 1994]
(iii) goods or services are deemed by subsection (1) or section 8(2) to have been supplied by him,
[Subparagraph (iii) substituted by section 18 of Act 20 of 1994]
and no deduction has been made in terms of section 16(3) in respect of or in relation to such goods or services; or
[Paragraph (b) amended by section 34 of Act 27 of 1997]
(c) second-hand goods situated in the Republic have been supplied (otherwise than under a taxable supply) to a person under a sale on or after the commencement date by a resident of the Republic and no deduction has been made in terms of section 16 (3) in respect of such second-hand goods; and
[Paragraph (c) inserted by section 18 of Act 20 of 1994]
such goods or services are subsequent to the commencement date applied in any tax period by that person or, where he is a member of a partnership, by the partnership, wholly or partly for consumption, use or supply in the course of making taxable supplies (other than taxable supplies in respect of which, if such goods or services had been acquired at the time of such application, a deduction of input tax would have been denied in terms of section 17(2)), those goods or services shall be deemed to be supplied in that tax period to that person or the partnership, as the case may be, and the Commissioner shall allow that person or the partnership, as the case may be, to make a deduction in terms of section 16(3) of an amount determined in accordance with the formula
A x B x C x D,
in which formula-
“A” represents the tax fraction;
“B” represents the lesser of-
(i) the adjusted cost (including any tax forming part of such adjusted cost) to the vendor of the acquisition, manufacture, construction or production of those goods or services: Provided that where the goods or services were acquired under a supply in respect of which the consideration in money was in terms of section 10(4) deemed to be the open market value of the supply, the adjusted cost of those goods or services shall be deemed to include such open market value to the extent that it exceeds the consideration in money for that supply; or
[Subparagraph (i) substituted by section 32 of Act 97 of 1993 and section 174 of Act 45 of 2003]
(ii) the open market value of the supply of those goods or services at the time when the supply is deemed to be made:
“C” represents the ratio that, immediately after the supply so deemed to be made, the intended use of the goods or services (as contemplated in section 17(1)) in the course of making taxable supplies (other than taxable supplies in respect of which, if such goods or services had been acquired at the time of such application, a deduction of input tax would have been denied in terms of section 17(2)) bears to the total intended use of those goods or services, expressed as a percentage: Provided that where the intended use of goods or services in the course of making taxable supplies (other than taxable supplies in respect of which, if such goods or services had been acquired at the time of such application, a deduction of input tax would have been denied in terms of section 17(2)) is equal to not less than 95 per cent of the total intended use of such goods or services such percentage shall be deemed to be 100 per cent; and
[Definition of “C” substituted by section 34 of Act 27 of 1997 and amended by section 89 of Act 53 of 1999]
“D” where paragraph (c) applies, represents the ratio that the amount paid, which payment reduces or discharges any obligation (whether an existing obligation or an obligation which will arise in future) in respect of or consequent upon, whether directly or indirectly, the consideration in money for the supply of second-hand goods, bears to the total consideration in money, expressed as a percentage:
[Definition of “D” substituted by section 93 of Act 30 of 1998 and section 138 of Act 24 of 2011 with effect from 10 January 2012]
Provided that-
(i) paragraph (b) of this subsection shall not apply where a vendor has, only as a result of not complying with the provisions of section 16(2), not been entitled to make a deduction of input tax in terms of section 16(3);
(ii) ..…….
[Paragraph (ii) of the proviso deleted by section 149 of Act 22 of 2012 effective on 10 January2012]
(iii) ……….
[Paragraph (iii) of the proviso amended by section 103 of Act 32 of 2004 and section 49 of Act 9 of 2006 and deleted by section 149 of Act 22 of 2012 effective on 10 January2012]
(iv) this subsection shall not apply where a constitutional institution listed in Schedule 1 or a public entity listed in Part A or C of Schedule 3 to the Public Finance Management Act, 1999 (Act No. 1 of 1999), is re-classified within the Schedules to the Public Finance Management Act, 1999 (Act No. 1 of 1999) and applies those goods or services for the purposes of consumption, use or supply in the course of making taxable supplies; or
[Paragraph (iv) added by section 103 of Act 32 of 2004 and amended by section 49 of Act 9 of 2006]
(v) this subsection shall not apply where a municipality applies goods or services acquired before 1 July 2006 for the purposes of consumption, use or supply in the course of making taxable supplies on or after 1 July 2006.
