When can Input VAT be claimed?

Before you can claim any VAT back at all, your business needs to be registered as a VAT Vendor with SARS.  All VAT vendors need to pay over to SARS the total of all the Output VAT they have received by invoicing customers, less whatever Input VAT they have paid themselves on goods and services bought by them.

The question is when are you able to claim the Input VAT you’ve paid and when are you not allowed to claim it?

The most important requirement is that you need to be in possession of a valid tax invoice from your supplier.  A tax invoice is valid under the following circumstances:

• The word “Tax Invoice” must be clearly indicated on the invoice
• It must state the names, addresses and VAT numbers of both the supplier company and the customer or client it is issued to
• The invoice number have a unique, sequenced number and a date
• It must describe the goods or services provided and state the quantity and cost per  unit
• It must state a total value for the goods or services provided
• The amount of VAT needs to be clearly stated and whether it is included in the total or not.  If included, but not shown separately, the applicable rate needs to be indicated, eg 14%.

If the total of the tax invoice is less than R3 000, an abridged invoice is acceptable. In this case, it’s not necessary to include the customer’s VAT number or the break-down of quantities of goods supplied.

In certain situations, even if you are in possession of a valid tax invoice, by law you are not allowed to claim the VAT.  An example is when your company buys a passenger vehicle, ie a vehicle with four doors that’s able to transport passengers.

Another situation is when the expense you incur is for providing entertainment.  This could be in the form of food or drinks for employees, or for lunch, biscuits, tea, coffee and milk for the office. It could also be for buying food and drinks for an event to entertain clients. When incurring expenses for an event, part of the expense could be deductible as marketing but any food or drink would be entertainment and the VAT will be non-deductible.

If your business does claim Input VAT when it’s not entitled to do so, you are committing an offence.  So it’s important to be well aware of all the requirements pertaining to VAT.  In fact, to ensure your VAT compliance, it makes good sense to employ the services of a professional in dealing with VAT returns.