16. Calculation of tax payable
(1) The tax payable by a vendor shall be calculated by him in accordance with the provisions of this section in respect of each tax period during which he has carried on an enterprise in respect of which he is registered or is required to be registered in terms of section 23: Provided that the Commissioner may authorise a vendor to calculate the tax payable in accordance with a method which the Minister may prescribe by regulation.
[Subsection (1) amended by section 91 of Act 30 of 1998]
(2) No deduction of input tax in respect of a supply of goods or services, the importation of any goods into the Republic or any other deduction shall be made in terms of this Act, unless-
[Words preceding paragraph (a) substituted by section 137 of Act 24 of 2011 with effect from 10 January 2012]
(a) a tax invoice or debit note or credit note in relation to that supply has been provided in accordance with section 20 or 21 and is held by the vendor making that deduction at the time that any return in respect of that supply is furnished;
[Paragraph (a) substituted by section 156 of Act 60 of 2001 and amended by section 172 of Act 45 of 2003]
(b)
(i) a document as is acceptable to the Commissioner has been issued in terms of section 20(6); or
(ii) a document issued by the supplier in compliance with section 20(7) or 21(5); or
[Paragraph (b) substituted by section 29 of Act 8 of 2010 effective on 2 November 2010]
(c) records are maintained as required by section 20(8) or 20(8A) where the supply is a supply of second-hand goods or a supply of goods as contemplated in section 8(10) and in either case is a supply to which that section relates; or
[Paragraph (c) substituted by section 26(1)(b) of Act 44 of 2014 and by section 29(1)(a) of Act 20 of 2022 deemed effective on 1 April, 2022]
(d) a bill of entry or other document prescribed in terms of the Customs and Excise Act together with the receipt for the payment of the tax in relation to the said importation have been delivered (including by means of an electronic delivery mechanism) in accordance with that Act and are held by the vendor making that deduction, at the time that any return in respect of that importation is furnished; or
[Paragraph (d) inserted by section 21 of Act 136 of 1992, substituted by section 87 of Act 53 of 1999, amended by section 156 of Act 60 of 2001 and substituted by section 25 of Act 44 of 2014 effective on 1 April 2015]
(dA) a bill of entry or other document prescribed in terms of the Customs and Excise Act as contemplated in section 54(2A) is held by the agent, and a statement as contemplated in section 54(3)(b) is held by the vendor at the time that any return in respect of that importation is furnished; or
[Paragraph (dA) inserted by section 25 of Act 44 of 2014 effective on 1 April 2015]
(e) a tax invoice or debit or credit note has been provided as contemplated in section 54(2), and a statement as contemplated in section 54(3)(a) is held by the vendor at the time a return in respect of the supply to the vendor is furnished;
[Paragraph (e) added by section 156 of Act 60 of 2001, amended by section 172 of Act 45 of 2003, substituted by section 30 of Act 36 of 2007 and amended by section 25 of Act 23 of 2015 effective on 1 April 2016]
(f) the vendor, in the case where an amount is deducted from the sum of the amounts of output tax which are attributable to that period in terms of subsection (3)(c), (d), (dA), (e), (f), (g), (h), (i), (j), (k), (l), (m), (n) or (o), is in possession of documentary proof, as is prescribed by the Commissioner, substantiating the vendor’s entitlement to the deduction at the time a return in respect of the deduction is furnished; or
[Paragraph (f) added by section 30(c) of Act 36 of 2007 and substituted by section 173(1)(a) of Act 31 of 2013, by section 25(1) of Act 23 of 2015, by section 26(1)(a) of Act 16 of 2016 and by section 29(1)(b) of Act 20 of 2022 deemed effective on 1 April, 2022]
(g)
(i) a ruling requested no later than two months prior to the expiry of the five-year period referred to in subsection (3) and issued in terms of section 41B of this Act or Chapter 7 of the Tax Administration Act confirms that the document in the vendor’s possession is acceptable for the purpose of making a deduction; and
(ii) the ruling and document are held by the vendor at the time a return in respect of the deduction is furnished: Provided that the Commissioner may only issue a ruling in terms of this paragraph if satisfied that-
(aa) the vendor has taken reasonable steps to obtain a document required in terms of paragraph (a), (b), (c), (d), (dA), (e) or (f) and is unable to obtain such a document due to circumstances beyond the vendor’s control; and
(bb) no other provision of this Act can be applied to satisfy the Commissioner that the document in the vendor’s possession is acceptable for purposes of making a deduction:
[Paragraph (g) added by section 25 of Act 23 of 2015 and substituted by section 26 of Act 16 of 2016 effective on 19 January 2017, applies in respect of tax periods commencing on or after that date]
Provided that where a tax invoice or debit note or credit note in relation to that supply has been provided in accordance with this Act, or a bill of entry or other document has been delivered (including by means of an electronic delivery mechanism) in accordance with the Customs and Excise Act, as the case may be, the Commissioner may determine that no deduction for input tax in relation to that supply or importation shall be made unless that tax invoice or debit note or credit note or that bill of entry or other document is retained in accordance with the provisions of section 55 and Part A of Chapter 4 of the Tax Administration Act.
