Page 76 - ADVANCED TAXATION - Day 1 Slides

Solution 76

The B & B business constitutes the provision of commercial accommodation.
As the annual receipts of the business exceed R60 000, Hein can register

voluntarily for VAT (still below the mandatory registration threshold of R1
million).

Should Hein decide to register, he will have to levy output tax on the supply of
the domestic goods and services (being a taxable supply) as follows:
 guests staying 28 days and less: 100% of the charge is subject to VAT at 14%

(for example three nights at R220 × 100% × 14% = R92,40 output tax), and
 guests staying more than 28 days at a time: only 60% of the charge is subject

to VAT at 14% (for example 30 nights at R220 × 60% × 14% = R554,40
output tax).
Hein will be entitled to an input tax deduction for VAT paid on the acquisition

of goods and services for the purposes of the B & B business. This is because
he is making taxable supplies.

Should Hein decide not to register for VAT purposes, he does not have to
account for output tax, but then he will not be entitled to any input tax
deductions.