Managing VAT Apportionment for Mixed Supplies in South Africa: Compliance and Best Practices

• Vendors making both taxable and exempt supplies must apportion input VAT according to section 17(1) of the VAT Act.
• Input VAT can only be claimed for goods or services used for taxable supplies.
• If goods or services are used 90 percent or more for taxable supplies, they are considered fully for taxable purposes.
• The standard apportionment method uses a formula involving taxable supplies and total input VAT on mixed costs.
• This method excludes capital goods and non-supply income and must be applied consistently and reviewed annually.
• Vendors can apply for alternative methods if the standard method is unfair, using criteria like floor space or headcount.
• Direct input tax should be separated for taxable or exempt supplies.
• The formula should be applied to shared or general overhead costs.
• Comprehensive records of the apportionment method must be kept for potential audits.
• The apportionment ratio should be reviewed annually or with significant business changes.
• Incorrect apportionment can lead to penalties or disallowance of input tax.

Source: pkf.co.za

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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