[Paragraph (v) added by section 49 of Act 9 of 2006]
[Subsection (4) amended by section 32 of Act 136 of 1991, section 23 of Act 136 of 1992, section 18 of Act 20 of 1994 and section 34 of Act 27 of 1997]
(5) Where-
(a) capital goods or services have been supplied to or imported by a vendor; or
(b) capital goods have been manufactured, assembled, constructed or produced by him; or
(c) capital goods or services are deemed by subsection (4) to have been supplied to him,
and such goods or services were acquired, manufactured, assembled, constructed or produced or applied by such vendor partly for the purpose of consumption, use or supply in the course of making taxable supplies (other than taxable supplies in respect of which, if such goods or services had been acquired at the time of such application, a deduction of input tax would have been denied in terms of section 17(2)) or of making supplies in the course of an activity which was an enterprise or would have been an enterprise if section 1 had been applicable prior to the date of promulgation of this Act (other than supplies in respect of which, if such goods or services had been acquired at the time of such application, a deduction of input tax would have been denied in terms of section 17(2) if that section had been applicable prior to the commencement date) such goods or services shall, if the extent of the application or use of such goods or services in the course of making taxable supplies (other than taxable supplies in respect of which, if such goods or services had been acquired at the time of such application, a deduction of input tax would have been denied in terms of section 17(2)) is subsequent to the commencement date increased in relation to their total application or use, be deemed to be supplied to him, and the Commissioner shall allow the vendor to make a deduction in terms of section 16(3), in the tax period during which such increase is deemed by subsection (6) to take place, of an amount determined in accordance with the formula
A x B x (C – D),
in which formula-
“A” represents the tax fraction;
“B” represents the lesser of-
(i)
(aa) the adjusted cost (including any tax forming part of such adjusted cost) to the vendor of the acquisition, manufacture, assembly, construction or production of those goods or services: Provided that where the goods or services were acquired under a supply in respect of which the consideration in money was in terms of section 10(4) deemed to be the open market value of the supply, the adjusted cost of those goods or services shall be deemed to include such open market value to the extent that it exceeds the consideration in money for that supply; or
[Subparagraph (aa) substituted by section 32 of Act 136 of 1991, section 32 of Act 97 of 1993 and section 174 of Act 45 of 2003]
(bb) where goods or services were deemed by subsection (4) to have been supplied to the vendor, the amount which was represented by “B” in the formula contemplated in that subsection when such goods or services were deemed to be supplied to the vendor; or
(cc) where the vendor was at some time after the acquisition of the goods or services required to make an adjustment contemplated in subsection (2) or this subsection the amounts represented by “A” in the formula contemplated in section 10(9) or by “B” in the formula contemplated in this subsection respectively, in the most recent adjustment made under subsection (2) or this subsection by the vendor prior to such supply of goods or services so deemed to be made; and
(ii) the open market value of the supply of those goods or services at the time any increase in the extent of the use or application of the goods or services is deemed by subsection (6) to take place;
“C” represents the percentage that, during the 12 month period during which the increase in use or application of the goods or services is deemed to take place, the use or application of the goods or services for the purposes of making taxable supplies (other than taxable supplies in respect of which, if such goods or services had been acquired at the time of such application, a deduction of input tax would have been denied in terms of section 17(2)) was of the total use or application of the goods: Provided that where the said percentage does not exceed the percentage contemplated in “D” by more than 10 per cent of the total use or application, the said percentage shall be deemed to be the percentage determined in “D”;
[Definition of “C” amended by section 32 of Act 136 of 1991 and section 34 of Act 27 of 1997]
“D” represents the percentage that the use or application of the goods or services for the purposes of making taxable supplies (other than taxable supplies in respect of which, if such goods or services had been acquired at the time of such application, a deduction of input tax would have been denied in terms of section 17(2)) was of the total use or application of such goods or services determined in terms of section 17(1), section 10(9) or subsection (4) of this section or this subsection, whichever was applicable in the period immediately preceding the 12 month period contemplated in “C”:
[Definition of “D” substituted by section 34 of Act 27 of 1997]
Provided that –
(i) this subsection does not apply to-
(aa) capital goods or services which cost less than R40 000 (excluding tax) or where such goods or services were deemed to be supplied to the person by subsection (4) if the amount which was represented by “B” in the formula contemplated in that subsection was less than R40 000 when such goods or services were deemed to be supplied to such person;
[Subparagraph (aa) amended by section 49 of Act 9 of 2006]
(bb) capital goods or services acquired by a public authority or public entity listed in Part A or C of Schedule 3 to the Public Finance Management Act, 1999 (Act No. 1 of 1999, prior to 1 April 2005, or if an input tax deduction in respect thereof was denied under proviso (iv) to section 18(4); or
[Subparagraph (bb) amended by section 49 of Act 9 of 2006]
(cc) capital goods or services acquired by a municipality prior to 1 July 2006, or if an input tax deduction in respect thereof was denied in terms of paragraph (v) of the proviso to section 18(4);
[Subparagraph (cc) added by section 49 of Act 9 of 2006]
(ii) ……….
[Para (ii) of the proviso deleted by section 149 of Act 22 of 2012 effective on 10 January 2012]
[Subsection (5) amended by section 32 of Act 136 of 1991, section 23 of Act 136 of 1992, section 34 of Act 27 of 1997 and section 109 of Act 31 of 2005]
(6) For the purposes of subsections (2) and (5), any reduction or increase in the extent of the application or use of goods or services shall be deemed to take place on the last day of the vendor’s ‘year of assessment’, as defined in section 1 of the Income Tax Act, or, if the vendor is not a taxpayer as defined in that section, on the last day of February: Provided that where a vendor who is not a taxpayer as so defined draws up annual financial statements in respect of a year or other period ending on a date other than the last day of February, the reduction or increase in the extent of the application or use of goods or services shall be deemed to take place on such first-mentioned date: Provided further that where a vendor ceases to be a vendor prior to any day contemplated in this subsection, any reduction or increase in the extent of the application or use of goods or services shall be deemed to take place immediately before that vendor ceased to be a vendor.
[Words preceding the proviso substituted by section 135 of Act 25 of 2015 effective on 8 January 2016]
[Subsection (6) substituted by section 92 of Act 17 of 2009]
(7) For the purposes of subsections (2) and (5) of this section, the extent of the application or use of any goods or services for the purpose of making taxable supplies shall be determined with reference to the application or use of such goods or services during the 12 month period ending on the day any reduction or increase in the extent of the application or use of such goods or services is deemed by subsection (6) to have taken place: Provided that where any goods or services are acquired, manufactured, assembled, constructed or produced by a vendor or are deemed under subsection (4) to have been supplied to that vendor during such 12 month period, the extent of the application or use of such goods or services shall be determined with reference to the period ending on the day contemplated in subsection (6) and commencing on the date such goods or services are acquired, manufactured, assembled, constructed or produced by the vendor or are deemed to be supplied to the vendor under subsection (4): Provided further that where the period between the commencement date and the date contemplated in subsection (6) is less than a 12 month period it shall for the purposes of this section be deemed to be a 12 month period.
(8) Where a deduction of an amount contemplated in paragraph (b) of the definition of “input tax” in section 1 has been made by any vendor in respect of the sale to him of any second-hand goods and subsequently-
(a) that sale is cancelled; or
(b) the nature of that sale is fundamentally varied or altered; or
(c) the previously agreed consideration for that sale is reduced; or
(d) the second-hand goods or part of the second-hand goods sold are returned to the supplier,
and, as a result of the occurrence of one or more of the abovementioned events, the input tax actually deducted in relation to such sale exceeds the input tax properly deductible by the vendor, either the amount of that excess shall be deemed to be tax charged in relation to a taxable supply made by that vendor in the tax period during which the said event has occurred, at the rate of tax which applied when the said deduction was made, or the amount of input tax deducted in terms of section 16 (3) in the said tax period shall be reduced by the amount of the said excess.
