Page 108 - P6 Slide Taxation - Lecture Day 5 - VAT Part 1

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 = 15/115 × R350 000 = 42 982

Although the full consideration for the supply was paid on 20 March 2018, the

actual registrationof the house in the name of Venter and Naidoo CC only occurred
on 15 April 2018 and the full deemed input tax may be claimed only after

registration – in the tax period covering April 2018.

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 × 15/115 × 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 2018. The input tax will then be as follows:15/115 × R350 000 ×
80% × R300 000/R350 000 = R29 473,68