Advisory: VAT on ‘long stays’ revised

Members should be advised that there are changes in the recently reissued SARS GUIDE as it pertains to the wording around ‘long stays’.

If a “commercial accommodation” (defined in paragraph 2.5 on page 10 of the VAT 411 guide attached) is provided by a VAT vendor to a customer or resident, for an unbroken period of 29 days or more, on an “all-inclusive charge” basis, only 60% of the “all-inclusive charge” will be subject to VAT at the standard rate (i.e. currently 14%).

Note that if the domestic goods and services are supplied separately for a separate consideration, then the full charge is subject to 14% VAT (not only 60%).

“Domestic goods and services” are defined –  see paragraph 2.4 (on page 10) and see 5.2.3 (on page 36). Note that the full value of goods and services supplied by the accommodation establishment which do not fall within the definition of “Domestic goods and services” (but which are not exempt or zero-rated) will always attract VAT at the standard rate, whether included in the “all-inclusive” tariff or not.

“All –inclusive charge” is defined –  see paragraph 2.2.

An Enterprise needs to supply at least R120 000 (see paragraph 5.2.4 on page 37) (was R60 000 up to 31 March 2016) receipts and accruals from the supply of accommodation per annum to qualify as an enterprise (it no longer needs this turnover to qualify as a Commercial accommodation. It cannot claim VAT input if it’s not an “Enterprise” for VAT purposes. It needs to de-register from VAT if this type of turnover is less than R120 000 per annum from 1 April 2016.

The on-charging of the initial costs along the supplier chain will be as normal:

  • Supplier 1  (pays VAT output to SARS) charges Supplier 2 (claims VAT input)
  • Supplier 2 (pays VAT output to SARS) charges Customer (pays the Tax Invoice inclusive of the VAT, and cannot claim the VAT input unless it is a VAT vendor qualifying to claim the qualifying VAT).

The above is an opinion and interpretation of the VAT legislation and guide. It covers broad principals only. It is based on information contained in the SARS guide. Any inaccuracies in any areas are not the responsibility of ASATA. The comments should be used as guidance only.