VAT 411 Guide for Entertainment Accommodation and

1 2009/02 forEntertainment, Accommodation and 411 Guide for Entertainment , Accommodation and CateringForeword1 FOREWORDT hisguideconcerns the application of the value-added tax (VAT) lawregarding supplies ofgoodsorserviceswhich fall into the category of Entertainment andservesas a supplement to theVAT 404 Guidefor Vendorswhich deals with thegeneral operation of fairly comprehensive, the guidedoes not deal with all the legal detail associated with VAT and is not intended for legal and legal terminology hasalso been avoided wherever the term Entertainment covers a very wide array of goods and services, itis not possible for theguideto cover all aspects of Entertainment . Itfocuses its attention on businesses which supplyaccommodation,food, beverages and other goods and services which are necessary to provide some form of hospitality orentertainment 1setsout in more detailthe scope of Entertainment topics covered in thisguide, but briefly, thisguidefocuses on- different types of suppliesmade by Accommodation establishments, including meals and otherdomestic goods and services supplied together with the Accommodation ; supplies of food and beverages in restaurants, bars, hotels, or other Entertainment environments.

2 And catering services supplied to customers or employees in different term Entertainment when used in thisguideis therefore intended to focus on these limited areas,but the reader should remember that the term has a much wider references to the VAT Act or the Act are to the Value-Added Tax Act, of 1991,andreferences to sections are to sections in the Value-Added Tax Act,unless the context otherwiseindicates. The terms Republic , South Africa or the abbreviation RSA , are used interchangeably in thisguideas a reference to the sovereign territory of the Republic of South Africa, as set out in the definitionof Republic insection1 of the VAT number of specific terms used throughout the Guide are defined in the VAT Act.

3 These terms andothers are listed in theGlossaryin a simplified formfor ease of following guides have also been issued and may be referred to for more information about specificVAT topics: AS-VAT-08 Guide for Registration of VAT Vendors Trade Classification Guide (VAT 403) Guide for Fixed Property and Construction (VAT 409) Share Block Schemes (VAT 412) Deceased Estates (VAT 413) Guide for Associations not for Gain and WelfareOrganisations (VAT 414) Diesel Refund Guide (VAT 415) Guide for the Small Retailers VAT Package (VAT416) Guide for Small Vendors (VAT 417) AS-VAT-02 Quick Reference Guide (Diplomatic Refunds) (VAT418) Guide for Municipalities (VAT 419) Guide for MotorDealers (VAT 420)The information in thisguideis issued for guidance only and does not constitute a binding general rulingas contemplated insection76P of the Income Tax Act, of 1962, and sections41 Aand 41 Bof theVAT Act unless otherwise 411 Guide for Entertainment , Accommodation and CateringForeword2 The information in this Guide is based on the VAT legislation (as amended) as at the time of publishingand includes the amendments contained in theTaxation Laws Amendment Act, No.

4 17 of 2009 and theTaxation Laws Second Amendment Act, No. 18 of 2009, both of which were promulgated on30 September2009 (as per GG 32610 and GG 32611respectively).The previous edition of the Guide forEntertainment, Accommodation and Catering(VAT 411) is there be any aspects relatingto VAT which are not clear or not dealt with in this Guide , or shouldyou require further information or a specific ruling on a legal issue, you may contact your local South African Revenue Service (SARS) branch; visittheSARS website ; contact your own tax advisors; if calling locally, contact the SARS National Call Centre on 0800007277or if calling from abroad, contact the SARS National Call Centre on +2711602 and/or suggestionsregarding this Guide may be by:Legal and Policy DivisionSouth AfricanRevenue Service1 November 2009 VAT 411 Guide for Entertainment , Accommodation and CateringContents3 CONTENTSCHAPTER 1 Entertainment 2:CONCEPTS AND goods and 3:AGENT vs principles of invoices, credit notes and debit of agency principles20 CHAPTER4:GENERAL RULES ON rule: disallowance of input to the general disallowance transportation or similar recreational care facilities36 VAT 411 Guide for Entertainment , Accommodation and donor funded projects38 CHAPTER5.

5 COMMERCIAL (a) Commercial (b) Old age homes and other care (c) Hospices42 CHAPTER6:VAT TREATMENT OF in a or board and lodging supplied by employers to or board and lodging supplied by educational non-taxable supplies of supplies of Accommodation (before1 October 2001) rental rental of the special value of supply supplies of commercial Accommodation (from1 October 2001) of the of the special value of supply to and machines and of facilities and miscellaneous for baggage handlingorother services55 VAT 411 Guide for Entertainment , Accommodation and CateringContents5 CHAPTER 7:INVOICING, TIME AND VALUE OF and tax invoices issued by invoices issued to of and prepayments for advance through and of rules Accommodation accommodation60 CHAPTER8:RESTAURANTSANDCATERING and , take-awaysand in factories, offices and other work provided by the organisation of the catering provided by an acting in a dual in exempt educational provided by the organisation of the catering provided by an acting in a dual in hospitals and other medical on ships and on trains and at seminars and similar supplies of catering67 VAT 411 Guide for Entertainment , Accommodation and CateringContents6 CHAPTER9.

