VAT

[Koos du Toit]

A few questions on VAT:
1. An individual earns income from different sources (ie hairdressing and selling baked goods), must all income be added together to determine if the individual should register for VAT ? What if neither one of these enterprises earn more than R 300 000 p.a, but together they exceed that limit ?
2. If an individual receives income for a service rendered and that fee consists of travelling expenses and service fee, should the travelling expenses be included in income when determining if the R 300 000 limit has been reached ?
3. Are royalties earned by authors / musicians subject to VAT ? And if so, how can they claim "input" VAT if the work was done years before the royalties are earned and before registration for VAT was needed ?
Hope someone can help !

[Dave A]

1. An individual earns income from different sources (ie hairdressing and selling baked goods), must all income be added together to determine if the individual should register for VAT ? What if neither one of these enterprises earn more than R 300 000 p.a, but together they exceed that limit ?

If they are the same legal entity, then the income from the various sources needs to be added up. For example, if each activity was owned by the same sole proprietor, the income of all those activities would have to be added up. This could be solved by placing each enterprise into a seperate cc, although you would have to take care not to fall foul of avoidance provisions. I'd think avoidance should only be a problem if you are breaking up a similar activity under different enterprises, though.

2. If an individual receives income for a service rendered and that fee consists of travelling expenses and service fee, should the travelling expenses be included in income when determining if the R 300 000 limit has been reached ?

"..that fee consists of travelling expenses and service fee.."
All fees are income/part of turnover.

3. Are royalties earned by authors / musicians subject to VAT ? And if so, how can they claim "input" VAT if the work was done years before the royalties are earned and before registration for VAT was needed ?

Not sure.

Ordinarily I'd say royalties would be deemed as income for VAT purposes, but I remember a dispute going to appeal about royalties paid by franchisees recently - SARS was claiming it wasn't a deductible expense in the hands of the franchisee for income tax purposes (and accordingly it would not be included as taxable income in the hands of the franchisor.) I never saw the result of that appeal...

Hopefully someone else can clear that one up.