Category: Value-Added Tax Act No. 89 of 1991

Section 24 (VAT) – Cancellation of registration

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24. Cancellation of registration

(1)     Subject to the provisions of subsection (2), every vendor shall cease to be liable to be registered where the Commissioner is satisfied that the total value of the vendor’s taxable supplies in the period of 12 months commencing at the beginning of any tax period of the vendor will be not more than the amount referred to in section 23(1) or (1A).

[Subsection (1) substituted by section 71(1) of Act 34 of 2019 deemed effective on 1 April, 2019]

(2)     Every vendor who wishes to have his registration cancelled in the circumstances contemplated in subsection (1), may request the Commissioner in writing to cancel his registration, and if the Commissioner is satisfied as contemplated in subsection (1), the Commissioner shall cancel the vendor’s registration with effect from the last day of the tax period during which the Commissioner was so satisfied, or from such other date as may be determined by the Commissioner, and shall notify the vendor of the date on which the cancellation of the registration takes effect.

(3)     Every vendor who ceases to carry on all enterprises shall notify the Commissioner of that fact within 21 days of the date of such cessation and the Commissioner shall cancel the registration of such vendor with effect from the last day of the tax period during which all such enterprises ceased, or from such other date as may be determined by the Commissioner.

[Subsection (3) amended by section 93 of Act 53 of 1999]

(4)     Any notification by a vendor in terms of subsection (3) shall be made in writing to the Commissioner and shall state the date upon which that vendor ceased to carry on all enterprises and whether or not that vendor intends to carry on any enterprise within 12 months from that date.

(5)     Where the Commissioner is satisfied that a vendor-

(a)     no longer complies with the requirements for registration as contemplated in section 23(1) and (3) ; or

(b)     has failed to furnish the Commissioner with a return reflecting such information as may be required for the purposes of the calculation of tax in terms of section 14 or 16,

the Commissioner may cancel such vendor’s registration with effect from the last day of the tax period during which the Commissioner is so satisfied, or from such other date as may be determined by the Commissioner: Provided that where such person lodges an objection against the Commissioner’s decision under this subsection the cancellation of that person’s registration shall not take effect until such time as the Commissioner’s decision becomes final and conclusive.

[Subsection (5) substituted by section 21 of Act 20 of 1994, section 93 of Act 53 of 1999 and section 179 of Act 31 of 2013 effective on 1 April 2014]

(6)    Where any person has been registered as a vendor in consequence of an application made by him under section 23(3) and subsequent to the registration of that person as a vendor it appears to the Commissioner that such person’s registration should be cancelled by reason of any of the circumstances referred to in section 23(7), the Commissioner may cancel such person’s registration with effect from a date determined by the Commissioner: Provided that where such person lodges an objection against the Commissioner’s decision under this subsection the cancellation of that person’s registration shall not take effect until such time as the Commissioner’s decision becomes final and conclusive.

(7)     The Commissioner shall give written notice to the person concerned of his decision to cancel such person’s registration in terms of this section or of his refusal to cancel such registration.

Section 23 (VAT) – Registration of persons making supplies in the course of enterprises

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23. Registration of persons making supplies in the course of enterprises

(1)     Every person who, on or after the commencement date, carries on any enterprise and is not registered, becomes liable to be registered-

(a)     at the end of any month where the total value of taxable supplies made by that person in the period of 12 months ending at the end of that month in the course of carrying on all enterprises has exceeded R1 million;

[Paragraph (a) amended by section 92 of Act 53 of 1999 and substituted by section 113 of Act 60 of 2008 effective on 1 March 2009]

(b)     at the commencement of any month where the total value of the taxable supplies in terms of a contractual obligation in writing to be made by that person in the period of 12 months reckoned from the commencement of the said month will exceed the above-mentioned amount:

[Paragraph (b) substituted by section 178 of Act 31 of 2013 effective on 1 April 2014]

Provided that the total value of the taxable supplies of the vendor within the period of 12 months referred to in paragraph (a) or the period of 12 months referred to in paragraph (b) shall not be deemed to have exceeded or be likely to exceed the amount contemplated in paragraph (a), where the Commissioner is satisfied that the said total value will exceed or is likely to exceed such amount solely as a consequence of-

[Words preceding item (i) substituted by section 24 of Act 4 of 2008]

(i)      any cessation of, or any substantial and permanent reduction in the size or scale of, any enterprise carried on by that person; or

(ii)     the replacement of any plant or other capital asset used in any enterprise carried on by that person; or

(iii)  abnormal circumstances of a temporary nature.

[Subsection (1) amended by section 92 of Act 53 of 1999]

(1A)  Every person who carries on any enterprise as contemplated in paragraph (b)(vi) or (vii) of the definition of “enterprise” in section 1 and is not registered becomes liable to be registered at the end of any month where the total value of taxable supplies made by that person has exceeded R1 million in any consecutive 12-month period: Provided that such person shall not be liable to register where the said total value of taxable supplies made by that person has exceeded R1 million in any consecutive 12-month period solely as a consequence of abnormal circumstances of a temporary nature.

