THE
FIFA WORLD CUP, ACCOMMODATION AND SARS
By Willie Smith at Exceed |
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The 2010 FIFA World Cup starts
in a few months. South Africa has not hosted an
event of this magnitude and will probable not
host such an event again for a long time. Everybody
is looking for ways to take advantage of various
opportunities that the World Cup will offer.
VAT Implications
Some people/companies have targeted the letting
of accommodation over the World Cup. Whether the
landlord receiving this rent is a company, CC,
trust or individual, beware of the VAT implications.
This caution comes from Willie Smith, director
of Tenk Loubser Inc.
The VAT Act divides letting of accommodation
into 2 main categories:
| • |
Letting of residential accommodation
(exempt supply for VAT purposes) |
| • |
Letting of commercial accommodation (standard
rated supply for VAT purposes) |
|
Residential Accommodation
| • |
The VAT Act describes residential
accommodation under S12(c), as the
supply of a dwelling under an agreement
for the letting and hiring thereof.
|
| • |
This will not constitute commercial
accommodation and therefore be an
exempt supply for VAT purposes. |
Commercial Accommodation
The VAT Act describes commercial accommodation
as lodging or board and lodging, together
with domestic goods and services, which
is regularly and systematically supplied
and where the total annual receipts from
the supply thereof exceeds R60, 000 in a
period of 12 months, but excluding a dwelling
supplied in terms of an agreement for the
letting and hiring thereof.
As some landlords will be charging
higher than normal rates for rental accommodation
for the period of the World Cup, this may
result in the income from rentals to exceed
R60, 000 during a period of 12 months.
| In the absence of a rental
agreement, S12(c) of the VAT Act,
will cause any residential accommodation
to be deemed as a commercial accommodation
for VAT purposes. Many landlords supplying
residential accommodation may find
themselves in contravention of the
VAT Act, without realizing it. |
Exceeding 28 Days
| • |
Another difficulty is that the period
of the World Cup may very well cause
rental periods to exceed 28 days,
as landlords may have tenants staying
in one rental accommodation for the
duration of the World Cup. |
| • |
S10(10) of the VAT Act states where
domestic goods and services are supplied
at an all inclusive charge in any
enterprise supplying commercial accommodation
for an unbroken period exceeding 28
days, the consideration in money (for
VAT purposes) is deemed to be 60%
of the all-inclusive charge. |
| • |
This means that VAT is only charged
on 60% of the all inclusive charge
(before VAT), which effectively will
cause a saving to the customer. |
| This
illustrates just some of the far-reaching
consequences for VAT vendors and it
is therefore imperative that tax payers
understand their circumstances to
insure that they comply with relevant
Income Tax and VAT Acts of South Africa. |
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| For more
information you can contact
Willie
Smith: Office: +27 (0) 21
915 6666 |
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