Page 21 - F6 Slide - VAT Part 3 - Lecture Day 5

Solution

Because the vendor has purchased a second-hand

bicycle from a person not registered for VAT

purposes, a deemed input tax credit can be claimed

for the second-hand bicycle. The deemed input tax

credit is based on the lower of the consideration paid

(R630) or open-market value (R780).

R

The deemed input tax is calculated as follows:

Tax fraction × consideration paid

14/114 × R630 = 77