DEEMED SUPPLIES
Output Tax
OVERVIEW
The definition of the term ‘supply’ as referred to in section 7(1)(a) of the
VAT Act is extremely broad and thus leaves some room for interpretation.
In order to limit the need for interpretation and provide further clarity,
there are a number of deeming provisions that have been included in the
VAT Act that have the effect of scoping certain transactions in and out of
s7(1)(a). It does this by deeming certain transactions to be supplies of
goods and services that are deemed to be made and not made for VAT
purposes.
The effect of this is that they will now have VAT Consequences – the
vendor will be liable for Output Tax.
, 1. PAYMENTS EXCEEDING CONSIDERATION
The VAT Act contains specific provisions that outlines the VAT
consequences of an overpayment received by a vendor for a standard-
rated taxable supply of goods or services, provided the overpaid amount
has not been refunded within a certain period.
SUPPLY
💣 vendor receives an amount > consideration charged for a taxable
supply of g/s made by them
When an excess consideration is
- received by a vendor and
- has not been refunded within 4 months of the receipt thereof,
It is deemed to be an amount received in respect of the supply of
services.
The vendor is liable for output tax in respect of this deemed supply
accordingly.
TIME OF SUPPLY
The time of the supply is the last day of the tax period during which the
four month period ends.
VALUE OF SUPPLY
Given that the term ‘consideration’ as defined in section 1 of the
VAT Act is reflective of an amount that includes VAT, the output tax
that is payable in respect of an excess consideration is calculated
as outlined below:
Excess consideration: Total
consideration received –
Price charged (including
VAT) MOCK ANSWERS
Output Tax: Excess
1. Output tax Consideration
should not have been recognised on the excess consideration that was received in
x 15/115
the February VAT period as it will only constitute to deemed supply for VAT purposes on 30 July
if it had not yet refunded by then (i.e. There is no supply/the time of supply has not yet taken
place in February but rather on 30 June)
2
Output Tax
OVERVIEW
The definition of the term ‘supply’ as referred to in section 7(1)(a) of the
VAT Act is extremely broad and thus leaves some room for interpretation.
In order to limit the need for interpretation and provide further clarity,
there are a number of deeming provisions that have been included in the
VAT Act that have the effect of scoping certain transactions in and out of
s7(1)(a). It does this by deeming certain transactions to be supplies of
goods and services that are deemed to be made and not made for VAT
purposes.
The effect of this is that they will now have VAT Consequences – the
vendor will be liable for Output Tax.
, 1. PAYMENTS EXCEEDING CONSIDERATION
The VAT Act contains specific provisions that outlines the VAT
consequences of an overpayment received by a vendor for a standard-
rated taxable supply of goods or services, provided the overpaid amount
has not been refunded within a certain period.
SUPPLY
💣 vendor receives an amount > consideration charged for a taxable
supply of g/s made by them
When an excess consideration is
- received by a vendor and
- has not been refunded within 4 months of the receipt thereof,
It is deemed to be an amount received in respect of the supply of
services.
The vendor is liable for output tax in respect of this deemed supply
accordingly.
TIME OF SUPPLY
The time of the supply is the last day of the tax period during which the
four month period ends.
VALUE OF SUPPLY
Given that the term ‘consideration’ as defined in section 1 of the
VAT Act is reflective of an amount that includes VAT, the output tax
that is payable in respect of an excess consideration is calculated
as outlined below:
Excess consideration: Total
consideration received –
Price charged (including
VAT) MOCK ANSWERS
Output Tax: Excess
1. Output tax Consideration
should not have been recognised on the excess consideration that was received in
x 15/115
the February VAT period as it will only constitute to deemed supply for VAT purposes on 30 July
if it had not yet refunded by then (i.e. There is no supply/the time of supply has not yet taken
place in February but rather on 30 June)
2