[Subsection (8) added by section 18 of Act 20 of 1994]
(9) Where a vendor has acquired or imported a motor car (in respect of which input tax has been denied in terms of section 17(2)(c)) and has subsequently converted that motor car into a game viewing vehicle or a hearse, as contemplated in paragraph (e) or (f) of the definition of ‘motor car’ in section 1, that motor car is deemed to be supplied in that tax period to that vendor, and the Commissioner shall allow that vendor to make a deduction in terms of section 16(3) of an amount equal to the tax fraction of the lesser of-
(a) the adjusted cost; or
(b) the open market value,
of that motor car on the day before that conversion: Provided that this deduction excludes any amount of input tax which qualifies or has qualified for a deduction under another provision of this Act.
[Subsection (9) added by section 103 of Act 32 of 2004]
(10) Where-
(a) goods or services have been supplied by a vendor at the zero rate in terms of sections 11(1)(c), 11(1)(m), 11(1)(mA) or 11(2)(k) to a vendor, that is a customs controlled area enterprise or an SEZ operator; or
(b) goods have been imported into the Republic by a vendor, being a customs controlled area enterprise or an SEZ operator and those goods are exempt from tax in terms of section 13(3),
and where a deduction of input tax would have been denied in terms of section 17(2), or to the extent that such goods or services are not wholly for consumption, use or supply within a customs controlled area in the course of making taxable supplies by that vendor, that is a customs controlled area enterprise or an SEZ operator, those goods or services shall be deemed to be supplied by the vendor concerned in the same tax period in which they were so acquired, in accordance with the formula:
A × B
in which formula-
‘A’ represents the rate of tax levied in terms of section 7(1); and
‘B’ represents-
(i) the cost to the vendor of the acquisition of those goods or services which were supplied to him or her in terms of sections 11(1)(c), 11(1)(m), 11(1)(mA) or 11(2)(k); or
(ii) the value to be placed on the importation of goods into the Republic as determined in terms of section 13(2).
[Subsection (10) added by section 103 of Act 32 of 2004, amended by section 109 of Act 31 of 2005, substituted by section 85 of Act 20 of 2006, amended by section 149 of Act 22 of 2012 and substituted by section 27 of Act 16 of 2016 effective on the date on which the Special Economic Zones Act, 2014 (Act No. 16 of 2014), came into operation, 9 February 2016]
Section 17 (VAT) – Permissible deductions in respect of input tax
17. Permissible deductions in respect of input tax
(1) Where goods or services are acquired or imported by a vendor partly for consumption, use or supply (hereinafter referred to as the intended use) in the course of making taxable supplies and partly for another intended use, the extent to which any tax which has become payable in respect of the supply to the vendor or the importation by the vendor, as the case may be, of such goods or services or in respect of such goods under section 7(3) or any amount determined in accordance with paragraph (b) or (c) of the definition of “input tax” in section 1, is input tax, shall be an amount which bears to the full amount of such tax or amount, as the case may be, the same ratio (as determined by the Commissioner in accordance with a ruling as contemplated in Chapter 7 of the Tax Administration Act or section 41B) as the intended use of such goods or services in the course of making taxable supplies bears to the total intended use of such goods or services: Provided that-
[Words preceding the proviso to subsection (1) substituted by section 271 of Act 28 of 2011 effective on 1 October 2012]
(i) where the intended use of goods or services in the course of making taxable supplies is equal to not less than 95 per cent of the total intended use of such goods or services, the goods or services concerned may for the purposes of this Act be regarded as having been acquired wholly for the purpose of making taxable supplies;
[Paragraph (i) substituted by section 31 of Act 97 of 1993 and section 88 of Act 53 of 1999]
(ii) where goods or services are deemed by section 9(3)(b) to be successively supplied, the extent to which the tax relating to any payment referred to in that section is input tax may be estimated where the calculation cannot be made accurately until the completion of the supply of the goods or services, and in such case such estimate shall be adjusted on completion of the supply, any amount of input tax which has been overestimated being accounted for as output tax in the tax period during which the completion occurs and any amount of input tax which has been underestimated being accounted for as input tax in that period; and
(iii) where a method for determining the ratio referred to in this subsection has been approved by the Commissioner, that method may only be changed with effect from a future tax period, or from such other date as the Commissioner may consider equitable and such other date must fall-
(aa) in the case of a vendor who is a taxpayer as defined in section 1 of the Income Tax Act, within the year of assessment as defined in that Act; or
(bb) in the case of a vendor who is not a taxpayer as defined in section 1 of the Income Tax Act, within the period of twelve months ending on the last day of February, or if such vendor draws up annual financial statements in respect of a year ending other than on the last day of February, within that year,
during which the application for the aforementioned method was made by the vendor.