6 CLUBS, ASSOCIATIONSAND SIMILAR not for gain and welfare , membership fees and entrance charges for goods or services71 CHAPTER 10 and independent provided to event of fines and penalties75 CHAPTER 11:MISCELLANEOUS and trade of of furnished of by educational for film production crew79 GLOSSARY80 ANNEXURE A MEDIA RELEASE NO 45 OF 2001:CHANGES TO VAT ON LONG TERMACCOMMODATION IN HOTELS, BOARDING HOUSES, RETIREMENTHOMES AND SIMILAR ESTABLISHMENTS84 ANNEXURE B COMMON LAW DOMINANT IMPRESSION TEST GRID85 CONTACT DETAILS87 VAT 411 Guide for Entertainment , Accommodation and CateringChapter 17 CHAPTER Entertainment TOPICSAs mentioned in theForewordof thisguide, theterm Entertainment covers a very wide array of goodsand services.

7 To illustrate, the definition of Entertainment insection1means the provision of any food,beverages, Accommodation , Entertainment , amusement, recreation or hospitality of any kind by a vendorwhether directly or indirectly to anyone in connection with an enterprise carried on by him. Ifonethinksof all the differenttypes ofentertainmentsupplies, and all thedirect or indirectways inwhicha person can be supplied with any food, beverages, Accommodation , Entertainment , amusement,recreation or hospitality as contemplated by the definition,the permutations are almost has,therefore,been necessary to limit the scope of thisguideso that it focuses attention onhospitality typebusinesses which supplyentertainment in the form ofaccommodation, food, beverages,andassociatedgoods and , this includes differenttypes of suppliesmade byaccommodation establishments, includingmealsand otherdomestic goods and services supplied together with the Accommodation (where applicable).

8 Suppliesof food and beverages in restaurants,bars,hotels, or other Entertainment environments;and catering servicessupplied to customers or employees at eventsandplaces of work, as well assome of theoutsourcingarrangements in respect of those term Entertainment when used in thisguideis therefore intended to focus on these limited areas,but the reader should remember that the term has a much wider meaning when applying the VAT Act in amore general THE GUIDEThe approach of thisguidein dealing with the topics mentioned out 1 Explores the scope of the topicand some of the special rules regarding supplies and legislative background isalso briefly 2 Introducesthe reader to the most importantconcepts, terms anddefinitionsmentioned in theguideso thattheVAT treatment of supplieswhich areexplainedin later chapterscan be point addressed in this chapter is thedifference between the supply of Accommodation in a dwelling(exempt supply) and the supply of commercial Accommodation (taxable supply).

9 Chapter 3 Provides abrief overview of the legal concepts agent and principal . This is important asthe VAT consequences of a transaction cannot be determined until the contractualrelationship betweenthe parties is established. Theseconcepts are particularly important with regard to supplies ofaccommodation, cateringand travel, which are often arranged through 4 Deals with supplies of entertainmentin general andfocuses onthe special ruleswhich denythe claiming ofinput taxon Entertainment expenses, as well astheexceptions to these 411 Guide for Entertainment , Accommodation and CateringChapter 18 Chapter 5 Provides a detailed analysis of the definition commercial Accommodation and highlights thedifferent types of suppliesand accommodationestablishments contemplated in the 6 Explains the VAT treatment ofthedifferenttypes ofsuppliesofexempt Accommodation andtaxable commercial chapterincludes a discussion on theapplication of the specialvalue of supply rulebothbefore, and after, the amendments to theVATlaw which came into Deals with matters pertaining tothe time and value of supplies,as well asthe issuing ofinvoicesandtax invoices, and how this impacts on the 8 Focuses onthe issues faced bycatering businesses which supply food and beverages tocustomersas their main business.

10 Or as an ancillary part of carrying on another activity. Examples includerestaurants,commercial caterers,employeeandstudentcanteens,andb usinesses which supplymealsand refreshments as part of Discussesthe supplies madebywelfare organisations,clubs, associations, societies andsimilar bodies, as well as somespecial rules which apply to these 10 Deals with the VAT treatment of supplies made by entertainers, sportspersons and 11 Discusses some of the other aspects regarding the supply of Entertainment which are notdealt with in the other aspects ofthe supply of Entertainment made by othervendors,such ascasinos,welfareorganisations,tour operators,municipalities,recreational clubs and associations not for gainwill betouched on briefly in thisguide.