[Subsection (1A) inserted by section 178(1)(b) of Act 31 of 2013 and substituted by section 11(1) of Act 21 of 2018 and by section 24 of Act 16 of 2022]

(2)     Every person who is not a resident of the Republic, and who in terms of subsection (1) or section 50A, becomes liable to be registered in accordance with Chapter 3 of the Tax Administration Act, shall be deemed not to have applied for registration, in addition to section 22(4) of the Tax Administration Act, until such person has-

(a)     appointed a representative vendor as contemplated in section 46 in the Republic and furnished the Commissioner with the particulars of such representative vendor;

(b)     opened a banking account with any bank, mutual bank or other similar institution, registered in terms of the Banks Act, 1990 (Act No. 94 of 1990), for the purposes of his or her enterprise carried on in the Republic and furnished the Commissioner with the particulars of such banking account.

[Subsection (2) substituted by section 37 of Act 27 of 1997, section 113 of Act 60 of 2008 and s, 271 of Act 28 of 2011 effective on 1 October 2012]

(2A)

(a)     Notwithstanding subsection (2), every person who is not a resident of the Republic and who in terms of subsection (1) or section 50A becomes liable to be registered in accordance with Chapter 3 of the Tax Administration Act, may be registered by the Commissioner as a branch of a registered vendor upon written application for a branch registration by that registered vendor: Provided that-

(i)      such resident vendor and a person who is not a resident forms part of the same “group of companies” as defined in section 1 of the Income Tax Act;

(ii)     where there is more than one holding company or subsidiary that is not a resident of the Republic, all those holding companies or subsidiaries may register under the same branch registration and will be deemed to constitute a single branch;

(iii)    the branch shall be treated as a separate person from the main registered vendor for the purposes of this Act;

(iv)    for the purposes of supplies made in the Republic between persons within the same branch registration, such supplies and acquisitions must be accounted for in that branch registration;

(v)     the Commissioner may effective on a date determined by the Commissioner, cancel the branch registration contemplated herein if-

(aa)   the main registered vendor has applied to the Commissioner in writing for such registration to be cancelled; or

(bb)   it appears to the Commissioner that the duties or obligations of such branch have not been satisfactorily performed or carried out,

and thereafter any activity carried on by such person who was part of the branch registration shall as from the said date, be deemed to be carried on separately by each person who is a non-resident;

(vi)    the Commissioner shall cancel the branch registration on the cancellation of the registration of the main registered vendor referred to herein and thereafter any activity carried on by such person that was part of the branch registration shall, as from the said date, be deemed to be carried on separately by each person who is a non-resident;

(vii)   where any person registered under such branch fails to do anything required to be done under this Act, the liability for the doing of that thing shall revert to the main registered vendor referred to herein;

(viii)   any decision or determination of the Commissioner made under section 15 or 27 in respect of the main registered vendor referred to herein shall, for the purposes of this Act, apply equally to the branch: Provided further that where a decision or determination is made by the Commissioner under section 27(2) which applies in respect of any such branch, this paragraph shall not be construed as preventing the Commissioner from making a separate decision or determination under section 27(4) in the circumstances contemplated in that subsection in respect of any other branch of the said main registered vendor; and

(ix)    notwithstanding the provisions of this section, any amount that is refundable under section 190 of the Tax Administration Act (including interest thereon) to the main registered vendor referred to herein or the branch may be set off against the outstanding tax debt of the main registered vendor referred to herein or the branch, as the case may be.

(b)     For the purposes of this Act, where a decision is made under this section, the main registered vendor and each person who is a non-resident falling under the branch registration shall be held jointly and severally liable for any tax due by such branch.

(c)     Where any person who is a non-resident elects and applies to register as a VAT vendor independently and not as part of the branch registration, the provisions of this section shall not apply to such person.

[Subsection (2A) added by section 32(1) of Act 20 of 2022 effective on 1 January, 2023]

(3)     Notwithstanding the provisions of subsections (1) and (2), every person who satisfies the Commissioner that, on or after the commencement date-

(a)     that person is a ‘municipality’ as defined in section 1 or is carrying on any enterprise as contemplated in paragraph (b)(ii), (iii) or (v) of the definition of ‘enterprise’ in section 1; or

[Paragraph (a) substituted by section 36 of Act 32 of 2005 and section 14 of Act 10 of 2006]

(b)     that person-

(i)      is carrying on any enterprise and the total value of taxable supplies made by that person in the course of carrying on all enterprises in the preceding period of 12 months has exceeded R50 000; or

(ii)     subject to the provisions of section 15(2B) and any regulation made by the Minister in terms of this Act, is carrying on any enterprise where the total value of taxable supplies made or to be made by that person has not exceeded R50 000 but can reasonably be expected to exceed that amount within 12 months from the date of registration,

other than any enterprise-

(AA)  as contemplated in paragraph (b)(ii) or (iii) of the definition of ‘enterprise’ in section 1; or

