Friday, March 31, 2023
  • About
  • Advertise
  • Privacy Policy
  • Cookie Policy
  • Contact
  • Subscribe
  • E-edition
  • Login
  • Register
  • Home
  • News
  • Economy
  • Columns
  • Companies & Markets
  • In Business With
  • Lifestyle
    • Motoring
  • Sports
    Botswana’s women boxing on the rise 

    Boxers Finally Receive their Prize Money from 2022 African Championships

    Darts Expects Only P50K from BNSC for 2023/24

    Darts Expects Only P50K from BNSC for 2023/24

    Botswana athletes to train in USA

    Botswana athletes to train in USA

    Debswana’s BAA Sponsorship Plays Critical Role in Developing BW Athletics – Theetso

    Debswana’s BAA Sponsorship Plays Critical Role in Developing BW Athletics – Theetso

    Boxers yet to Receive Prizes from 2022 African Boxing Championships 

    Boxers yet to Receive Prizes from 2022 African Boxing Championships 

    April will see 2nd Instalment of Summer Kids Marathon

    April will see 2nd Instalment of Summer Kids Marathon

    Trending Tags

    • Subscribe
    No Result
    View All Result
    • Home
    • News
    • Economy
    • Columns
    • Companies & Markets
    • In Business With
    • Lifestyle
      • Motoring
    • Sports
      Botswana’s women boxing on the rise 

      Boxers Finally Receive their Prize Money from 2022 African Championships

      Darts Expects Only P50K from BNSC for 2023/24

      Darts Expects Only P50K from BNSC for 2023/24

      Botswana athletes to train in USA

      Botswana athletes to train in USA

      Debswana’s BAA Sponsorship Plays Critical Role in Developing BW Athletics – Theetso

      Debswana’s BAA Sponsorship Plays Critical Role in Developing BW Athletics – Theetso

      Boxers yet to Receive Prizes from 2022 African Boxing Championships 

      Boxers yet to Receive Prizes from 2022 African Boxing Championships 

      April will see 2nd Instalment of Summer Kids Marathon

      April will see 2nd Instalment of Summer Kids Marathon

      Trending Tags

      • Subscribe
      No Result
      View All Result
      The Business Weekly & Review
      No Result
      View All Result
      Home Columns Tax & Your Pockets

      Moving assets out of business triggers VAT

      mm by Jonathan Hore & Gavin Mashiri Jonathan Hore & Gavin Mashiri
      October 25, 2022
      in Tax & Your Pockets
      Reading Time: 3 mins read
      0
      Register for VAT without P1m in sales
      Share on FacebookShare on Twitter

      Business assets are generally items of great value and importance to an enterprise and its owners.

      Basically, assets are acquired for the furtherance of generating revenue and help in the running of an enterprise. However, in some instances, business operators are compelled to modify the original use of business assets so that they suit an alternative trade or to fulfil a new business endeavour. Consequently, such change inherently triggers Value Added Tax (VAT) implications, particularly when such change is executed by a VAT registered enterprise to pursue a new venture that accommodates exempt supplies. The same VAT consequences arise where the assets are put to a private endeavour such as allocation of the assets to directors or employees’ use. In this article, words importing the masculine shall be deemed to include the feminine.

      The principle

      Fundamentally, a VAT registered operator is only permitted to claim VAT incurred on asset acquisitions that are utilised towards the production of taxable supplies. For clarity, the VAT incurred on acquisition of assets or purchases of goods and services is technically known as input tax, whereas taxable supplies are goods and services which are ordinarily sold and chargeable to a VAT rate of either 0 percent or the standard rate of 12 percent. Looking at it from a different perspective, one is permitted to claim a VAT credit on inputs that are directly converted to or utilised in producing taxable supplies. Having regard to the principles governing claiming of input tax, let us now have a look at the technicalities of changing the use of assets and how VAT is triggered.

      Enter change

      As alluded to above, a VAT credit i.e., input tax, is ordinarily granted when an acquired asset is utilised in the production or making of taxable supplies. Now, if a change of asset use is made such that the proportion of taxable use is less than the non-taxable use in relation to the use when the asset was first acquired, a claw back of the input tax previously claimed should be calculated and paid to BURS. On the other hand, when the asset use changes from making taxable supplies, in whole or in part, to the use of wholly non-taxable supplies i.e., exempt supplies or private use, output tax is determined based on the lesser of cost and prevailing market value of the asset at the time the change of use occurs. 

      Enter VAT

      Having regard to the above rules of change of use, it is key to note that the claw back of input tax (in the form of deemed output tax) is determined by making use of a tax fraction i.e., (14/114) on the lesser of the market value or cost the impacted asset. Technically, the claw back tax i.e., the determination of deemed output tax is only applicable to assets that previously qualified for input tax credit when acquired, imported, or manufactured. As an addition, the same rules also apply to inventory and also in instances where use of acquired services might also change to be expended towards non-taxable supplies.

      As an illustration, if a telecommunications company changed its business model to diversify into financial services sector which is exempt from VAT and transferred assets which cost P1.12m (VAT-inclusive) to the new business when the market value then is P2m, the telecommunications company should claw back the input tax previously claimed by making use of the tax fraction i.e., 12 percent/112 percent of P1.12m, yielding VAT due to BURS of P112 000. Therefore, the company will be liable to pay VAT of P120 000 on the change of use of the transferred assets.

      Well folks, we hope that was insightful. As us the two Yours Truly say goodbye, remember to pay to Caesar what belongs to him. If you want to consult, join our free Tax WhatsApp group or to know about our 9 Tax e-books, send us a text on the cell number below. You can read more tax articles on our website, www.aupracontax.co.bw under the ‘Tax articles’ tab.

      Navigation

      • Home
      • News
      • Economy
      • Columns
      • Companies & Markets
      • In Business With
      • Lifestyle
        • Motoring
      • Sports
      • Subscribe

      Recent News

      • March 30th Edition
      • The botched ‘rip off’
      • Grit cashes P200m from Letlole
      • March 24th Edition
      • March 17th Edition

      Site

      • About
      • Advertise
      • Privacy Policy
      • Cookie Policy
      • Contact
      • Subscribe
      • E-edition

      © 2021 The Business Weekly & Review. All Rights Reserved.

      No Result
      View All Result
      • Home
      • News
      • Economy
      • Columns
      • Companies & Markets
      • In Business With
      • Lifestyle
        • Motoring
      • Sports
      • Subscribe

      © 2021 The Business Weekly & Review. All Rights Reserved.

      Welcome Back!

      Login to your account below

      Forgotten Password? Sign Up

      Create New Account!

      Fill the forms below to register

      All fields are required. Log In

      Retrieve your password

      Please enter your username or email address to reset your password.

      Log In
      This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
      Are you sure want to unlock this post?
      Unlock left : 0
      Are you sure want to cancel subscription?