https://youtu.be/jg5UNWG8-ww

s16(3)(h) of the VAT Act is an important section that is often tested. It can easily be incorporated into your first UNISA CTA test.

If a VAT vendor carries on a business that is partly taxable and partly exempt, input tax is limited to the percentage of taxable supplies.

EXAMPLE: A registered VAT vendor makes 80% taxable supplies and 20% exempt supplies. If the vendor acquires goods that is used by the whole of the business, the vendor will only be able to claim 80% of the input tax.

However, when a taxpayer supplies goods (such as through a sale), output tax must be calculated at 100% per s8(16). This can then result in a situation where less than 100% of the input tax was claimed but output tax must be raised on 100% of the consideration charged.

s16(3)(h) remedies the situation by providing additonal input tax that is calculated on the lower of

• cost (including VAT) or
• the open market value of the goods at the time of the supply.

REMEMBER: The term “open market value” is discussed in s3 of the VAT Act and it means that it is the market value including VAT.

Good luck with your first UNISA CTA test!

Roulon du Toit CA (SA) is a founder of CA Campus and lectures taxation.

CA Campus provides UNISA CTA support classes both online and face-to-face. Our online lectures and tutorials are available for the entire year so you can always catch up to classes that you have missed.

For more information on our programme, visit the following page: www.cacampus.co.za/programme-fees/