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Time of Supply (s9) and Value of Supply (s10) - The provisions relating to the time and value of supply determine when a transaction has occurred for VAT purposes and the value of a transaction on which VAT must be calculated and subsequently accounted for in a particular tax period. General Rule Time ofSu I Invoice Basis :Earlier of • Date of invoice, or • The date the payment is received Payment Basis: When consideration is received A deposit (other than on a returnable container) is not considered a payment made for a supply unless and until the supplier applies the deposit as a consideration for the supply or the deposit is forfeited. Example a deposit paid to a lessor is not considered a payment for a su Value ofSu I • The amount of money if consideration is in money, or • The open market value of the consideration if the consideration is not mone.

Time and Value of Supply : connected persons "connected persons" as defined in section 1— (a) (b) (c) (d) (f) (g) any natural person (including the estate of a natural person if such person is deceased or insolvent) and— (0 any relative Of that natural person (being a relative as defined in section 1 of the Income Tax Act) or the estate Of any such relative if the relative iS deceased or insolvent or (ii) any trust fund in respect of which any such relative or such estate of such relative iS or may be a benencjary; or any trust fund and any person who is or may be a beneficiary in respect of that fund; or any partnership or close corporation and— (0 any member thereof; or (ii) any other person where that person and a member Of such partnership or close connected persons in terms Of this definition; or any company (other than a close corporation) and— (i) any person (Other than a company) where that person, his spouse or minor child or any trust fund in respect of which that person, his spouse or minor child is or may be a beneficiary, is separately interested or two or more of them are in the aggregate interested in 10 per cent or more of the company's paid-up capital or 10 per cent or more of the company's equity shares (as defined in section 1 of the Income Tax Act) or 10 per cent or more of the voting rights of the shareholders of the company, whether directly or indirectly; or (ii) any other company the shareholders in which are substantially the same persons as the shareholders in the first-mentioned company, or which iS controlled by the same persons who control the first-mentioned company; or (iii) any person where that person and the person referred to in subparaqraph (i) or his spouse or minor Child or the trust fund referred to in that subparagraph or the other company referred to in subparaqraph are connected persons in terms of this definition; or any separate enterprise, branch or division of a vendor which is separately registered as a vendor under the provisions of section 50 and any other such enterprise, or division of the vendor; or any branch, division or separate enterprise of an association not for gain which is deemed by subsection (5) of section 23 to be a separate person for the purposes Of that section and any other branch, division or separate enterprise Of that association, whether or not such other branch, division or separate enterprise iS a vendor, or any employer and the pension or provident fund of which most of his employees are members..

Time of Supply — Connected erson • If the goods supplied are to be removed — the time of supply occurs at the time the goods are removed. • If the goods supplied are not removed — the time ot supply occurs at the time the goods are made available to the recipient. • If services are supplied — the time of supply occurs at the time the services are performed. The general time of supply rules will apply when — • an invoice is issued or payment is received on or before the date that a return was submitted (overing the tax ßEriod in which the or services are deemed to be supplied as stated above), or the last day for submitting a return for that tax period; or the consideration cannot be determined at the time the supply iS deemed to be made to a connected person who is entitled to deduct input tax in full Value of Supply — Connected erson • The normal value Of supply rules also apply to connected persons. However, in the case of a supply made for no consideration, or for a consideration which is tElow the Open Market Value, or for a consideration which cannot determined at the time the supply is made, tne consideration tor tne supply is equal to the Open Market Value it the recipient would not have entitled to a full input tax** deduction on the goods or services acquired, had the Open Market Value cha edin res ectofthatsu I . ** The rule will also apply if the recipent can only claim a partial VAT input..

** The rule will also apply if the recipient can only claim a partial VAT input. - The reason for this special rule is that connected persons could try to limit the VAT cost and therefore manipulate the prices so that the VAT cost is decreased. - If the recipient is a vendor and allowed to claim the full input tax, no manipulation can take place, as the VAT paid by the one vendor is claimed back by the other vendor. Therefore no special value of supply rules is required when the recipient can claim the full input tax Example - Time of supply for connected persons Facts: Farmer A is a vendor registered under Category B. Farmer A rents a harvesting machine to a who is connected to Farmer A (that is, Farmer B), during the peak season from January to March. Farmer B collected the machine from Farmer A on 10 January 2022. Farmer A submits the return for February on 25 March 2022. Solution: If no payment was received, and no invoice was issued by 25 March 2022, the time of supply will be at the time that the goods were removed on 10 January 2022. Farmer A will, therefore, have to account for the supply in the February 2022 retum. If Farmer A issues an invoice for the rental on or before 25 March 2022, the normal time of supply rules apply, in which case, Farmer A will declare the VAT on the supply in the return ending April 2022..

