Whether input tax can be deducted on the acquisition of a motor car is still a recurring question we receive and Interpretation Note 82 “Input Tax on Motor Cars” was published to provide guidance on this matter. However, there has been a recent influx of requests for the Commissioner to exercise a discretion to override the prohibition of input tax on the acquisition of a motor car in certain situations. Unfortunately, the Commissioner does not have any discretion in this regard under the VAT Act. Generally, a vendor is not entitled to deduct input tax on the acquisition of a motor car, irrespective of the purpose for which the motor car is acquired. To determine whether input tax can be claimed, a vendor must first establish whether the vehicle is a “motor car” as defined. Interpretation Note 82 sets out in detail how the test works for determining whether or not a vehicle is constructed mainly for the conveyance of passengers. The outcome of the test is a question of fact and where uncertainty exists, an objective test must be applied. (That is, to determine whether the vehicle is intended mainly (more than 50%) for the carriage of passengers.)
If the vehicle concerned qualifies as a “motor car” as defined, the input tax will be denied unless the vendor is a motor car dealer or car rental enterprise as provided in the exceptions in section 17(2)(c). Vendors should therefore not request a ruling for the Commissioner to exercise a discretion in this regard to make exceptions based on the circumstances of the vendor, as the VAT Act does not confer any such discretion upon the Commissioner to deviate from the law.
Source: gov.za
