# General Business Category > Business Finance Forum > [Question] VAT returns

## AmithS

Hi Everyone,

Quick Question on VAT.  I am in the process of registering for VAT but already incuring VAT expenses.

Can i claim back the VAT for these expenses when the VAT registration comes through even thought the registration date for VAT will be after the actual incured expenses.

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## Dave A

In your first return you can claim input VAT for your stocks and (VAT allowable) assets that are already on the company's books.

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## eitai2001

If I remember correctly, you can back date the actual registration date for the VAT, and you can claim all VAT from the date you wish to register for VAT on the actual reg forms.

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## AmithS

What can a company claim VAT back for as input VAT.

Rental of business premesis ?
Bank Fees ?
labour broker fees ?
Insurance fees ?

I am really lost around this area of VAT claims.

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## Dave A

I was going to say: "As long as you get a tax invoice, all of the above  :Big Grin: " But that isn't quite true. 

For example banks don't send a tax invoice; they indicate VAT included charges on their bank statement - and with insurance VAT is covered in the contract, but once again I don't get a monthly tax invoice. Despite this they're claimable, though.  :Confused:

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## sgafc

> What can a company claim VAT back for as input VAT.
> 
> Rental of business premesis ?
> Bank Fees ?
> labour broker fees ?
> Insurance fees ?
> 
> I am really lost around this area of VAT claims.


All of the above. Just ensure that you do receive an invoice for labour broker fees, and that the broker is registered for Vat.If not, you cannot claim.

You however can claim vat input expenses, below R200.00 without an invoice. SARS allows you to get away with it. If however your R200 claims amount to more than R1000.00, SARS will insist on invoices on all the amounts.

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## eitai2001

Also you must remember ... VAT can only be claimable on something that is directly attributable to the earning of income. So Insurance you can argue is in the earning of income because you are protecting your trading stock, computer equipment, etc ... same applies to say security. However, if you had to buy a coffee machine, you couldn't claim VAT on that because it is not a all attributable to earning income.

Another more confusing example ... I was told by my lecturers, that Edcon for example, have to apportion their VAT claims on IT equipment to directly attributable to income. For example ... it could be argued that 80% of a till point is used in the production of income, but 20% of it is admin ... therefore you can only claim 80% VAT.

This will not be looked at in small companies, but in the big multi billions, it will. VAT can get VERY confusing.

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## Dave A

> However, if you had to buy a coffee machine, you couldn't claim VAT on that because it is not a all attributable to earning income.


That depends who the coffee machine is for, surely. If it is for staff use, no claim. But for customers... my understanding is you can claim the VAT portion of entertainment expenses actually spent on your clients.

When it comes to entertainment the bill generally includes the cost of the sales rep, so we don't bother trying to split out and claim VAT on the clients' portion of the bill. But in theory you can. Please correct me if I'm mistaken because who knows, one day it might seem worth it after all (or somebody else reading this might get the wrong idea).

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## eitai2001

> That depends who the coffee machine is for, surely. If it is for staff use, no claim. But for customers... my understanding is you can claim the VAT portion of entertainment expenses actually spent on your clients.
> 
> When it comes to entertainment the bill generally includes the cost of the sales rep, so we don't bother trying to split out and claim VAT on the clients' portion of the bill. But in theory you can. Please correct me if I'm mistaken because who knows, one day it might seem worth it after all (or somebody else reading this might get the wrong idea).


I'm not 100% sure what you say in terms of VAT, but you are not allowed to claim entertainment expenses, even on clients unless the salesperson's remuneration is > 50% commission. I have been out of tax for nearly a year though, so you may correct me if I'm wrong ... but I think I am remembering correctly.

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## AmithS

Wow guys and gals, thanks for all the usefull information i really appreciate it.

So how do you claim VAT on e.g. insurance etc... where you dont get an invoice as such ?

Thanks in advance

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## Dave A

> So how do you claim VAT on e.g. insurance etc... where you dont get an invoice as such ?