[Proviso to subsection (2) substituted by section 271 of Act 28 of 2011 and section 25 of Act 44 of 2014 effective on 1 April 2015]
[Subsection (2) amended by section 21 of Act 136 of 1992, section 91 of Act 30 of 1998, section 107 of Act 31 of 2005, section 83 of Act 20 of 2006 and section 30 of Act 36 of 2007]
(3) Subject to the provisions of subsection (2) of this section and the provisions of sections 15 and 17, the amount of tax payable in respect of a tax period shall be calculated by deducting from the sum of the amounts of output tax of the vendor which are attributable to that period, as determined under subsection (4), and the amounts (if any) received by the vendor during that period by way of refunds of tax charged under section 7(1)(b) and (c) and 7(3)(a), the following amounts, namely-
(a) in the case of a vendor who is in terms of section 15 required to account for tax payable on an invoice basis, the amounts of input tax-
(i) in respect of supplies of goods and services (not being supplies of second-hand goods to which paragraph (b) of the definition of “input tax” in section 1 applies and supplies referred to in subparagraph (iiA)) made to the vendor during that tax period;
[Subparagraph (i) substituted by section 23 of Act 37 of 1996]
(ii)
(aa) subject to the provisions of item (bb), in respect of supplies of second-hand goods to which paragraph (b) of the definition of “input tax” in section 1 applies to the extent that payment of any consideration which has the effect of reducing or discharging any obligation (whether an existing obligation or an obligation which will arise in the future) relating to the purchase price for those supplies has been made during that tax period;
[Item (aa) substituted by section 137 of Act 24 of 2011 with effect from 10 January 2012]
(bb) in respect of supplies of second-hand goods to which paragraph (b) of the definition of “input tax” in section 1 applies which consist of-
(A) fixed property in respect of which the provisions of section 9(3)(d) apply if transfer of that fixed property was effected by registration in a deeds registry and the fixed property was registered in the name of the vendor that makes the deduction during that tax period;
[Subitem (A) substituted by section 137 of Act 24 of 2011 with effect from 10 January 2012]
(B) a share in a share block company which confers a right to or an interest in the use of immovable property if a signed use agreement has been entered into between the company that operates the share block scheme and a member of that company;
[Subitem (B) substituted by section 137 of Act 24 of 2011 with effect from 10 January 2012]
[Words following subitem (B) deleted by section 137 of Act 24 of 2011 with effect from 10 January 2012]
[Subparagraph (ii) substituted by section 30 of Act 97 of 1993 and section 16 of Act 20 of 1994, amended by section 23 of Act 37 of 1996 and substituted by section 32 of Act 27 of 1997]
(iiA) in respect of taxable supplies made to the vendor under sales concluded on or after 6 June 1996 in respect of which the provisions of section 9(3)(d) apply (other than supplies in respect of which the provisions of section 10 (4) apply), to the extent that payment of any consideration which has the effect of reducing or discharging any obligation (whether an existing obligation or an obligation which will arise in the future) relating to the purchase price for those supplies has been made during that tax period;
[Subparagraph (iiA) inserted by section 23 of Act 37 of 1996 and substituted by section 32 of Act 27 of 1997]
(iii) charged in terms of section 7(1)(b) in respect of goods imported into the Republic by the vendor and released in terms of the Customs and Excise Act during that tax period;
[Subparagraph (iii) substituted by section 173 of Act 31 of 2013 and section 98 of Act 43 of 2014 effective on 1 April 2015]
(iv) charged in terms of section 7(3)(a) in respect of goods subject to excise duty or environmental levy as contemplated in that section and paid during that tax period;
[Subparagraph (iv) substituted by section 83 of Act 8 of 2007 and section 173 of Act 31 of 2013 effective on 1 April 2014]
(v) calculated in accordance with section 21(2)(b) or 21 (7) or section 22(1), 22(1A) or 22(4), as applicable to the vendor:
[Subparagraph (v) substituted by section 30 of Act 136 of 1991, section 23 of Act 37 of 1996 and section 32 of Act 27 of 1997]
Provided that this paragraph does not apply where a vendor acquires goods or services that are to be awarded as a prize or winnings and in respect of which that vendor qualifies or will qualify for a deduction in terms of paragraph (d).
