TAX TIP - VAT RETURNS AND THE CLAIMING OF VAT ON SECOND HAND GOODS

Claiming Vat on second hand goods

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A lot of taxpayers registered for Vat do not claim Vat on second hand goods they buy, as they are not aware of the deemed input vat provisions in the Vat Act. If you are one of them, we hope that the following article will clarify the requirements and that you will claim the input Vat in your next Vat return.

In order to claim the input vat on second hand goods you purchase, ensure you meet the following requirements.

  • The goods you purchase should be second hand goods. Second hand goods are goods that have previously been owned and used. Goods are therefore normally assets and not trading stock, as trading stock has not previously been used.
  • The goods should be purchased from an individual or a company that is not registered for Vat. 
  • The seller must be a resident of South African
  • The goods must be situated in South Africa.
  • The goods purchased should be used to make taxable supplies. If a portion is used to make private supplies, the input vat must be apportioned.
  • You can only claim the input vat if you have paid for the goods (fixed property is an exception). If you have only paid for a portion of the goods, you can only claim a portion of the input vat.

Once you have established that you meet all the above requirements, complete a VAT264 form. You must keep this form for a period of five years from date of purchase. Where the seller is an individual, obtain a copy of his ID and make a copy for your records. In the case of a company obtain a copy of the companies letterhead and verify the companies registration number .

The input Vat is calculated by multiplying the tax fraction (14/114) with the lower of the open market value of the goods on date of purchase or the purchase price.

Source : Financials Intact