PART II
VALUE-ADDED TAX
Author: admin_kmos
Section 5 (VAT) – Exercise of powers and performance of duties
5. Exercise of powers and performance of duties
(1) The powers conferred and the duties imposed upon the Commissioner by or in terms of the provisions of this Act or any amendment thereof may be exercised or performed by the Commissioner, or by any SARS official.
[Subsection (1) substituted by section 271 of Act 28 of 2011 effective on 1 October 2012]
(2) ……….
[Subsection (2) deleted by section 271 of Act 28 of 2011 effective on 1 October 2012]
6. ……….
[Section 6 amended by section 20 of Act 37 of 1996, section 34 of Act 34 of 1997, section 88 of Act 30 of 1998, section 66 of Act 19 of 2001, section 150 of Act 60 of 2001, section 116 of Act 74 of 2002, section 48 of Act 12 of 2003, section 45 of Act 16 of 2004, section 13 of Act 10 of 2006, section 36 of Act 21 of 2006, section 26 of Act 36 of 2007 and repealed by section 271 of Act 28 of 2011 effective on 1 October 2012]
Part I – Administration (VAT)
PART I
ADMINISTRATION
Section 4 (VAT) – Administration of Act
4. Administration of Act
(1) The Commissioner is responsible for carrying out the provisions of this Act.
(2) Administrative requirements and procedures for purposes of the performance of any duty, power or obligation or the exercise of any right in terms of this Act are, to the extent not regulated in this Act, regulated by the Tax Administration Act.
[Section 4 amended by section 34 of Act 34 of 1997 and substituted by section 271 of Act 28 of 2011 effective on 1 October 2012]
VAT Act Index
Section 2 – Financial services
Section 3 – Determination of “open market value”
ADMINISTRATION
Section 4 – Administration of Act
Section 5 – Exercise of powers and performance of duties
Section 6 – [Repealed]
VALUE-ADDED TAX
Section 7 – Imposition of value-added tax
Section 8 – Certain supplies of goods or services deemed to be made or not made
Section 8A – Sharia compliant financing arrangements
Section 10 – Value of supply of goods or services
Section 16 – Calculation of tax payable
Section 17 – Permissible deductions in respect of input tax
Section 18 – Change in use adjustments
Section 18B – Temporary letting of residential fixed property
Section 18C – Adjustments for leasehold improvements
Section 18D – Temporary letting of residential property
Section 19 – Goods or services acquired before incorporation
Section 21 – Credit and debit notes
Section 22 – Irrecoverable debts
REGISTRATION
Section 23 – Registration of persons making supplies in the course of enterprises
Section 24 – Cancellation of registration
Section 25 – Vendor to notify change of status
Section 26 – Liabilities not affected by person ceasing to be vendor
RETURNS, PAYMENTS AND ASSESSMENTS
Section 28 – Returns and payments of tax
Section 29 – Special records and payments
Section 30 – [Repealed]
OBJECTIONS AND APPEALS
Section 32 – Objections to certain decisions
Section 33 – [Repealed]
Section 34 – [Repealed]
Section 35 – [Repealed]
Section 36 – [Repealed]
Section 37 – [Repealed]
PAYMENT, RECOVERY AND REFUND OF TAX
Section 38 – Manner in which tax shall be paid
Section 39 – Penalty for failure to pay tax when due
Section 40 – [Repealed]
Section 40A – [Repealed]
Section 40B – [Repealed]
Section 40D – Liability for tax and limitation of refunds in respect of National Housing Programmes
Section 40E – Liability for tax and limitation of refunds in respect of supplies by school
Section 40F – Liability for tax and limitation of refunds in respect of National Housing Programmes
Section 41 – Liability for tax in respect of certain past supplies or importations
Section 41A – [Repealed]
Section 41B – VAT class ruling and VAT ruling
Section 42 – [Repealed]
Section 43 – [Repealed]
Section 45 – Interest on delayed refunds
Section 45A – Calculation of interest payable under this Act
REPRESENTATIVE VENDORS
Section 46 – Persons acting in a representative capacity
Section 47 – [Repealed]
Section 48 – [Repealed]
Section 49 – [Repealed]
SPECIAL PROVISIONS
Section 50 – Separate enterprises, branches and divisions
Section 51 – Bodies of persons, corporate or unincorporate (other than companies)
Section 52 – Pooling arrangements
Section 53 – Death or insolvency of vendor
Section 54 – Agents and auctioneers
Section 54A – Advance Tax Rulings
COMPLIANCE
Section 56 – [Repealed]
Section 57 – [Repealed]
Section 59 – [Repealed]
Section 60 – [Repealed]
Section 61 – Recovery of tax from recipient
Section 62 – [Repealed]
Section 63 – [Repealed]
MISCELLANEOUS
Section 64 – Prices deemed to include tax
Section 65 – Prices advertised or quoted to include tax
Section 66 – Rounding-off of tax
Section 67 – Contract price or consideration may be varied according to rate of value-added tax
Section 67A – Application of increased or reduced tax rate
Section 68 – Tax relief allowable to certain diplomats and diplomatic and consular missions
Section 69 – [Repealed]
Section 70 – [Repealed]
Section 71 – [Repealed]
Section 72 – Arrangements and decisions to overcome difficulties, anomalies or incongruities
Section 73 – Schemes for obtaining undue tax benefits
Section 74 – Schedules and Regulations
Section 76 – [Repealed]
Section 77 – [Repealed]
Section 78 – Transitional matters
Section 78A – Transitional matters: Turnover Tax
Section 79 – Amendment of section 9 of Act 40 of 1949
Section 80 – Amendment of section 12 of Act 40 of 1949
Section 81 – Amendment of section 23 of Act 77 of 1968
Section 82 – Amendment of section 24 of Act 77 of 1968
Section 83 – Amendment of Item 15 of Schedule 1 to Act 77 of 1968
Section 84 – Amendment of Item 18 of Schedule 1 to Act 77 of 1968
Section 86 – Act binding on State, and effect of certain exemptions from taxes
Section 86A – Provisions relating to special economic zones
Schedule 1 – Exemption: certain goods imported into the Republic
Section 3 (VAT) – Determination of “open market value”
3. Determination of “open market value”
(1) For the purposes of this section-
(a) “similar supply”, in relation to a supply of goods or services, means any other supply of goods or services that, in respect of the characteristics, quality, quantity, functional components, materials and reputation of the first mentioned goods or services, is the same as, or closely or substantially resembles, that supply of goods or services;
(b) the open market value of a supply shall include any tax charged under section 7(1)(a) on that supply.
