Disallowable VAT Claims Part 2
LAST week we looked at the general rules you should bear in mind when determining the amount of VAT that can be claimed from the Receiver of Revenue. You should remember that if you are Namibian resident and you are not VAT registered, you cannot claim any VAT from the Receiver of Revenue.The Receiver will only register you for VAT if you carry on some form of business and you sell goods or supply services to clients.Individuals not carrying on business can therefore not register for VAT and the VAT paid when buying goods or services cannot be claimed back from the Receiver of Revenue.Non-resident individuals can claim VAT from the Receiver of Revenue even if they are not registered for VAT in Namibia provided they take the goods purchased in Namibia on which they have paid VAT with them when they leave Namibia.This provision of the Value-Added Tax Act makes perfect sense because the goods will not be used or consumed in Namibia and therefore the VAT paid on the goods can be given back to purchaser.This rule of course does not apply to services that are consumed by a non-resident in Namibia because a service acquired by a non-resident in Namibia (for example staying in a hotel) cannot be taken with that person when they leave Namibia.The Value-Added Tax Act contains very specific provisions dealing with VAT paid that cannot be claimed irrespective of the fact that the individual or business is registered for VAT in section 19 of the Act.In this article we look specifically at the rules you should remember about vehicles.Generally, VAT cannot be claimed when a passenger vehicle is acquired even if it is acquired for purposes of the registered person’s business.A good example of this is where a lawyer acquires a sedan car to visit clients for consultation purposes.The car is used by the lawyer to generate income in the ordinary course of carrying on the legal business.There are some exceptions to this general rule.The VAT paid to acquire a passenger vehicle can be claimed if you are a car dealer, rent vehicles to clients, or are in the tour operating business and the car is acquired for purposes of the business.In addition to these exceptions, any short-term insurer who acquires a passenger vehicle to indemnify a client, can also claim the VAT paid when the vehicle is purchased.A passenger vehicle is defined in the VAT Act as a motor vehicle that is principally designed or adapted for the transport of nine or fewer seated persons including the driver.Note that the definition specifically refers to the purpose for which the vehicle is designed or adapted and not the purpose for which the vehicle is used.Therefore, when deciding on whether the VAT paid when acquiring a vehicle can be claimed from the Receiver of Revenue you need to look at the purpose for which the vehicle was made and not what the vehicle is used for.If it was designed or adapted to transport nine or fewer people (for example a station wagon or micro bus) then the VAT payable when buying it cannot be claimed even if you transport fifteen people in the vehicle.The definition of a passenger vehicle specifically includes all double cab vehicles.Therefore, if a farmer acquires a double cab vehicle for purposes of his farming enterprise, no VAT can be claimed from the Receiver of Revenue because the double cab is a passenger vehicle as defined.In contrast to this, if the farmer acquires a single cab vehicle (more commonly referred to as a bakkie) the VAT paid to acquire the vehicle can be claimed from Revenue.Based on the definition of a passenger vehicle, if a registered person buys an eight-seat microbus to transport employees from home to their place of work, the VAT cannot be claimed from the Receiver of Revenue.If the same person buys a ten-seat microbus for the same purpose, the VAT can be claimed because a ten-seat vehicle is not included in the definition of a passenger vehicle.The VAT paid when buying any ambulance or motor cycle with a purchase price that is less than N$110 750 excluding VAT can be claimed by a VAT registered person because these vehicles are not passenger vehicles as defined.The VAT paid by any charitable organisation as defined in the VAT Act, children’s home, old age home or orphanage when buying a passenger vehicle as defined can be claimed provided that when the same vehicle is sold, the organisation must charge VAT on the selling price of the vehicle.Although this specific rule makes sense, it does complicate the rules that these type of organisations should bear in mind because all their other supplies (goods or services) are taxed at the zero rate of tax in terms of Schedule III to the VAT Act.One wonders why the legislator has drafted such complex rules to follow.Most of these organisations cannot afford a professional consultant and the staff they employ to attend to their administration cannot be expected to know all the complexities of the VAT Act.Next week we look at the some other specific rules regarding VAT claims.In this series of articles, Cameron Kotze, the Tax Partner at Ernst and Young, discusses some topical tax issues for our readers.Should readers have queries, they