[Paragraph (iii) added by section 92 of Act 30 of 1998 and substituted by section 84 of Act 8 of 2007 and section 271 of Act 28 of 2011 effective on 1 October 2012]
[Subsection (1) amended by section 22 of Act 136 of 1992, section 92 of Act 30 of 1998 and section 84 of Act 8 of 2007]
(2) Notwithstanding anything in this Act to the contrary, a vendor, shall not be entitled to deduct from the sum of the amounts of output tax and refunds contemplated in section 16(3), any amount of input tax-
(a) in respect of goods or services acquired by such vendor to the extent that such goods or services are acquired for the purposes of entertainment: Provided that this paragraph shall not apply where-
(i) such goods or services are acquired by the vendor for making taxable supplies of entertainment in the ordinary course of an enterprise which-
(aa) continuously or regularly supplies entertainment to clients or customers (other than in the circumstances contemplated in item (bb)) for a consideration to the extent that such taxable supplies of entertainment are made for a charge which-
(A) covers all direct and indirect costs of such entertainment; or
(B) is equal to the open market value of such supply of entertainment,
unless-
(i) such costs or open market value is for bona fide promotion purposes not charged by the vendor in respect of the supply to recipients who are clients or customers in the ordinary course of the enterprise, of entertainment which is in all respects similar to the entertainment continuously or regularly supplied to clients or customers for consideration; or
(ii) the goods or services were acquired by the vendor for purposes of making taxable supplies to such clients or customers of entertainment which consists of the provision of any food and a supply of any portion of such food is subsequently made to any employee of the vendor or to any welfare organization as all such food was not consumed in the course of making such taxable supplies;
[Item (aa) amended by section 84 of Act 20 of 2006]
(bb) supplies entertainment to any employee or office holder of the vendor or any connected person in relation to the vendor, to the extent that such taxable supplies of entertainment are made for a charge which covers all direct and indirect costs of such entertainment;
[Paragraph (i) substituted by section 31 of Act 136 of 1991 and section 33 of Act 27 of 1997]
(ii) such goods or services are acquired by the vendor for the consumption or enjoyment by that vendor (including, where the vendor is a partnership, a member of such partnership), an employee, office holder of such vendor, or a self-employed natural person in respect of a meal, refreshment or accommodation, in respect of any night that such vendor or member is by reason of the vendor’s enterprise or, in the case of such employee, office holder or self-employed natural person, he or she is by reason of the duties of his or her employment, office or contractual relationship, obliged to spend away from his or her usual place of residence and from his or her usual working-place. For the purposes of this section, the term ‘self-employed natural person’ shall mean a person to whom an amount is paid or is payable in the course of any trade carried on by him or her independently of the person by whom such amount is paid or payable and of the person to whom the services have been or are to be rendered, as contemplated in the proviso to paragraph (ii) of the exclusions to the definition of ‘remuneration’ in paragraph 1 of the Fourth Schedule to the Income Tax Act;
[Paragraph (ii) substituted by section 22 of Act 136 of 1992, section 33 of Act 27 of 1997 and section 84 of Act 20 of 2006]
(iii) such goods or services consist of entertainment supplied by the vendor as operator of any conveyance to a passenger or crew member, in such conveyance during a journey, where such entertainment is supplied as part of or in conjunction with the transport service supplied by the vendor, where the supply of such transport service is a taxable supply;
[Subparagraph (iii) substituted by section 173 of Act 45 of 2003, section 102 of Act 32 of 2004 and section 174 of Act 31 of 2013 effective on 1 April 2014]
(iv) such goods or services consist of a meal or refreshment supplied by the vendor as organizer of a seminar or similar event to a participant in such seminar or similar event, the supply of such meal or refreshment is made during the course of or immediately before or after such seminar or similar event and a charge which covers the cost of such meal or refreshment is made by the vendor to the recipient;
[Paragraph (iv) substituted by section 22 of Act 136 of 1992]
(v) such goods or services are acquired by a municipality for the purpose of providing sporting or recreational facilities or public amenities to the public;
[Paragraph (v) substituted by section 31 of Act 97 of 1993 and section 48 of Act 9 of 2006]
(vi) such goods or services are acquired by a welfare organization, for the purpose of making supplies in the furtherance of its aims and objects; or
[Paragraph (vi) added by section 31 of Act 136 of 1991]
(vii) such goods or services are acquired by a vendor for an employee or office holder of such vendor, that are incidental to the admission into a medical care facility;
[Subparagraph (vii) added by section 173 of Act 45 of 2003, substituted by section 102 of Act 32 of 2004 and amended by section 108 of Act 31 of 2005]
(viii) such goods or services consist of a meal or refreshment supplied by the vendor as operator of any ship or vessel (otherwise than in the circumstances contemplated in subparagraph (iii)) in such ship or vessel to a crew member of such ship or vessel, where such meal refreshment is supplied in the course of making a taxable supply by that vendor; or
[Subparagraph (viii) added by section 102 of Act 32 of 2004 and amended by section 108 of Act 31 of 2005]
(ix) that entertainment is acquired by the vendor for the purpose of awarding that entertainment as a prize contemplated in section 16(3)(d) in consequence of a supply contemplated in section 8(13);
[Subparagraph (ix) added by section 108 of Act 31 of 2005]
[Paragraph (a) amended by section 31 of Act 97 of 1993]
(b) in respect of any fees or subscriptions paid by the vendor in respect of membership of any club, association or society of a sporting, social or recreational nature; or
(c) in respect of any motor car supplied to or imported by the vendor: Provided that-
(i) this paragraph shall not apply where that motor car is acquired by the vendor exclusively for the purpose of making a taxable supply of that motor car in the ordinary course of an enterprise which continuously or regularly supplies motor cars, whether that supply is made by way of sale or under an instalment credit agreement or by way of rental agreement at an economic rental consideration;
(ii) for the purposes of this paragraph a motor car acquired by such vendor for demonstration purposes or for temporary use prior to a taxable supply by such vendor shall be deemed to be acquired exclusively for the purpose of making a taxable supply; and
(iii) this paragraph shall not apply where-
(aa) that motor car is acquired by the vendor for the purposes of awarding that motor car as a prize contemplated in section 16(3)(d) in consequence of a supply contemplated in section 8(13); or
(bb) the supply of that motor car is in the ordinary course of an enterprise which continuously or regularly supplies motor cars as prizes to clients or customers (other than to any employee or office holder of the vendor or any connected person in relation to that employee, office holder or vendor) to the extent that it is in consequence of a taxable supply made in the course or furtherance of an enterprise; or
[Paragraph (c) amended by section 108 of Act 31 of 2005]
(d) in respect of any goods or services acquired by a superannuation scheme referred to in section 2, for the purposes of the supply by such scheme of any medical or dental services or services directly connected with such medical or dental services or of any goods necessary for or subordinate or incidental to the supply of any such services.
[Paragraph (d) added by section 22 of Act 136 of 1992 and substituted by section 17 of Act 20 of 1994]
[Subsection (2) amended by section 108 of Act 31 of 2005 and section 84 of Act 8 of 2007]
(2A) Subsection (2) shall not apply to input tax in respect of goods or services that are applied in the course or furtherance of a foreign donor funded project.
[Subsection (2A) inserted by section 84 of Act 20 of 2006 and substituted by section 84 of Act 8 of 2007 and section 31 of Act 36 of 2007]
(3) Notwithstanding anything in section 16 (4), where a vendor has made a supply of goods as contemplated in section 8(10) and in respect of the acquisition thereof by the vendor a deduction of input tax under section 16 (3) was denied in terms of subsection (2) of this section, the vendor shall not be required to account for output tax in relation to such supply.
(4) Where, but for the provisions of this subsection, an amount qualifies or has qualified for a deduction under more than one provision of this Act, a deduction of such amount, or any portion thereof, shall not be made more than once in the calculation of the amount of tax payable by any person.