[Proviso added by section 107 of Act 31 of 2005]
(b) in the case of a vendor who is in terms of section 15 required to account for tax payable on a payments basis, the amounts of input tax-
(i) in respect of supplies of goods and services made to the vendor in respect of which the provisions of section 9 (1), (3) (a), (b) or (d) or (4) apply, to the extent that payments of any consideration which has the effect of reducing or discharging any obligation (whether an existing obligation or an obligation which will arise in the future) relating to the purchase price for those supplies have been made during that tax period;
[Proviso to subparagraph (i) deleted by section 148 of Act 22 of 2012 effective on 10 January 2012]
shall be deducted only after such transfer duty or stamp duty, as the case may be, has been paid;
[Subparagraph (i) substituted by section 30 of Act 97 of 1993 and by section 16 of Act 20 of 1994 and amended by section 23 of Act 37 of 1996]
(ii) charged in terms of section 7(1)(b) in respect of goods imported into the Republic by the vendor and released in terms of the Customs and Excise Act or in terms of section 7(3)(a) in respect of goods subject to excise duty or environmental levy as contemplated in that section and paid by the vendor during that tax period;
[Subparagraph (ii) substituted by section 83 of Act 8 of 2007 and section 98 of Act 43 of 2014 effective on 1 April 2015]
(iii) in respect of supplies of goods and services made to the vendor during the tax period, excluding supplies of goods and services to which subparagraph (i) of this paragraph applies;
(iv) calculated in accordance with section 21(2)(b) or 21 (7), as applicable to the vendor, to the extent that payments in respect of the tax so calculated have been made during the tax period;
(v) calculated in accordance with section 22(1), as applicable to the vendor:
[Subparagraph (v) substituted by section 30 of Act 136 of 1991]
Provided that this paragraph does not apply where a vendor acquires goods or services that are to be awarded as a prize or winnings and in respect of which that vendor qualifies or will qualify for a deduction in terms of paragraph (d).
