5 Year Period to Claim Input Tax Repealed?

When the Minister of Finance announced in the 2016 budget speech that the ability to claim input tax credits within 5 years will be revisited, taxpayers and tax practitioners alike waited with great anticipation to see if the proposal found its way into the draft bills so as to comment on why this should most definitely not happen.

When the 2016 Draft Tax Administration Laws Amendment Bill was published for public comment, the Draft Memorandum of Objects on that draft bill indicated that:

“It is proposed that an input tax deduction be limited in certain instances to the tax period in which the time of supply occurred.”

However, most stakeholders were left scratching their heads as the actual draft bill proposed no amendments to the proviso to section 16(3) of the VAT Act and which allows the 5 year time period to claim input taxes. The only proposed changes in the actual draft bill was to reinsert section 44 into the VAT Act.

The confusion was however eventually put to rest with the response document from National Treasury and SARS in which the following statement was made:

“The Memorandum of Objects will be amplified to clarify that the proposed amendment does not limit input tax claims to the tax period in which the supply occurred…”

Accordingly, as it stands at the moment the 5 year period to claim input tax is not being changed.

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