Up and until the decision of the Supreme Court of Appeal (“SCA”) in the Capitec case the consensus view seemed to be that a bank/lender could not attribute any costs incurred for the purposes of making a loan, exclusively to the earning of fees, such as the initiation fee or the monthly service fee. This would be because the costs would be incurred with the intention of producing exempt interest and taxable fee income, thus requiring an apportionment to determine the extent to which any VAT incurred constitutes “input tax”, eligible for deduction.
Source Chris Eager
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