[Proviso added by section 107 of Act 31 of 2005]
(c) an amount equal to the tax fraction of any payment made during the tax period by the vendor to indemnify another person in terms of any contract of insurance: Provided that this paragraph-
(i) shall only apply where the supply of that contract of insurance is a taxable supply or where the supply of that contract of insurance would have been a taxable supply if the time of performance of that supply had been on or after the commencement date;
(ii) shall not apply where that payment is in respect of the supply of goods or services to the vendor or the importation of any goods by the vendor;
(iii) shall not apply where the supply of that contract of insurance is a supply charged with tax at the rate of zero per cent under section 11 and that other person is, at the time that that payment is made, not a vendor and not a resident of the Republic;
(iv) shall not apply where that payment results from a supply of goods or services to that other person where those goods are situated outside the Republic or those services are physically performed elsewhere than in the Republic at the time of that supply;
[Subparagraph (iv) substituted by section 16 of Act 20 of 1994]
(d) an amount equal to the tax fraction of any amount paid during the tax period by the supplier of the services contemplated in section 8(13) as a prize or winnings to the recipient of such services: Provided that where the prize or winnings awarded constitutes either goods or services, the deduction must be limited to the input tax on the initial cost of acquiring those goods or services;
[Paragraph (d) substituted by section 107 of Act 31 of 2005 and section 83 of Act 20 of 2006]
(dA) an amount equal to the tax fraction of any amount paid by the supplier of the services as contemplated in section 8(13) to the National Lottery Distribution Trust Fund, established by section 21 of the Lotteries Act, 1997 (Act No. 57 of 1997);
[Paragraph (dA) inserted by section 87 of Act 53 of 1999]
(e) an amount equal to the tax fraction of any amount of tax on totalizator transactions or tax on betting levied and paid for the benefit of any Provincial Revenue Fund by the supplier of the services contemplated in section 8 (13);
(f) the amounts calculated in accordance with section 18(4) or (5) in relation to any goods or services applied during the tax period as contemplated in that section;
(g) any amount of input tax in relation to any supply in respect of which subsection (2) of this section has operated to deny a deduction and the vendor has obtained, during the tax period, the prescribed documents or records in relation to that supply;
[Paragraph (g) substituted by section 30 of Act 36 of 2007]
(h) in the case of a vendor who has supplied goods or services during that tax period otherwise than in terms of section 18(2), an amount determined in accordance with the formula-
A × B × C
in which formula-
“A” represents the tax fraction;
“B” represents the lesser of-
(i)
(aa) the adjusted cost (including any tax forming part of such adjusted cost) to the vendor of the acquisition, manufacture, assembly, construction or production of those goods or services: Provided that where the goods or services were acquired under a supply in respect of which the consideration in money was in terms of section 10 (4) deemed to be the open market value of the supply, the adjusted cost of those goods or services shall be deemed to include such open market value to the extent that it exceeds the consideration in money for that supply; or
[Item. (aa) substituted by section 30 of Act 97 of 1993 and section 172 of Act 45 of 2003]
(bb) where the vendor was at some time after the acquisition of such goods or services deemed under section 18(4) to have been supplied with such goods or services, the amount which was represented by “B” in the formula contemplated in section 18(4) when such goods or services were deemed to be supplied to the vendor; or
(cc) where the vendor was at some time after the acquisition of such goods or services required to make an adjustment contemplated in section 18 (2) or (5), the amounts then represented by “A” in the formula contemplated in section 10(9) or “B” in the formula contemplated in section 18 (5) respectively, in the most recent adjustment made in terms of section 18(2) or (5) by the vendor prior to such supply of goods or services; and
(ii) the open market value of the supply of those goods or services at the time those goods or services are deemed to be supplied; and
“C” represents the percentage that, immediately before the time of the supply, the use or application of the goods or services for the purpose other than that of making taxable supplies was of the total use or application of the goods or services:
[Definition of “C” amended by section 21 of Act 136 of 1992]
Provided that-
(i) ……….
