VAT on Car hire for a Tour Operator

[colind]

We are a tour operator, hire cars for clients and charge VAT on the sale.

As we pay VAT on the sale we reclaim the VAT on the purchase.

SARS now telling us we are not allowed to recalim VAT on car hire, I believe they are misunderstanding the rules, Ik understand if it was for our personal transport it would not be reclaimable but its nit it is part of a VAT able sale.

How do I agrue our case ?

[Andromeda]

Input tax on the supply of the car rental is denied in terms section 17(2)(c) of the Value-Added Tax Act. Can you explain why you think otherwise?

[colind]

VAT ON CAR HIRE

Input tax on the supply of the car rental is denied in terms section 17(2)(c) of the Value-Added Tax Act. Can you explain why you think otherwise?

Because it is part of our business, we charge VAT on the sale, so should be able to claim relief on the expense. Exactly the same way as the car hire companies are allowed to reclaim the VAT one the purchase of the cars.

[Andromeda]

Hi Colin, 17(2)(c)(i) gives the hire company an exemption, because hiring out of vehicles is what they do, like Avis and Budget. In your claim, you are their client and are merely passing the rental on to your client.

I think there is actually a Practice Note about your scenario, but I can't find it.

If you are successful with this against SARS, please post it here.

[colind]

Hi Colin, 17(2)(c)(i) gives the hire company an exemption, because hiring out of vehicles is what they do, like Avis and Budget. In your claim, you are their client and are merely passing the rental on to your client.

I think there is actually a Practice Note about your scenario, but I can't find it.

If you are successful with this against SARS, please post it here.

Many thanks will do.

We have been reclaiming for the past 10 years, our SARS office has misunderstood,not being able to claim back car hire' applies to car rental personal or for employees.

With the power of Google I found the rule on the car purchase, which applies to the hire car companies, I just need as you say to find the Practice Note and in this case Google is not my friend.

I will inded post it when I have found it.

[OOSAR]

Good day,

You are referring to interpretation notes which can be downloaded from the SARS website.

IN 42 dealing with tour operators;
IN 82 dealing with motor cars.

The matter raised can be resolved through the SARS objection phase subject to the time limits.


Kind regards

[dellatjie]

@colind, did you manage to object and convince SARS to reduce the assessment?

[colind]

Finally yes.

We charge vat on the sale so were allowed to reclaim vat on the purchase.

It is part of our business.