|
Where
a registered operator incurs VAT on entertainment, the
operator shall not be entitled to claim input tax relating
to such goods or services that have been acquired for the
purposes of entertainment. This prohibition is in terms of
Section 16(2)(a) of the Value Added Tax Act.
Generally,
registered operators provide food or canteen services
and/or refreshments to their employees as a way of
thanking them for executing their duties well. Kindly note
that a registered operator is prohibited from claiming
input tax on this type of expenditure.
However,
there are certain instances where the registered operator
can be allowed to claim VAT input tax on expenditure
incurred on entertainment. These are as follows:
l
Where the registered operator acquires goods or services
in the course of making taxable supplies of entertainment
in the ordinary course of trade. This covers registered
operators whose nature of trade is entertainment, for
instance hotels, food outlets, lodges, among others.
l
Promotional activities: For the promotion to be bona fide
or genuine, the entertainment supplied to recipients
should be similar to the entertainment usually supplied by
that registered operator in the ordinary course of trade.
For example, if one usually supplies food to his clients,
the promotion made should be in respect of supplies of
food. This therefore means that where a registered
operator who usually supplies food in the course of his
trade supplies, say music or accommodation, then no input
tax shall be allowable as a claim as this is different
from what they usually supply to their clients for a
consideration.
l
Leftover food subsequently donated to any employee of the
registered operator or to a private voluntary organisation.
l
Supplies of entertainment to any employee or office-holder
or any person by the registered operator made for a charge
that covers all the direct costs of such entertainment. In
certain instances registered operators supply canteen
facilities. If the food is supplied at a subsidised cost,
then no input tax deduction is allowable. However, if the
employees or any person so supplied pays a fee that meets
the costs of that meal, then input tax deduction shall be
allowable.
l
Travel and subsistence to an employee, or office-holder or
member of a partnership of the registered operator, spent
for the purpose of the registered operator's trade. This
deduction shall, however, not extend to expenditure
incurred for purposes of amusement or recreation.
l
Goods or services acquired by a local authority for
purposes of providing sporting or recreational facilities
or public amenities.
l
Goods or services acquired by a private voluntary
organisation for the purposes of making supplies in the
furtherance of its aims.
l
Meals or refreshments supplied by the registered operator
during a journey if such meal or refreshment is supplied
as part of or in conjunction with the transport service
supplied by the registered operator and such supply is a
taxable supply. An example would be meals supplied by an
airline during conveyance of passengers. Such supply of
meals is ordinarily a taxable supply. If such supply of a
meal or refreshment is supplied by a bus operator within
Zimbabwe that is for the conveyance of fare paying
passengers, no input tax deduction can be made because the
latter is not a taxable supply.
Source
: AllAfrica.com - Washington, USA, dated 04/10/2007
|