are invited to send them to cameron.kotze@za.ey.com.You should remember that if you are Namibian resident and you are not VAT registered, you cannot claim any VAT from the Receiver of Revenue.The Receiver will only register you for VAT if you carry on some form of business and you sell goods or supply services to clients. Individuals not carrying on business can therefore not register for VAT and the VAT paid when buying goods or services cannot be claimed back from the Receiver of Revenue.Non-resident individuals can claim VAT from the Receiver of Revenue even if they are not registered for VAT in Namibia provided they take the goods purchased in Namibia on which they have paid VAT with them when they leave Namibia. This provision of the Value-Added Tax Act makes perfect sense because the goods will not be used or consumed in Namibia and therefore the VAT paid on the goods can be given back to purchaser. This rule of course does not apply to services that are consumed by a non-resident in Namibia because a service acquired by a non-resident in Namibia (for example staying in a hotel) cannot be taken with that person when they leave Namibia.The Value-Added Tax Act contains very specific provisions dealing with VAT paid that cannot be claimed irrespective of the fact that the individual or business is registered for VAT in section 19 of the Act. In this article we look specifically at the rules you should remember about vehicles.Generally, VAT cannot be claimed when a passenger vehicle is acquired even if it is acquired for purposes of the registered person’s business. A good example of this is where a lawyer acquires a sedan car to visit clients for consultation purposes. The car is used by the lawyer to generate income in the ordinary course of carrying on the legal business. There are some exceptions to this general rule. The VAT paid to acquire a passenger vehicle can be claimed if you are a car dealer, rent vehicles to clients, or are in the tour operating business and the car is acquired for purposes of the business. In addition to these exceptions, any short-term insurer who acquires a passenger vehicle to indemnify a client, can also claim the VAT paid when the vehicle is purchased.A passenger vehicle is defined in the VAT Act as a motor vehicle that is principally designed or adapted for the transport of nine or fewer seated persons including the driver. Note that the definition specifically refers to the purpose for which the vehicle is designed or adapted and not the purpose for which the vehicle is used. Therefore, when deciding on whether the VAT paid when acquiring a vehicle can be claimed from the Receiver of Revenue you need to look at the purpose for which the vehicle was made and not what the vehicle is used for. If it was designed or adapted to transport nine or fewer people (for example a station wagon or micro bus) then the VAT payable when buying it cannot be claimed eve
n if you transport fifteen people in the vehicle.The definition of a passenger vehicle specifically includes all double cab vehicles. Therefore, if a farmer acquires a double cab vehicle for purposes of his farming enterprise, no VAT can be claimed from the Receiver of Revenue because the double cab is a passenger vehicle as defined. In contrast to this, if the farmer acquires a single cab vehicle (more commonly referred to as a bakkie) the VAT paid to acquire the vehicle can be claimed from Revenue.Based on the definition of a passenger vehicle, if a registered person buys an eight-seat microbus to transport employees from home to their place of work, the VAT cannot be claimed from the Receiver of Revenue. If the same person buys a ten-seat microbus for the same purpose, the VAT can be claimed because a ten-seat vehicle is not included in the definition of a passenger vehicle.The VAT paid when buying any ambulance or motor cycle with a purchase price that is less than N$110 750 excluding VAT can be claimed by a VAT registered person because these vehicles are not passenger vehicles as defined.The VAT paid by any charitable organisation as defined in the VAT Act, children’s home, old age home or orphanage when buying a passenger vehicle as defined can be claimed provided that when the same vehicle is sold, the organisation must charge VAT on the selling price of the vehicle. Although this specific rule makes sense, it does complicate the rules that these type of organisations should bear in mind because all their other supplies (goods or services) are taxed at the zero rate of tax in terms of Schedule III to the VAT Act. One wonders why the legislator has drafted such complex rules to follow. Most of these organisations cannot afford a professional consultant and the staff they employ to attend to their administration cannot be expected to know all the complexities of the VAT Act.Next week we look at the some other specific rules regarding VAT claims. In this series of articles, Cameron Kotze, the Tax Partner at Ernst and Young, discusses some topical tax issues for our readers. Should readers have queries, they are invited to send them to cameron.kotze@za.ey.com.
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