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BUS100 2023 Topic 15 VAT Notes 6

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24 views

BUS100 2023 Topic 15 VAT Notes 6

Uploaded by

mathabathatekano
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
You are on page 1/ 11

Topic 15:

Value Added Tax


Notes Part 6
Roadmap for VAT

1. The basics
2. VAT levied (output tax)
3. Zero rated supplies
4. Exempt supplies
5. Inputs
6. Special rules & miscellaneous
Part 6 – Special rules & miscellaneous

1. Irrecoverable debts
 Debtors
 Creditors

2. VAT & the interaction with income tax


Irrecoverable debts
A debtor goes bad

If VENDOR accounted for OUTPUT tax in respect of a debtor

Taxable Supply
Debt
becomes
bad Entitled to INPUT tax deduction

Principle: Paid over an amount to SARS (output) on invoicing. Never received


consideration, therefore must be a correction (additional input).
Irrecoverable debts
A debtor recovers

Debt is partly
Debtor pays an amount or wholly
Debt was recovered
bad

Must raise deemed OUTPUT on


portion recovered

Principle: An amount owing, thought to be irrecoverable, is received. When it


went bad, claimed an input - now there’s a deemed output
Irrecoverable debts
Can’t pay a creditor
Vendor (invoice basis)

Output
•Deducted input tax on taxable supplies made to him
•Cannot pay the full consideration
•Within 12 months from the tax period where input claimed
•15/115 x unpaid consideration raised as output tax

Subsequently do pay creditor

Input
•Input tax may again be deducted
Irrecoverable debts - example
A shop (category C vendor) sells items with 6 months to pay policy,
where an amount is settled every month.
Sale in Jan 2023 at R1 150. R150 output paid to SARS in Jan VAT 201.
Payments of R191,67 received for Jan, Feb and March but debtor is
untraceable after that and debt is written off.

SOLUTION:
Remaining debt at the end of March = R1 150 - (191,67 x 3) = R575
Of this R75 relates to VAT (R575 x 15/115).
A R75 VAT input can be claimed to recover the R75 of the initial output
VAT that will not be paid back.
7
VAT & Income Tax

VAT affects income tax!!

100 + 15 = 115
Tax Input / TOTAL
calc Output paid
& AFS (consideration)
EXAMPLE 1 - VAT & Income Tax
EXPENSES
A taxpayer pays R230 for stationery.
Determine VAT and Income Tax effect.

Solution:

VAT: Claim input tax of R30 (R230 x 115/115)

Income Tax: Claim expense of R200 (R230 x 100/115)

Total claimed = R30 (VAT) + R200 (Income Tax) = R230


EXAMPLE 2 - VAT & Income Tax
INCOME
A taxpayer charges R460 for services rendered to clients.
Determine VAT and Income Tax effect.

Solution:

VAT: Raise output tax of R60 (R460 x 115/115)

Income Tax: Include income of R400 (R460 x 100/115)

Total taxes levied = R60 (VAT) + R400 (Income Tax) = R460


Consolidate

Work through in detail in Silke (INCLUDING all examples):

 Part 6:
 31.18 – 31.19

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