[Subsection (4) added by section 33 of Act 27 of 1997]
Section 16 (VAT) – Calculation of tax payable
16. Calculation of tax payable
(1) The tax payable by a vendor shall be calculated by him in accordance with the provisions of this section in respect of each tax period during which he has carried on an enterprise in respect of which he is registered or is required to be registered in terms of section 23: Provided that the Commissioner may authorise a vendor to calculate the tax payable in accordance with a method which the Minister may prescribe by regulation.
[Subsection (1) amended by section 91 of Act 30 of 1998]
(2) No deduction of input tax in respect of a supply of goods or services, the importation of any goods into the Republic or any other deduction shall be made in terms of this Act, unless-
[Words preceding paragraph (a) substituted by section 137 of Act 24 of 2011 with effect from 10 January 2012]
(a) a tax invoice or debit note or credit note in relation to that supply has been provided in accordance with section 20 or 21 and is held by the vendor making that deduction at the time that any return in respect of that supply is furnished;
[Paragraph (a) substituted by section 156 of Act 60 of 2001 and amended by section 172 of Act 45 of 2003]
(b)
(i) a document as is acceptable to the Commissioner has been issued in terms of section 20(6); or
(ii) a document issued by the supplier in compliance with section 20(7) or 21(5); or
[Paragraph (b) substituted by section 29 of Act 8 of 2010 effective on 2 November 2010]
(c) records are maintained as required by section 20(8) or 20(8A) where the supply is a supply of second-hand goods or a supply of goods as contemplated in section 8(10) and in either case is a supply to which that section relates; or
[Paragraph (c) substituted by section 26(1)(b) of Act 44 of 2014 and by section 29(1)(a) of Act 20 of 2022 deemed effective on 1 April, 2022]
(d) a bill of entry or other document prescribed in terms of the Customs and Excise Act together with the receipt for the payment of the tax in relation to the said importation have been delivered (including by means of an electronic delivery mechanism) in accordance with that Act and are held by the vendor making that deduction, at the time that any return in respect of that importation is furnished; or
[Paragraph (d) inserted by section 21 of Act 136 of 1992, substituted by section 87 of Act 53 of 1999, amended by section 156 of Act 60 of 2001 and substituted by section 25 of Act 44 of 2014 effective on 1 April 2015]
(dA) a bill of entry or other document prescribed in terms of the Customs and Excise Act as contemplated in section 54(2A) is held by the agent, and a statement as contemplated in section 54(3)(b) is held by the vendor at the time that any return in respect of that importation is furnished; or
[Paragraph (dA) inserted by section 25 of Act 44 of 2014 effective on 1 April 2015]
(e) a tax invoice or debit or credit note has been provided as contemplated in section 54(2), and a statement as contemplated in section 54(3)(a) is held by the vendor at the time a return in respect of the supply to the vendor is furnished;
[Paragraph (e) added by section 156 of Act 60 of 2001, amended by section 172 of Act 45 of 2003, substituted by section 30 of Act 36 of 2007 and amended by section 25 of Act 23 of 2015 effective on 1 April 2016]
(f) the vendor, in the case where an amount is deducted from the sum of the amounts of output tax which are attributable to that period in terms of subsection (3)(c), (d), (dA), (e), (f), (g), (h), (i), (j), (k), (l), (m), (n), (o) or (p), is in possession of documentary proof, as is prescribed by the Commissioner, substantiating the vendor’s entitlement to the deduction at the time a return in respect of the deduction is furnished; or
[Paragraph (f) added by section 30(c) of Act 36 of 2007 and substituted by section 173(1)(a) of Act 31 of 2013, by section 25(1) of Act 23 of 2015, by section 26(1)(a) of Act 16 of 2016, by section 29(1)(b) of Act 20 of 2022 and by section 10(a) of Act 43 of 2024]
(g)
(i) a ruling requested no later than two months prior to the expiry of the five-year period referred to in subsection (3) and issued in terms of section 41B of this Act or Chapter 7 of the Tax Administration Act confirms that the document in the vendor’s possession is acceptable for the purpose of making a deduction; and
(ii) the ruling and document are held by the vendor at the time a return in respect of the deduction is furnished: Provided that the Commissioner may only issue a ruling in terms of this paragraph if satisfied that-
(aa) the vendor has taken reasonable steps to obtain a document required in terms of paragraph (a), (b), (c), (d), (dA), (e) or (f) and is unable to obtain such a document due to circumstances beyond the vendor’s control; and
(bb) no other provision of this Act can be applied to satisfy the Commissioner that the document in the vendor’s possession is acceptable for purposes of making a deduction:
[Paragraph (g) added by section 25 of Act 23 of 2015 and substituted by section 26 of Act 16 of 2016 effective on 19 January 2017, applies in respect of tax periods commencing on or after that date]
Provided that where a tax invoice or debit note or credit note in relation to that supply has been provided in accordance with this Act, or a bill of entry or other document has been delivered (including by means of an electronic delivery mechanism) in accordance with the Customs and Excise Act, as the case may be, the Commissioner may determine that no deduction for input tax in relation to that supply or importation shall be made unless that tax invoice or debit note or credit note or that bill of entry or other document is retained in accordance with the provisions of section 55 and Part A of Chapter 4 of the Tax Administration Act.
