Dear fellow taxpayer,

This is my first time at the helm of the new Tax Bulletin. Hello to those of you who’ve not yet “met” me.

So let’s jump straight into some interesting Vat advice...

Don’t eat your Vat input tax!

Do you (or your company) run your own staff canteen? If you do, you’re acting as a principal. How you treat your Vat will depend of whether the prices you charge for food cover the costs of supplying meals and drinks (direct costs) AND the operating (indirect) costs of your canteen.

If the prices do cover both costs, your canteen is considered an entertainment supplier, and you must charge Vat at the standard rate for all food and drink. In these circumstances, you can claim input tax.

What’s included in direct costs?

The direct costs of running the canteen and supplying the food and drink include:

•    The raw materials
•    Ingredients
•    Salaries of canteen staff

What’s included in indirect costs?

•    Electricity
•    Water
•    Overheads
•    An appropriate portion of the cost of fridges, ovens and other equipment

No price means no input tax

If you don’t charge for the food, or your prices don’t cover costs (e.g. if you subsidise the canteen), your charges for the meal are deemed nil and you can’t deduct input tax.

In this case, you’re not considered as supplying entertainment.

When will SARS deny input tax?

SARS will deny an input tax credit for:

•    Food and other ingredients
•    Utensils
•    Furniture and fittings
•    Other expenses directly or indirectly related to the supply of entertainment by the canteen operation

With the appointment of Pravin Gordhan, ex-Commissioner of SARS, as the new Finance Minister I know my interest in Government affairs just increased!

Stay tax savvy,
Matsika Vengesa