Amendments to the VAT Act – Treatment of repossessed goods

Essentially the amendment only extends the circumstances under which the special rules applicable to goods repossessed apply, to goods surrendered by the recipient.

The Credit Act now allows recipients of goods acquired under an instalment credit agreement to surrender the goods to the supplier where the recipient is incapable of servicing the debt.

Where goods are surrendered, it has the following implications:

• Where the goods are surrendered by a vendor who was entitled to an input tax credit on the acquisition of the goods, the vendor must account for output tax on the cash value of the goods surrendered. The cash value is essentially the capital amount (excluding interest) outstanding on the loan.

• Where the goods are surrendered by a non-vendor or a vendor who was not entitled to an input tax credit on the acquisition of the goods, no output tax liability arises in the hands of the person surrendering the goods.

• The original supplier of the goods surrendered is entitled to an input tax credit by applying the tax fraction to the cash value of the goods. Where the supply is deemed to be a taxable supply, the original supplier may self-invoice for the goods surrendered. Where the supply is not a taxable supply, a notional input tax credit can be claimed.

• No deduction for irrecoverable debts is available where goods are surrendered.

Information courtesy of:  LexisNexis South Africa

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One Response so far.

  1. Irene says:

    I have paid R60 000 that I’m trying to buy from Auction Auto Cars and the vehicle is repossessed but now they want me to pay R15 000 as far as I know the previous owner is liable for his tax I’m only paying the price they advertise the vehicle for am I right

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