[Proviso to subsection (2) substituted by section 271 of Act 28 of 2011 and section 25 of Act 44 of 2014 effective on 1 April 2015]
[Subsection (2) amended by section 21 of Act 136 of 1992, section 91 of Act 30 of 1998, section 107 of Act 31 of 2005, section 83 of Act 20 of 2006 and section 30 of Act 36 of 2007]
(3) Subject to the provisions of subsection (2) of this section and the provisions of sections 14, 15 and 17, the amount of tax payable in respect of a tax period shall be calculated by deducting from the sum of the amounts of output tax of the vendor which are attributable to that period, as determined under subsection (4), and the amounts (if any) received by the vendor during that period by way of refunds of tax charged under section 7(1)(b) and (c) and 7(3)(a), the following amounts, namely-
(a) in the case of a vendor who is in terms of section 15 required to account for tax payable on an invoice basis, the amounts of input tax-
(i) in respect of supplies of goods and services (not being supplies of second-hand goods to which paragraph (b) of the definition of “input tax” in section 1 applies and supplies referred to in subparagraph (iiA)) made to the vendor during that tax period;
[Subparagraph (i) substituted by section 23 of Act 37 of 1996]
(ii)
(aa) subject to the provisions of item (bb), in respect of supplies of second-hand goods to which paragraph (b) of the definition of “input tax” in section 1 applies to the extent that payment of any consideration which has the effect of reducing or discharging any obligation (whether an existing obligation or an obligation which will arise in the future) relating to the purchase price for those supplies has been made during that tax period;
[Item (aa) substituted by section 137 of Act 24 of 2011 with effect from 10 January 2012]
(bb) in respect of supplies of second-hand goods to which paragraph (b) of the definition of “input tax” in section 1 applies which consist of-
(A) fixed property in respect of which the provisions of section 9(3)(d) apply if transfer of that fixed property was effected by registration in a deeds registry and the fixed property was registered in the name of the vendor that makes the deduction during that tax period;
[Subitem (A) substituted by section 137 of Act 24 of 2011 with effect from 10 January 2012]
(B) a share in a share block company which confers a right to or an interest in the use of immovable property if a signed use agreement has been entered into between the company that operates the share block scheme and a member of that company;
[Subitem (B) substituted by section 137 of Act 24 of 2011 with effect from 10 January 2012]
[Words following subitem (B) deleted by section 137 of Act 24 of 2011 with effect from 10 January 2012]
[Subparagraph (ii) substituted by section 30 of Act 97 of 1993 and section 16 of Act 20 of 1994, amended by section 23 of Act 37 of 1996 and substituted by section 32 of Act 27 of 1997]
(iiA) in respect of taxable supplies made to the vendor under sales concluded on or after 6 June 1996 in respect of which the provisions of section 9(3)(d) apply (other than supplies in respect of which the provisions of section 10 (4) apply), to the extent that payment of any consideration which has the effect of reducing or discharging any obligation (whether an existing obligation or an obligation which will arise in the future) relating to the purchase price for those supplies has been made during that tax period;
[Subparagraph (iiA) inserted by section 23 of Act 37 of 1996 and substituted by section 32 of Act 27 of 1997]
(iii) charged in terms of section 7(1)(b) in respect of goods imported into the Republic by the vendor and released in terms of the Customs and Excise Act during that tax period;
[Subparagraph (iii) substituted by section 173 of Act 31 of 2013 and section 98 of Act 43 of 2014 effective on 1 April 2015]
(iv) charged in terms of section 7(3)(a) in respect of goods subject to excise duty or environmental levy as contemplated in that section and paid during that tax period;
[Subparagraph (iv) substituted by section 83 of Act 8 of 2007 and section 173 of Act 31 of 2013 effective on 1 April 2014]
(v) calculated in accordance with section 21(2)(b) or 21 (7) or section 22(1), 22(1A) or 22(4), as applicable to the vendor:
[Subparagraph (v) substituted by section 30 of Act 136 of 1991, section 23 of Act 37 of 1996 and section 32 of Act 27 of 1997]
Provided that this paragraph does not apply where a vendor acquires goods or services that are to be awarded as a prize or winnings and in respect of which that vendor qualifies or will qualify for a deduction in terms of paragraph (d).
[Proviso added by section 107 of Act 31 of 2005]
(b) in the case of a vendor who is in terms of section 15 required to account for tax payable on a payments basis, the amounts of input tax-
(i) in respect of supplies of goods and services made to the vendor in respect of which the provisions of section 9 (1), (3) (a), (b) or (d) or (4) apply, to the extent that payments of any consideration which has the effect of reducing or discharging any obligation (whether an existing obligation or an obligation which will arise in the future) relating to the purchase price for those supplies have been made during that tax period;
[Proviso to subparagraph (i) deleted by section 148 of Act 22 of 2012 effective on 10 January 2012]
shall be deducted only after such transfer duty or stamp duty, as the case may be, has been paid;
[Subparagraph (i) substituted by section 30 of Act 97 of 1993 and by section 16 of Act 20 of 1994 and amended by section 23 of Act 37 of 1996]
(ii) charged in terms of section 7(1)(b) in respect of goods imported into the Republic by the vendor and released in terms of the Customs and Excise Act or in terms of section 7(3)(a) in respect of goods subject to excise duty or environmental levy as contemplated in that section and paid by the vendor during that tax period;
[Subparagraph (ii) substituted by section 83 of Act 8 of 2007 and section 98 of Act 43 of 2014 effective on 1 April 2015]
(iii) in respect of supplies of goods and services made to the vendor during the tax period, excluding supplies of goods and services to which subparagraph (i) of this paragraph applies;
(iv) calculated in accordance with section 21(2)(b) or 21 (7), as applicable to the vendor, to the extent that payments in respect of the tax so calculated have been made during the tax period;
(v) calculated in accordance with section 22(1), as applicable to the vendor:
[Subparagraph (v) substituted by section 30 of Act 136 of 1991]
Provided that this paragraph does not apply where a vendor acquires goods or services that are to be awarded as a prize or winnings and in respect of which that vendor qualifies or will qualify for a deduction in terms of paragraph (d).
