South Africa issues binding rulings about input tax deduction on the acquisition of second-hand fixed property

When second-hand fixed property is supplied by a person that is not a VAT vendor,
transfer duty will usually be payable on that transaction, subject to any exemptions or
exceptions that may apply under the Transfer Duty Act. Transfer duty is only applicable
if the supply of fixed property is not a taxable supply under the VAT Act.

If the person acquiring the fixed property is a registered VAT vendor and is using that
property for taxable purposes in an enterprise, that vendor will, in principle (and subject
to certain requirements), be entitled to a notional input tax deduction. The deduction is
made under section 16(3)(a)(iiA) if the vendor is registered on the invoice basis of
accounting or section 16(3)(b)(i) if the vendor is registered on the payments (or cash)
basis of accounting.

The issue that arises in this regard is whether the transfer duty on the transaction is
included in the meaning of the term “consideration” as defined in section 1(1) of the
VAT Act, for the purposes of claiming a notional input tax deduction.

Source: Binding General Ruling 57

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