Just have the insurance contract available. (My auditors check it every year to make sure  :Wink:  ). In terms of amount (if your financial software doesn't work it out for you automatically), take the premium you pay, multiply by 14 and divide by 114 to get the VAT portion.

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## eitai2001

And then your total VAT claim / payment at the end of the day is your VAT Output (The VAT on your invoices which you owe SARS) - VAT Input (The VAT you claim on expenses and other invoices).

In theory, if you are making a profit, you should have more output than input ... but not always the case ... if you buy a lot of stock in month x, then you may have more VAT Input than what you sold (VAT Output) ... confusing enough  :Wink:   :Drunk:

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## AmithS

Hi Everyone,

Thanks for all the usefull tips i really appreciate them.

With regards to the income tax for the year i.e. 28% tax, for your income and expenditure do you exclude or include VAT from the figures for this calcultation ?

Thanks in advance

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## eitai2001

If you are VAT registered, you exclude the VAT.

By the way ... if you are a small company (If I remember correctly < 5mil turnover), registered as a CC, and the members have no other businesses, you could qualify for Small Business Corporation ... saves you a lot in tax ... you should check it out.

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## sgafc

For Income Tax returns(IT14) for your CC/Coy a Vat recon always have to be performed. ie reconciling the input and output items for Vat, to the Income and Expenses/Assets to be declared on tax return. SARS love to audit these. And expect another assessment for under declared VAT. 

*Vat is never included in income and expense figures. A decent accounting package will do this, and link it to the annual recon.*

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## eitai2001

> For Income Tax returns(IT14) for your CC/Coy a Vat recon always have to be performed. ie reconciling the input and output items for Vat, to the Income and Expenses/Assets to be declared on tax return. SARS love to audit these. And expect another assessment for under declared VAT. 
> 
> *Vat is never included in income and expense figures. A decent accounting package will do this, and link it to the annual recon.*


Agreed ... VAT is a balance sheet item as it is either a liability or an asset ... never an expense or income.

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## AmithS

Can VAT be claimed back on Rental Deposits and Electricity Deposits and can this be deducted as an business expense?

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## eitai2001

> Can VAT be claimed back on Rental Deposits and Electricity Deposits and can this be deducted as an business expense?


No, because it is a deposit which is an asset and should be loaded into your balance sheet. (Unless they charge VAT on the deposit which they shouldn't). Either way though ... it is classified as an asset not expense.

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Dave A (22-Oct-09)

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## sterne.law@gmail.com

Quite correct, no VAT on entertainment. As to the coffee machine and computers - all of these are expenses in order to generate income and the VAT is claimable. The concept of only direct expenses in producing a revenue is not quite correct, that is input tax for generating an item for sale. the exceptions would be let say traffic fines or obvious fronting, such as claiming taht your Harley Davidson is a delivery bike and therefore VAT can be claimed. A computer, coffee machine are all genuine expenses used to generate income, indirectly. If the EDCON chaps suggestion that IT costs are split for VAT purposes then so should electricity, rent and in fact every expense. This would be impossible and uncontrollable from the governments point of view. they probably split and apportion cost for different cost centres. Eg a business running different cost centres for incentives and bonuses might divide the rent up between 3 departments etc. in summary all VAT paid is claimable. As with any accounting cost if it is not a genuine expense or perhaps outlay is a better word, then it cannot go through the books anyway. One final pointer, fringe benefits are supposed to be VAT items.

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## Dave A

> One final pointer, fringe benefits are supposed to be VAT items.


As in the company must charge output VAT to the employee for the fringe benefit?

I'd be interested to see a practical example of how that is calculated and applied in the books.

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## mazia

And just to make your your day.Please note the following.

An invoice above R1000(subject to correction) need to show your vat number on  the supplier and therefore i do not believe that you can claim this vat before having a vat number.

You SARS Vat Office would be the best people to talk to if you need clarity.

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## VirtuallyAssist

I do this every month - you just enter it into your cashbook with the appropriate amount of VAT. (The actual amount is deducted from the bank account via a debit order each month). If there is ever an audit - we have the insurance policy on file, showing the monthly deduction.

Sandra

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