[Proviso added by section 107 of Act 31 of 2005]
(c) an amount equal to the tax fraction of any payment made during the tax period by the vendor to indemnify another person in terms of any contract of insurance: Provided that this paragraph-
(i) shall only apply where the supply of that contract of insurance is a taxable supply or where the supply of that contract of insurance would have been a taxable supply if the time of performance of that supply had been on or after the commencement date;
(ii) shall not apply where that payment is in respect of the supply of goods or services to the vendor or the importation of any goods by the vendor;
(iii) shall not apply where the supply of that contract of insurance is a supply charged with tax at the rate of zero per cent under section 11 and that other person is, at the time that that payment is made, not a vendor and not a resident of the Republic;
(iv) shall not apply where that payment results from a supply of goods or services to that other person where those goods are situated outside the Republic or those services are physically performed elsewhere than in the Republic at the time of that supply;
[Subparagraph (iv) substituted by section 16 of Act 20 of 1994]
(d) an amount equal to the tax fraction of any amount paid during the tax period by the supplier of the services contemplated in section 8(13) as a prize or winnings to the recipient of such services: Provided that where the prize or winnings awarded constitutes either goods or services, the deduction must be limited to the input tax on the initial cost of acquiring those goods or services;
[Paragraph (d) substituted by section 107 of Act 31 of 2005 and section 83 of Act 20 of 2006]
(dA) an amount equal to the tax fraction of any amount paid by the supplier of the services as contemplated in section 8(13) to the National Lottery Distribution Trust Fund, established by section 21 of the Lotteries Act, 1997 (Act No. 57 of 1997);
[Paragraph (dA) inserted by section 87 of Act 53 of 1999]
(e) an amount equal to the tax fraction of any amount of tax on totalizator transactions or tax on betting levied and paid for the benefit of any Provincial Revenue Fund by the supplier of the services contemplated in section 8 (13);
(f) the amounts calculated in accordance with section 18(4) or (5) in relation to any goods or services applied during the tax period as contemplated in that section;
(g) any amount of input tax in relation to any supply in respect of which subsection (2) of this section has operated to deny a deduction and the vendor has obtained, during the tax period, the prescribed documents or records in relation to that supply;
[Paragraph (g) substituted by section 30 of Act 36 of 2007]
(h) in the case of a vendor who has supplied goods or services during that tax period otherwise than in terms of section 18(2), an amount determined in accordance with the formula-
A × B × C
in which formula-
“A” represents the tax fraction;
“B” represents the lesser of-
(i)
(aa) the adjusted cost (including any tax forming part of such adjusted cost) to the vendor of the acquisition, manufacture, assembly, construction or production of those goods or services: Provided that where the goods or services were acquired under a supply in respect of which the consideration in money was in terms of section 10 (4) deemed to be the open market value of the supply, the adjusted cost of those goods or services shall be deemed to include such open market value to the extent that it exceeds the consideration in money for that supply; or
[Item. (aa) substituted by section 30 of Act 97 of 1993 and section 172 of Act 45 of 2003]
(bb) where the vendor was at some time after the acquisition of such goods or services deemed under section 18(4) to have been supplied with such goods or services, the amount which was represented by “B” in the formula contemplated in section 18(4) when such goods or services were deemed to be supplied to the vendor; or
(cc) where the vendor was at some time after the acquisition of such goods or services required to make an adjustment contemplated in section 18 (2) or (5), the amounts then represented by “A” in the formula contemplated in section 10(9) or “B” in the formula contemplated in section 18 (5) respectively, in the most recent adjustment made in terms of section 18(2) or (5) by the vendor prior to such supply of goods or services; and
(ii) the open market value of the supply of those goods or services at the time those goods or services are deemed to be supplied; and
“C” represents the percentage that, immediately before the time of the supply, the use or application of the goods or services for the purpose other than that of making taxable supplies was of the total use or application of the goods or services:
[Definition of “C” amended by section 21 of Act 136 of 1992]
Provided that-
(i) ……….
[Paragraph (i) of the proviso deleted by section 148 of Act 22 of 2012 effective on 10 January 2012]
(ii) this subsection does not apply where-
(aa) such goods or services were acquired before 1 April 2005, or an input tax deduction in respect of that acquisition was denied under proviso (iv) to section 18(4); and
(bb) the vendor is a public authority which registered prior to 1 April 2005, notwithstanding paragraph (b)(i) of ‘enterprise’ in section 1 or a public entity listed in Part A or C of Schedule 3 to the Public Finance Management Act, 1999 (Act No. 1 of 1999); or
[Subparagraph (ii) amended by section 47 of Act 9 of 2006]
(iii) this subsection does not apply where such goods or services were acquired by a municipality before 1 July 2006, or an input tax deduction in respect of that acquisition was denied in terms of paragraph (v) of the proviso to section 18(4);
[Subparagraph (iii) added by section 47 of Act 9 of 2006]
[Proviso substituted by section 107 of Act 31 of 2005]
[Paragraph (h) amended by section 16 of Act 20 of 1994 and section 91 of Act 30 of 1998]
(i) an amount equal to the tax fraction of any payment made by the vendor during the tax period in respect of the redemption with him, or his agent, of the monetary value of any token, voucher or stamp contemplated in section 10(20), to a supplier of goods or services who has granted a discount on the surrender to him of such token, voucher or stamp by a recipient of a supply of goods or services if those goods or services are not charged with tax at the rate of zero per cent under section 11;
[Paragraph (i) inserted by section 16 of Act 20 of 1994 and substituted by section 137 of Act 24 of 2011 with effect from 10 January 2012]
(j)
(i) in the case of a vendor who has, during the tax period, supplied a property in possession in the course or furtherance of his enterprise under a sale, an amount equal to the tax fraction of the lesser of-
(aa) the amount (excluding any amount of tax) received in respect of the sale of such property in possession less any amount paid by the vendor in respect of the acquisition of such property in possession; and
(bb) the amount of the unrecovered loan balance less any amount paid by the vendor in respect of the acquisition of such property in possession:
Provided that no deduction shall be made in terms of this paragraph where the person in default is or will be held liable for payment of such lesser amount;
(ii) for the purposes of this paragraph-
(aa) “property in possession” means fixed property acquired by any vendor-
(A) at a sale in execution as a result of default by any person (other than a person who held or applied such fixed property for the purpose of making taxable supplies in the course or furtherance of his enterprise immediately before such sale in execution) in respect of an unrecovered loan balance due to that vendor in terms of a credit agreement; or