(2) For the purposes of this Act, the open market value of any supply of goods or services at any date shall be the consideration in money which the supply of those goods or services would generally fetch if supplied in similar circumstances at that date in the Republic, being a supply freely offered and made between persons who are not connected persons.
(3) Where the open market value of any supply of goods or services cannot be determined under subsection (2), the open market value shall be the consideration in money which a similar supply would generally fetch if supplied in similar circumstances at that date in the Republic, being a supply freely offered and made between persons who are not connected persons.
(4) Where the open market value of any supply of goods or services cannot be determined in terms of subsection (2) or (3), the open market value shall be determined in accordance with a method approved by the Commissioner which provides a sufficiently objective approximation of the consideration in money which could be obtained for that supply of those goods or services.
(5) For the purposes of this Act the open market value of any consideration, not being consideration in money, for a supply of goods or services shall be ascertained in the same manner, with any necessary modifications, as the open market value of any supply of goods or services is ascertained under the provisions of this section.
Section 2 (VAT) – Financial services
2. Financial services
(1) For the purposes of this Act, the following activities shall be deemed to be financial services:
(a) The exchange of currency (whether effected by the exchange of bank notes or coin, by crediting or debiting accounts, or otherwise);
(b) the issue, payment, collection or transfer of ownership of a cheque or letter of credit;
(c) the issue, allotment, drawing, acceptance, endorsement or transfer of ownership of a debt security;
(d) the issue, allotment or transfer of ownership of an equity security or a participatory security;
(e) ……….
[Paragraph (e) deleted by section 19 of Act 37 of 1996]
(f) the provision by any person of credit under an agreement by which money or money’s worth is provided by that person to another person who agrees to pay in the future a sum or sums exceeding in the aggregate the amount of such money or money’s worth;
[Paragraph (f) substituted by section 19 of Act 37 of 1996]
(g) ……….
[Paragraph (g) deleted by section 19 of Act 37 of 1996]
(h) ……….
[Paragraph (h) deleted by section 19 of Act 37 of 1996]
(i) the provision, or transfer of ownership, of a life insurance policy, the provision or transfer of ownership of reinsurance in respect of any such policy: Provided that such an activity shall not be deemed to be a financial service to the extent that it includes the management of a superannuation scheme;
[Paragraph (i) substituted by section 19(1)(d) of Act 37 of 1996, amended by section 67(1) of Act 34 of 2019 and substituted by section 49(a) of Act 20 of 2021]
(j) the provision, or transfer of ownership, of an interest in a superannuation scheme;
[Paragraph (j) substituted by section 19 of Act 37 of 1996]
(k) the buying or selling of any derivative or the granting of an option: Provided that where a supply of the underlying goods or services takes place, that supply shall be deemed to be a separate supply of goods or services at the open market value thereof: Provided further that the open market value of those goods or services shall not be deemed to be consideration for a financial service as contemplated in this paragraph;
[Paragraph (k) substituted by section 13 of Act 136 of 1992 and section 82 of Act 53 of 1999 and amended by section 93 of Act 32 of 2004 and section 41 of Act 9 of 2006]
(l) ……….
[Paragraph (l) deleted by section 44 of Act 16 of 2004]
(m) ……….
[Paragraph (m) deleted by section 10 of Act 20 of 1994]
(n) ……….
[Paragraph (n) substituted by section 10 of Act 20 of 1994 and deleted by section 19 of Act 37 of 1996]
(o) the issue, acquisition, collection, buying or selling or transfer of ownership of any cryptocurrency:
[Paragraph (o) added by section 90(1)(a) of Act 23 of 2018 effective on 1 April, 2019]
Provided that the activities contemplated in paragraphs (a), (b), (c), (d), (f) and (o) shall not be deemed to be financial services to the extent that the consideration payable in respect thereof is any fee, commission, merchant’s discount or similar charge, excluding any discount cost.
