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South Africa

services rendered by welfare organisations, to the extent that the services are funded by national or local government;

certain services funded by government grants;

services funded by international donor funds;

vocational training of employees of nonresident employers;

housing subsidies; certain warranty services; municipal property rates;

supply of goods by an inbound duty- and tax-free shop; and

supply of goods in a licensed Customs and Excise storage warehouse, if the goods have not been entered for home consumption (if approval has been obtained to zero-rate instead of exempt the supply).

milk powder, dairy powder blend, eggs and edible legumes;

  • illuminating paraffin (kerosene) used for illuminating or heating;

  • movable goods (excluding a motor car) sold to a registered vendor in a Customs Controlled Area (in an Industrial Development Zone), if the goods are physically delivered to the recipient by the supplier or his VAT-registered cartage contractor;

  • goods supplied by a vendor to a person who is a nonresident and non-vendor, but delivered to a vendor-recipient who will use the goods wholly for taxable supplies;

  • international transport of passengers or goods – outside, to or from South Africa;

  • local leg of international carriage by aircraft;

local leg of international transport of goods;

services relating to land and improvements outside South Africa;

certain services relating to goods outside South Africa, foreign-going ships or aircraft, goods temporarily admitted, goods exported or a foreign-operated railway train;

services rendered elsewhere than in South Africa or to a registered vendor in a Customs Controlled Area;

services supplied to a nonresident, if not directly in connection with movable or immovable property in South Africa (with certain exceptions);

the granting of, and other services relating to, intellectual property rights, to the extent that the rights will be used outside South Africa;

Input tax

Input tax allowed

Input VAT incurred on goods or services acquired for the purpose of consumption, use or supply in the course of making taxable supplies (including zero-rated supplies) is generally deductible as input tax, provided all documentary requirements are met and the deduction is made in time (generally speaking within five years). VAT incurred in the making of exempt (without credit) supplies cannot be deducted as input tax.

Input tax expressly denied

The deduction of VAT incurred is expressly denied as input tax in the following circumstances:

  • to the extent that goods or services are acquired for purposes of entertainment (i.e. the provision of food, beverages, accommodation, entertainment, amusement, recreation or hospitality), except where –

    • a vendor carries on an

entertainment business;

    • the entertainment expenses are incurred for personal subsistence for business purposes (subject to requirements);

    • a meal or refreshment forms part of a taxable transport service;

    • food and drinks are included in the fee for a seminar;

    • the entertainment is supplied by a municipality in providing sports or recreational facilities or amenities to the public;

    • a welfare organisation incurs entertainment expenses;

    • entertainment is provided to an employee at a medical care facility;

    • a meal or refreshment is supplied to a crew member of a ship or vessel; or

    • entertainment is provided as a prize in a competition if the entry fees were subject to VAT;

  • motorcars, except if acquired by a motor dealer or rental firm for resale or rental purposes or as demonstrators, or where the motorcar is awarded as a prize (conditions apply); and

  • membership fees with regard to sports, social or recreational activities.

PricewaterhouseCoopers 135

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