A guide to how input tax applies to your motor vehicle
Navigating tax regulations can be challenging, especially when it comes to specific areas like input tax on motor vehicles. Here, we break down the key points from the SARS guidelines to help you understand how input tax applies to motor vehicles.
What is Input Tax?
Input tax is the VAT a business pays on purchases and expenses, which can be deducted from the VAT collected on sales. However, certain items, such as motor vehicles, have specific rules.
Key Points from the SARS Guidelines
Definition of Motor vehicles: According to SARS, a motor car includes any motor vehicle designed for the transportation of people. This definition is broad and encompasses sedans, station wagons, and similar vehicles. However, it excludes vehicles like bakkies, trucks, and minibuses designed to carry more than 16 people.
Restrictions on Input Tax Claims
Businesses cannot claim input tax on motor vehicles bought or leased, except in specific circumstances. These exceptions include:
- Motor dealers purchasing vehicles for resale.
- Driving schools purchasing vehicles for teaching purposes.
- Vehicles used for commercial rental purposes.
Leasing and Hire Purchase
When a motor car is acquired under a lease or hire purchase agreement, the restrictions on input tax claims still apply. Businesses cannot claim input tax on the lease payments or instalments.
Special Cases
There are exceptions where input tax can be claimed. For instance, if a vehicle is converted for commercial purposes, such as a hearse or an ambulance, the business may claim input tax.
Record Keeping
Businesses must maintain accurate records and documentation to support any claims for input tax. This includes invoices, contracts, and detailed logs of how the vehicles are used in the business.
Why These Rules Matter
Understanding the rules around input tax on motor vehicles ensures that businesses comply with tax laws and avoid potential penalties. It also helps in accurate financial planning and budgeting.
By staying informed, businesses can effectively manage their tax obligations and avoid common pitfalls associated with input tax on motor vehicles. If you need further assistance or have specific queries, don’t hesitate to contact PRNC.