[Paragraph (i) of the proviso deleted by section 148 of Act 22 of 2012 effective on 10 January 2012]
(ii) this subsection does not apply where-
(aa) such goods or services were acquired before 1 April 2005, or an input tax deduction in respect of that acquisition was denied under proviso (iv) to section 18(4); and
(bb) the vendor is a public authority which registered prior to 1 April 2005, notwithstanding paragraph (b)(i) of ‘enterprise’ in section 1 or a public entity listed in Part A or C of Schedule 3 to the Public Finance Management Act, 1999 (Act No. 1 of 1999); or
[Subparagraph (ii) amended by section 47 of Act 9 of 2006]
(iii) this subsection does not apply where such goods or services were acquired by a municipality before 1 July 2006, or an input tax deduction in respect of that acquisition was denied in terms of paragraph (v) of the proviso to section 18(4);
[Subparagraph (iii) added by section 47 of Act 9 of 2006]
[Proviso substituted by section 107 of Act 31 of 2005]
[Paragraph (h) amended by section 16 of Act 20 of 1994 and section 91 of Act 30 of 1998]
(i) an amount equal to the tax fraction of any payment made by the vendor during the tax period in respect of the redemption with him, or his agent, of the monetary value of any token, voucher or stamp contemplated in section 10(20), to a supplier of goods or services who has granted a discount on the surrender to him of such token, voucher or stamp by a recipient of a supply of goods or services if those goods or services are not charged with tax at the rate of zero per cent under section 11;
[Paragraph (i) inserted by section 16 of Act 20 of 1994 and substituted by section 137 of Act 24 of 2011 with effect from 10 January 2012]
(j)
(i) in the case of a vendor who has, during the tax period, supplied a property in possession in the course or furtherance of his enterprise under a sale, an amount equal to the tax fraction of the lesser of-
(aa) the amount (excluding any amount of tax) received in respect of the sale of such property in possession less any amount paid by the vendor in respect of the acquisition of such property in possession; and
(bb) the amount of the unrecovered loan balance less any amount paid by the vendor in respect of the acquisition of such property in possession:
Provided that no deduction shall be made in terms of this paragraph where the person in default is or will be held liable for payment of such lesser amount;
(ii) for the purposes of this paragraph-
(aa) “property in possession” means fixed property acquired by any vendor-
(A) at a sale in execution as a result of default by any person (other than a person who held or applied such fixed property for the purpose of making taxable supplies in the course or furtherance of his enterprise immediately before such sale in execution) in respect of an unrecovered loan balance due to that vendor in terms of a credit agreement; or
(B) as a result of an abandonment authorised by the Master of the High Court where such person has defaulted in respect of an unrecovered loan balance due to that vendor in terms of a credit agreement or gone insolvent;
(bb) “unrecovered loan balance” means the amount of capital, interest and administrative holding costs outstanding in terms of a credit agreement at the date of sale in execution or the date of authorisation of abandonment by the Master of the High Court;
[Paragraph (j) inserted by section 32 of Act 27 of 1997]
(k) an amount of input tax as determined by the Commissioner paid by a vendor to a supplier of pastoral, agricultural or other farming products who is not a vendor, in terms of a scheme operated by the controlling body of an industry for the development of small-scale farmers approved by the Minister with the concurrence of the Cabinet member responsible for agriculture to compensate that supplier for tax incurred in the production of such goods:
[Paragraph (k) added by section 71 of Act 19 of 2001 and substituted by section 83 of Act 17 of 2017 effective on 18 December 2017]
(l) an amount as determined by the Commissioner in lieu of a refund in respect of the purchase and use of diesel paid by a vendor to a supplier of pastoral, agricultural or other farming products who is not a vendor, in terms of a scheme operated by the controlling body of an industry for the development of small- scale farmers approved by the Minister with the concurrence of the Cabinet member responsible for agriculture to compensate that supplier for an amount refundable in the production of such goods;
[Paragraph (l) added by section 156 of Act 60 of 2001 and substituted by section 173 of Act 31 of 2013 effective on 1 April 2014]
(m) an amount equal to the tax fraction initially applied to any excess amount contemplated in section 8(27) which is refunded by the vendor during the tax period:
(n) an amount equal to the tax fraction of the lesser of the amount contemplated in section 10(25) or the open market value of the movable goods on the date-
(i) those goods are returned to the customs controlled area enterprise or SEZ operator; or
[Subparagraph (i) substituted by section 26 of Act 16 of 2016 effective on the date on which the Special Economic Zones Act, 2014 (Act No. 16 of 2014), came into operation, 9 February 2016]