Example - Value of supply for connected persons Connoted persow A vendor sells equipment for R138 000 (including VAT) to its wholly owned subsidiary, which is not a VAT vendor The open market value of the equipment on the date of sale is R230 000. Required: Calculate the VAT payable by the vendor Solution: The opn market value of R230 000 must be used since the recipient, a connected person is not entitled to claim the input tax. VAT payable: R230 000 X 151115 R30000 If the wholly owned subsidiary is a registered VAT vendor AND is entitled to claim the full input tax, the consideration for the supply would be R138 OOO and the output tax R18 000..

Time and Value of Supply : Rental agreements and Instalment Credit Agreement (ICA) Time ot Supply Value of Supply Rental agreements Instalment CreditA reement • any agreement entered into for the letting of payment will be made goods, other than a lease referred to in the definition credit agreement' Where the agreement provides for periodic payments, each period is a separate supply which is deemed to take place at the earlier of. • when payment is due or • when payment is actualJ Connected persons rule does not a Para ra h a -Sale - Goods are sold and in future. - Purchase price includes finance charges and total payments will exceed cash value of deemed to take place at the earlier of • the time the gocds are delivered, or • any payment of the consideration is received Para rah b -Lease - Goods are leased and payment of rent will be made in future. - Rentals includes finance charges. - Total payments plus residual value will exceed ash value. deemed to take place at the earlier of • the time the goods are delivered, or • any payment of the consideration is rkceived The full amount of VAT must be accounted for. Cash value of goods Cash value of goods excludes finance cha es excludes finance char es.

Value of Supply: Commercial Accommodation -SIO(IO) (Refer to definition provided in Lecture one) - Commercial accommodation excludes the letting or hiring of a dwelling which constitutes the place of residence of a natural person or the supply of employee housing, both of which are exempt supplies. - The supply of commercial accommodation is subject to VAT at the standard rate - Note well: Proviso to the "enterprise" definition states that a business cannot register as an enterprise for VAT if taxable supplies in the previous 12 months did not exceed R120 000. Value of supply • Where domestic goods and services are supplied at an all- inclusive charge for unbroken period exceeding 28 days, the consideration for the supply is deemed to be 60% of the all-inclusive charge. • The full amount charged is subject to VAT at the standard rate when a person stays for a period less than 28 days. • Any domestic goods and services WhiCh are charged separately and are not included in the all-inclusive tariff for the accommodation, are also taxed in full at the standard rate. Note well: - Qespüe.tDe.tactjna1 the occupant will only pay VAT on of the all-inclusive charge, the vendor is entitled to deduct the input tax as if the occupant is taxed on the full value. - The vendor still bills the occupant the full 100% of the price Of the accommodation and not only 60%..

Example : Commercial Accommodation Ms Belani owns a bed-and-breakfast establishment and a boarding house. During the two-month VAT period ending 30 June 2022, Ms Belani eamed the following amounts: Bed-and-breakfast establishment: Short term stay (less than 28 days) including VAT Boarding house: Board and lodging (all stay longer than 28 days) exduding VAT Required: R57 500 R70 000 Calculate the output tax for the VAT period ending 30 June 2022 Solution Bed-and-breakfast establishment R57 500 x 151115 Boarding house Output Tax R7 500 R6 300.

Value of Supply : Taxable supplies applied for private, or other non.taxable supplies - s10(7) - Where goods or services are acquired by a vendor wholly or partly for the purpose of making taxable supplies the vendor is entitled to an input tax deduction. - If such goods and services are subsequently used for private or non- qualifying purposes or to make exempt supplies, such use is treated as a taxable supply made by the vendor and output tax is payable thereon. Value of supply: The consideration of such supplies is the open market value..

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