Page 37 - F6 Slide - VAT Part 3 - Lecture Day 5

Solution

Because the vendor has purchased second-hand fixed property from a South
African resident, deemed input tax may be claimed for the house.

The deemed input tax credit is calculated as follows:Tax fraction × lesser of

consideration paid or market value = 14/114 × R350 000 = 42 982

Although the full consideration for the supply was paid on 20 March 2014, the

actual registrationof the house in the name of Venter and Naidoo CC only

occurred on 15 April 2014 and the full deemed input tax may be claimed only

after registration – in the tax period covering April 2014.

If it is assumed that only 80% of the house will be used by Venter and Naidoo

CC for taxable purposes, the calculation for the allowable input VAT would have

been as follows: R350 000 × 14/114 × 80% = R34 385,96

If the house was purchased by a natural person who is registered on the

payments basis, the input tax will be claimable to the extent that payment has

been made for the consideration. Let us assume that the natural person is going

to use 80% of the house for taxable purposes, and that only R300 000 of the

consideration has been paid on 20 March 2014. The input tax will then be as

follows:14/114 × R350 000 × 80% × R300 000/R350 000 = R29 473,68