(B) as a result of an abandonment authorised by the Master of the High Court where such person has defaulted in respect of an unrecovered loan balance due to that vendor in terms of a credit agreement or gone insolvent;
(bb) “unrecovered loan balance” means the amount of capital, interest and administrative holding costs outstanding in terms of a credit agreement at the date of sale in execution or the date of authorisation of abandonment by the Master of the High Court;
[Paragraph (j) inserted by section 32 of Act 27 of 1997]
(k) an amount of input tax as determined by the Commissioner paid by a vendor to a supplier of pastoral, agricultural or other farming products who is not a vendor, in terms of a scheme operated by the controlling body of an industry for the development of small-scale farmers approved by the Minister with the concurrence of the Cabinet member responsible for agriculture to compensate that supplier for tax incurred in the production of such goods:
[Paragraph (k) added by section 71 of Act 19 of 2001 and substituted by section 83 of Act 17 of 2017 effective on 18 December 2017]
(l) an amount as determined by the Commissioner in lieu of a refund in respect of the purchase and use of diesel paid by a vendor to a supplier of pastoral, agricultural or other farming products who is not a vendor, in terms of a scheme operated by the controlling body of an industry for the development of small- scale farmers approved by the Minister with the concurrence of the Cabinet member responsible for agriculture to compensate that supplier for an amount refundable in the production of such goods;
[Paragraph (l) added by section 156 of Act 60 of 2001 and substituted by section 173 of Act 31 of 2013 effective on 1 April 2014]
(m) an amount equal to the tax fraction initially applied to any excess amount contemplated in section 8(27) which is refunded by the vendor during the tax period:
(n) an amount equal to the tax fraction of the lesser of the amount contemplated in section 10(25) or the open market value of the movable goods on the date-
(i) those goods are returned to the customs controlled area enterprise or SEZ operator; or
[Subparagraph (i) substituted by section 26 of Act 16 of 2016 effective on the date on which the Special Economic Zones Act, 2014 (Act No. 16 of 2014), came into operation, 9 February 2016]
(ii) those goods are supplied by the customs controlled area enterprise or SEZ operator where those goods are supplied after the relevant prescribed time period contemplated in section 8(24);
[Subparagraph (ii) substituted by section 26(1)(c) of Act 16 of 2016 and amended by section 53(1) of Act 20 of 2021 effective on 1 April, 2022]
[Paragraph (n) inserted by section 111 of Act 60 of 2008]
(o) an amount equal to the tax fraction of the amount determined in accordance with the provisions of section 10(29); and
[Paragraph (o) inserted by section 53(1) of Act 20 of 2021, substituted by section 29(1)(c) of Act 20 of 2022 and amended by section 10(c) of Act 43 of 2024]
(p) any amount of tax paid by a vendor in terms of this Act to the Commissioner in excess of the amount of tax that should properly have been levied under section 7(1)(c):
[Paragraph (p) added by section 10(d) of Act 43 of 2024]
Provided that –
(i) where any vendor is entitled under the preceding provisions of this subsection to deduct any amount in respect of any tax period from the said sum, the vendor may deduct that amount from the amount of output tax attributable to a later tax period which ends no later than five years after the end of the tax period during which –
(aa) the tax invoice for that supply should have been issued as contemplated in section 20(1);
(bb) goods were entered for home consumption in terms of the Customs and Excise Act;
(cc) second-hand goods were acquired or goods as contemplated in section 8(10) were repossessed or surrendered;
[Subparagraph (cc) substituted by section 173 of Act 31 of 2013 effective on 1 April 2014]
(dd) the agent should have notified the principal as contemplated in section 54(3); or
(ee) in any other case, the vendor for the first time became entitled to such deduction, notwithstanding the documentary proof that the vendor must be in possession of in terms of subsection (2) of this section; and
(ii) the said period of five years contemplated in proviso (i) of this section shall be limited to six months prior to the tax period in which the deduction is made, where the Commissioner is satisfied that the deduction was not permissible in accordance with the practice generally prevailing,
and to the extent that it has not previously been deducted by the vendor under this subsection:
[First proviso substituted by section 106 of Act 35 of 2007]
Provided further that the amount of input tax which, in relation to any supply of goods or services to a vendor, the vendor may deduct in respect of any payment referred to in paragraph (a) (ii) or (b) (i) of this subsection, shall be an amount which bears to the full amount of the input tax relating to that supply the same ratio as the amount of the payment bears to the full value on which tax was payable in respect of the supply.
[Subsection (3) amended by section 71 of Act 19 of 2001, section 107 of Act 31 of 2005 and section 83 of Act 20 of 2006]
(4) For the purposes of subsection (3), output tax in relation to a supply made by a vendor shall be attributable to a tax period-
(a) in the case of a vendor who is in terms of section 15 required to account for tax payable on an invoice basis-
(i) subject to the provisions of subparagraph (ii), where a supply is made or is deemed to be made by him during that tax period;
(ii) where a supply is made under a sale concluded on or after 6 June 1996 in respect of which the provisions of section 9(3)(d) apply (other than a supply in respect of which the provisions of section 10(4) apply), to the extent that payment of any consideration which has the effect of reducing or discharging any obligation (whether an existing obligation or an obligation which will arise in the future) relating to the purchase price for that supply has been made during that tax period; or
[Subparagraph (ii) substituted by section 32 of Act 27 of 1997]
[Paragraph (a) substituted by section 23 of Act 37 of 1996]
(b) in the case of a vendor who is in terms of section 15 required to account for tax payable on a payments basis-
(i) to the extent that payment of any consideration which has the effect of reducing or discharging any obligation (whether an existing obligation or an obligation which will arise in the future) relating to the purchase price has been received by the vendor during that tax period for any supply of goods or services in respect of which the provisions of section 9(1), (3) (a), (b) or (d) or (4) or 21 (2) (a) or (6) apply (other than a supply in respect of which the provisions of section 10(4) apply);
[Subparagraph (i) substituted by section 30 of Act 97 of 1993, section 16 of Act 20 of 1994, section 23 of Act 37 of 1996 and section 87 of Act 53 of 1999]
(ii) where a supply of goods or services is made or deemed to be made during the tax period by that vendor, not being a supply of goods or services to which subparagraph (i) of this paragraph applies.
(5) If, in relation to any tax period of any vendor, the aggregate of the amounts that may be deducted under subsection (3) from the sum referred to in that subsection, the amount (if any) refundable to the vendor under section 15(8), and any other amount refundable under Chapter 13 of the Tax Administration Act, exceeds the said sum, the amount of the excess shall, subject to the provisions of this Act, be refundable to the vendor by the Commissioner as provided in Chapter 13 of the Tax Administration Act.
[Subsection (5) substituted by section 271 of Act 28 of 2011 effective on 1 October 2012 except to the extent related to interest under section 39 in respect of which the wording prior to the amendment applies]