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VAT: Input tax on motor cars
- 09 March 2023
- Accounting
- South African Accounting Academy
Whether input tax can be deducted on the acquisition of a motor car remains a recurring question that SARS receives. Interpretation Note 82 “Input Tax on Motor Cars” was published on 25 March 2015 to provide guidance on this matter.
There has been an influx of requests for the Commissioner to exercise a discretion to override the prohibition of input tax on the acquisition of a motor car in certain situations. The Commissioner does not have any discretion in this regard under the VAT Act. Generally, a vendor is not entitled to deduct input tax on the acquisition of a motor car, irrespective of the purpose for which the motor car is acquired. To determine whether input tax can be claimed, a vendor must first establish whether the vehicle is a “motor car” as defined.
Interpretation Note 82 sets out in detail how the test works for determining whether or not a vehicle is constructed mainly for the conveyance of passengers. The outcome of the test is a question of fact and where uncertainty exists, an objective test must be applied. (That is, to determine whether the vehicle is intended mainly (more than 50%) for the carriage of passengers.)
If the vehicle concerned qualifies as a “motor car” as defined, the input tax will be denied unless the vendor is a motor car dealer or car rental enterprise as provided in the exceptions in section 17(2)(c).
Vendors should therefore not request a ruling from the Commissioner to exercise a discretion in this regard to make exceptions based on the circumstances of the vendor, as the VAT Act does not confer any such discretion upon the Commissioner to deviate from the law.
Click here to download the Interpretation Note:
Relevance to Auditors, Independent Reviewers & Accountants:
- The Income Tax Act is yet another piece of legislation that your clients should consider, so that they are aware of their obligations when claiming input VAT on the acquisitions of motor cars.
- As an auditor, independent reviewer, accountant or tax practitioners you need to be aware of the latest notices issued/gazetted by SARS.
Relevance to Your clients:
- A taxpayer should be aware of the contents of the Income Tax Act, so that they are aware of their obligations when claiming input VAT on the acquisitions of motor cars.
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