[Subsection (1) amended by section 19(1)(g) of Act 37 of 1996, by section 87(1)(a) of Act 30 of 1998 and by section 90(1)(b) of Act 23 of 2018 effective on 1 April, 2019]
Section 1 (VAT) – Definitions
1. Definitions
(1) In this Act, unless the context otherwise indicates-
Subparagraph 2 of paragraph 43A of Eighth Schedule
(2) Subject to subparagraph (3), where a company holds shares in another company and disposes of any of those shares in terms of a transaction that is not a deferral transaction and that company held a qualifying interest in that other company at any time during the period of 18 months prior to that disposal, the amount of any exempt dividend received by or that accrued to that company in respect of the shares disposed of must-
(a) to the extent that the exempt dividend constitutes an extraordinary dividend; and
(b) if that company immediately before that disposal held the shares disposed of as a capital asset (as defined in section 41),
be taken into account as part of the proceeds from the disposal of those shares or, if those shares are treated as having been disposed of in terms of subparagraph (4), as a capital gain in respect of those shares, in the year of assessment in which those shares are disposed of or are treated as having been disposed of or, where that dividend is received or accrues after that year of assessment, the year of assessment in which that dividend is received or accrues: Provided that where a company disposes of shares that are treated as having been disposed of previously by that company in terms of subparagraph (4), the amount of any extraordinary dividend in respect of those shares must be included in the proceeds from that disposal only to the extent to which it has not previously been taken into account in respect of those shares in terms of this subparagraph .
[Subparagraph (2) amended by section 80(1)(e) of Act 23 of 2018 and substituted by section 62(1)(d) of Act 34 of 2019 deemed effective on 20 February, 2019 and applicable in respect of shares held by a company in a target company if the effective interest held by that company in the shares of that target company is reduced on or after that date]
(3) Where a company holds shares in another company and disposes of any of those shares in terms of a transaction that is not a deferral transaction within a period of 18 months after having acquired those shares in terms of a deferral transaction, other than an unbundling transaction and—
(a) within a period of 18 months prior to the disposal of those shares by that company an exempt dividend in respect of those shares accrued to or was received by a person that-
(i) disposed of those shares in terms of a deferral transaction; and
(ii) was a connected person in relation to that company at any time within that period or immediately after that disposal,
that dividend must for purposes of this paragraph be treated as a dividend that accrued to or was received by that company in respect of those shares within the period during which that company held those shares; and
(b) if that company acquired those shares (hereinafter referred to as ‘new shares’) in terms of that deferral transaction in return for or by virtue of the holding, by that company, of other shares (hereinafter referred to as ‘old shares) that were disposed of in terms of that deferral transaction and an exempt dividend in respect of the old shares, other than a dividend consisting of new shares, accrued to or was received by that company within a period of 18 months prior to the disposal of the new shares, that dividend must for purposes of this paragraph be treated as an amount that accrued to or was received by that company as an exempt dividend in respect of the new shares.
[Subparagraph (3) added by section 80(1)(f) of Act 23 of 2018 and amended by section 62(1)(e) of Act 34 of 2019]
(4) Where a company holds equity shares in another company (hereinafter referred to as the “target company”) and-
(a) the target company issues shares (hereinafter referred to as the “new shares”) to a person other than that company; and
(b) the effective interest of that company in the equity shares of the target company is reduced by reason of the new shares issued by the target company,
that company must for purposes of this paragraph be treated as having disposed, immediately after the new shares were issued, of a percentage of those equity shares that is equal to the percentage by which the effective interest of that company in the equity shares of the target company has been reduced by reason of the new shares issued by the target company: Provided that any new shares that are convertible to equity shares must for purposes of this subparagraph be treated as equity shares.
[Subparagraph (4) added by section 62(1)(f) of Act 34 of 2019 deemed effective on 20 February, 2019 and applicable in respect of shares held by a company in a target company if the effective interest held by that company in the shares of that target company is reduced on or after that date]
[Paragraph 43A inserted by section 112 of Act 24 of 2011, amended by section 118 of Act 22 of 2012 and substituted by section 72 of Act 17 of 2017 effective on 19 July 2017, applies in respect of any disposal on or after that date other than a disposal in terms of an agreement all the terms of which were finally agreed to before that date by all the parties to that agreement]
“Qualifying interest” definition of paragraph 43A of Eighth Schedule
‘qualifying interest’ means an interest held by a company in another company, whether alone or together with any connected persons in relation to that company, that constitutes-
(a) if that other company is not a listed company, at least-
(i) 50 per cent of the equity shares or voting rights in that other company; or
(ii) 20 per cent of the equity shares or voting rights in that other company if no other person (whether alone or together with any connected person in relation to that person) holds the majority of the equity shares or voting rights in that other company; or
(b) if that other company is a listed company, at least 10 per cent of the equity shares or voting rights in that other company.