(BB)  that is a ‘municipality’ as defined in section 1;

 [Paragraph (b) substituted by section 14 of Act 10 of 2006, amended by section 93 of Act 17 of 2009 and substituted by section 178 of Act 31 of 2013 effective on 1 April 2014]

(c)     that person intends to carry on any enterprise from a specified date, where that enterprise will be supplied to him as a going concern and the total value of taxable supplies made by the supplier of the going concern from carrying on that enterprise or part of the enterprise which will be supplied has exceeded R50 000 in the preceding period of 12 months; or

[Paragraph (c) substituted by section 93 of Act 17 of 2009 effective on 1 March 2010]

(d)     that person is continuously and regularly carrying on an activity of a nature set out in any regulation made by the Minister in terms of this Act and in consequence of the nature of that activity is likely to make taxable supplies only after a period of time,

[Paragraph (d) substituted by section 93 of Act 17 of 2009 effective on 1 March 2010 and section 178 of Act 31 of 2013 effective on 1 April 2014]

may apply to the Commissioner in the approved form for registration.

[Words following paragraph (d) substituted by section 271 of Act 28 of 2011 effective on 1 October 20112]

[Subsection (3) substituted by section 92 of Act 53 of 1999]

(4)     Where any person has-

(a)     applied for registration in accordance with Chapter 3 of the Tax Administration Act or subsection (2) or (3) and the Commissioner is satisfied that that person is eligible to be registered in terms of this Act, that person shall be a vendor for the purposes of this Act with effect from such date as the Commissioner may determine; or

[Paragraph (a) substituted by section 271 of Act 28 of 2011 effective on 1 October 2012]

(b)     not applied for registration in terms of Chapter 3 of the Tax Administration Act and the Commissioner is satisfied that that person is liable to be registered in terms of this Act, that person shall be a vendor for the purposes of this Act with effect from the date on which that person first became liable to be registered in terms of this Act: Provided that the Commissioner may, having regard to the circumstances of the case, determine that person to be a vendor from such later date as the Commissioner may consider equitable:

[Paragraph (b) substituted by section 271 of Act 28 of 2011 effective on 1 October 2012]

Provided that where that person is a public entity listed in Schedule 1 or Part A or C of Schedule 3 to the Public Finance Management Act, 1999 (Act No. 1 of 1999), which was liable to be registered as a vendor for any supplies made on or before 31 March 2005, but did not register before 1 April 2005, the Commissioner must not register that person in respect of those supplies.

[Proviso inserted by section 9 of Act 10 of 2005]

(5)     Notwithstanding anything in this Act to the contrary, where any enterprise is carried on by any association not for gain in branches or divisions, or separate enterprises are carried on by that association, that association may apply in writing to the Commissioner for any such branch, division or separate enterprise to be deemed to be a separate person for the purposes of this section, and if every such branch, division or separate enterprise maintains an independent system of accounting and can be separately identified by reference to the nature of the activities carried on or the location of that branch, division or separate enterprise, every such branch, division or separate enterprise shall be deemed to be a separate person, and not a part of the association, and, where any such branch, division or separate enterprise is deemed to be a separate person under this subsection, any enterprise carried on by that branch or division or any separate enterprise carried on by the association shall, to that extent, be deemed not to be carried on by the association concerned.

(6)     The provisions of this Act relating to the determination of the value of any supply of goods or services, whether such supply is made before or on or after the commencement date, shall apply for the purposes of this section, but no regard shall be had to any tax charged in respect of any such supply: Provided that any supply of services contemplated in section 11(2) (n) shall for the purposes of this section be deemed not to be a taxable supply.

(7)     Where the Commissioner is satisfied that any person who has applied for registration in terms of subsection (3) is not eligible to be registered in terms of this Act or should not be registered by reason of the fact that such person-

(a)     has no fixed place of abode or business; or

(b)     does not keep proper accounting records relating to any enterprise carried on by him; or

(c)     has not opened a banking account with any bank, mutual bank or other similar institution for the purposes of any enterprise carried on by him; or

[Paragraph (c) substituted by section 20 of Act 20 of 1994]

(d)     has previously been registered as a vendor in respect of any enterprise, whether in terms of this Act or in terms of the Sales Tax Act, 1978 (Act No. 103 of 1978), but failed to perform his duties under either of the said Acts in relation to such enterprise,

the Commissioner may refuse to register the said person as a vendor in terms of this Act and shall give written notice to that person of such refusal.

Section 22 (VAT) – Irrecoverable debts

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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) 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 of Act 136 of 1992]

(3)     Subject to subsection (3), 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

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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) 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; or

[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]

 

(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

Posted on by admin_kmos

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

Posted on by admin_kmos

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

Posted on by admin_kmos

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

Posted on by admin_kmos

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

Posted on by admin_kmos

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]