Page 66 - P6 Slide Taxation - Lecture Day 5 - VAT Part 1

Solution

The B & B business constitutes the provision of commercial accommodation. As

the annual receipts of the business exceed R120 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 15% (for

example three nights at R220 × 100% × 15% = R99 output tax), and

 guests staying more than 28 days at a time: only 60% of the charge is subject to

VAT at 15% (for example 30 nights at R220 × 60% × 15% = R594 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.