This reference guide provides information and guidelines regarding the value-added tax (VAT)
treatment of foreign donor funded projects (FDFPs). This guide does not deal with all the legal
detail associated with VAT and is not intended for legal reference. For more details on VAT in
general, see the VAT 404 – Guide for Vendors (VAT 404).
All references to sections are to sections of the Value-Added Tax Act 89 of 1991 (VAT Act),
unless the context indicates otherwise. The Tax Administration Act 28 of 2011 and the Income
Tax Act 58 of 1962 are referred to as the “TA Act” and the “Income Tax Act” respectively.
The terms “Republic” and “South Africa” are used interchangeably in this document as a
reference to the sovereign territory of the Republic of South Africa, as set out in the definition
of “Republic” in section 1(1). The information in this guide is based on the VAT Act and the
TA Act as at the time of publishing, including the Taxation Laws Amendment Act 34 of 2019
and the Tax Administration Laws Amendment Act 33 of 2019.
Contents
Preface……………………………………………………………………………………………………………….i
1. Background……………………………………………………………………………………………..1
PART I – INTRODUCTION TO A FOREIGN DONOR FUNDED PROJECT …………..2
2. Legislative history and development………………………………………………………….2
3. Introduction to a foreign donor funded project…………………………………………….3
3.1 What is a foreign donor funded project?……………………………………………………………… 3
3.2 Official Development Assistance Agreement………………………………………………………… 4
3.3 Implementing agency……………………………………………………………………………………. 5
PART II – VALUE-ADDED TAX REGISTRATION ……………………………………………….7
4. Enterprise………………………………………………………………………………………………..7
5. Registration……………………………………………………………………………………………..8
5.1 Eligibility of a foreign donor funded project to register for VAT …………………………………… 8
5.2 Where and how must the implementing agency register?…………………………………………. 9
5.3 What documents must be submitted with an application?…………………………………………10
6. Accounting basis……………………………………………………………………………………11
PART III – VALUE-ADDED TAX TREATMENT OF FOREIGN DONOR FUNDED
PROJECT TRANSACTIONS…………………………………………………………………………….12
7. Output tax………………………………………………………………………………………………12
7.1 Calculation of output tax ………………………………………………………………………………..12
7.1.1 Deemed supplies…………………………………………………………………………………………13
7.2 Value of supply and consideration…………………………………………………………………….15
7.3 Time of supply…………………………………………………………………………………………….16
8. Input tax and other deductions…………………………………………………………………16
8.1 What will qualify as input tax or a deduction?……………………………………………………….16
8.2 Documentary requirements…………………………………………………………………………….17
8.3 How is a deduction made?……………………………………………………………………………..18
8.4 Period in which a deduction should be made………………………………………………………..18
PART IV – DOCUMENTATION AND RECORD-KEEPING…………………………………19
9. Tax invoices…………………………………………………………………………………………..19
9.1 Introduction………………………………………………………………………………………………..19
9.2 What are the requirements for tax invoices? ………………………………………………………..19
10. Record-keeping………………………………………………………………………………………20
PART V – COMPREHENSIVE EXAMPLES……………………………………………………….22
Structure 1: Basic foreign donor funded project structure……………………………………. 22
Structure 2: Multiple implementing agencies for one project………………………………… 23
Source: gov.za