(ii) those goods are supplied by the customs controlled area enterprise or SEZ operator where those goods are supplied after the relevant prescribed time period contemplated in section 8(24);
[Subparagraph (ii) substituted by section 26(1)(c) of Act 16 of 2016 and amended by section 53(1) of Act 20 of 2021 effective on 1 April, 2022]
[Paragraph (n) inserted by section 111 of Act 60 of 2008]
(o) an amount equal to the tax fraction of the amount determined in accordance with the provisions of section 10(29):
[Paragraph (o) inserted by section 53(1) of Act 20 of 2021 and substituted by section 29(1)(c) of Act 20 of 2022 deemed effective on 1 April, 2022]
Provided that –
(i) where any vendor is entitled under the preceding provisions of this subsection to deduct any amount in respect of any tax period from the said sum, the vendor may deduct that amount from the amount of output tax attributable to a later tax period which ends no later than five years after the end of the tax period during which –
(aa) the tax invoice for that supply should have been issued as contemplated in section 20(1);
(bb) goods were entered for home consumption in terms of the Customs and Excise Act;
(cc) second-hand goods were acquired or goods as contemplated in section 8(10) were repossessed or surrendered;
[Subparagraph (cc) substituted by section 173 of Act 31 of 2013 effective on 1 April 2014]
(dd) the agent should have notified the principal as contemplated in section 54(3); or
(ee) in any other case, the vendor for the first time became entitled to such deduction, notwithstanding the documentary proof that the vendor must be in possession of in terms of subsection (2) of this section; and
(ii) the said period of five years contemplated in proviso (i) of this section shall be limited to six months prior to the tax period in which the deduction is made, where the Commissioner is satisfied that the deduction was not permissible in accordance with the practice generally prevailing,
and to the extent that it has not previously been deducted by the vendor under this subsection:
[First proviso substituted by section 106 of Act 35 of 2007]
Provided further that the amount of input tax which, in relation to any supply of goods or services to a vendor, the vendor may deduct in respect of any payment referred to in paragraph (a) (ii) or (b) (i) of this subsection, shall be an amount which bears to the full amount of the input tax relating to that supply the same ratio as the amount of the payment bears to the full value on which tax was payable in respect of the supply.
[Subsection (3) amended by section 71 of Act 19 of 2001, section 107 of Act 31 of 2005 and section 83 of Act 20 of 2006]
(4) For the purposes of subsection (3), output tax in relation to a supply made by a vendor shall be attributable to a tax period-
(a) in the case of a vendor who is in terms of section 15 required to account for tax payable on an invoice basis-
(i) subject to the provisions of subparagraph (ii), where a supply is made or is deemed to be made by him during that tax period;
(ii) where a supply is made under a sale concluded on or after 6 June 1996 in respect of which the provisions of section 9(3)(d) apply (other than a supply in respect of which the provisions of section 10(4) apply), to the extent that payment of any consideration which has the effect of reducing or discharging any obligation (whether an existing obligation or an obligation which will arise in the future) relating to the purchase price for that supply has been made during that tax period; or
[Subparagraph (ii) substituted by section 32 of Act 27 of 1997]
[Paragraph (a) substituted by section 23 of Act 37 of 1996]
(b) in the case of a vendor who is in terms of section 15 required to account for tax payable on a payments basis-
(i) to the extent that payment of any consideration which has the effect of reducing or discharging any obligation (whether an existing obligation or an obligation which will arise in the future) relating to the purchase price has been received by the vendor during that tax period for any supply of goods or services in respect of which the provisions of section 9(1), (3) (a), (b) or (d) or (4) or 21 (2) (a) or (6) apply (other than a supply in respect of which the provisions of section 10(4) apply);
[Subparagraph (i) substituted by section 30 of Act 97 of 1993, section 16 of Act 20 of 1994, section 23 of Act 37 of 1996 and section 87 of Act 53 of 1999]
(ii) where a supply of goods or services is made or deemed to be made during the tax period by that vendor, not being a supply of goods or services to which subparagraph (i) of this paragraph applies.
(5) If, in relation to any tax period of any vendor, the aggregate of the amounts that may be deducted under subsection (3) from the sum referred to in that subsection, the amount (if any) refundable to the vendor under section 15(8), and any other amount refundable under Chapter 13 of the Tax Administration Act, exceeds the said sum, the amount of the excess shall, subject to the provisions of this Act, be refundable to the vendor by the Commissioner as provided in Chapter 13 of the Tax Administration Act.
[Subsection (5) substituted by section 271 of Act 28 of 2011 effective on 1 October 2012 except to the extent related to interest under section 39 in respect of which the wording prior to the amendment applies]