This blog explains the three key scenarios in Notional Input Tax calculations and highlights the role of SARS (South African Revenue Service) and the Vendor Refund Agency (VRA).

What is Notional Input Tax?

Notional Input Tax applies to second-hand goods to determine VAT adjustments between the claimant and the vendor. The calculation compares the VAT amounts paid by both parties and determines if the claimant is eligible for a refund.

Categories of Notional Input Tax Calculations

1. Notional (Refund Payable to Claimant):
   In this scenario, the VAT paid by the claimant exceeds the VAT paid by the vendor. The difference between the two is refunded to the claimant.

   Example:

   • VAT paid by the claimant: R15,000.00
   • VAT paid by the vendor: R10,000.00
   • Refund to claimant: R15,000.00 – R10,000.00 = R5,000.00
2. Greater (Net VAT Loss):
   If the VAT paid by the claimant is less than the VAT paid by the vendor, the difference represents a net VAT loss. No refund is issued in this case.

   Example:

   • VAT paid by the claimant: R10,000.00
   • VAT paid by the vendor: R15,000.00
   • Refund: None (Net VAT loss of -R5,000.00)
3. Set Equal (No Refund):
   When the VAT amounts paid by both the claimant and the vendor are equal, no refund is issued as there is no discrepancy in the amounts.

   Example:

   • VAT paid by the claimant: R15,000.00
   • VAT paid by the vendor: R15,000.00
   • Refund: None (Net difference of R0.00)

The Role of SARS and the VAT264 Form

To streamline the VAT adjustment process for second-hand goods, SARS collaborates with the vendor to determine the applicable VAT amounts. This involves issuing a VAT264 form, which documents the necessary details for the calculation.

Important Notes for Claimants

• The VAT Refund Agency (VRA) cannot guarantee refunds of VAT amounts paid by the claimant.
• Refunds are strictly determined based on the calculations outlined above, as verified by SARS.
• To ensure compliance and clarity, it’s essential to maintain accurate records of VAT transactions and consult with a tax professional if needed.

Understanding the intricacies of VAT on second-hand goods can help claimants navigate the refund process effectively. Always stay informed about SARS regulations to avoid surprises and ensure your claims are processed correctly.

For further assistance, consult our support team:
Email: info@vatrefundagency.co.za OR support@vatrefundagency.co.za
Call: +27 10 025 6371