According to reports in the South African press, SARS (South African Revenue Service) has warned holding companies that they are not eligible to deduct input tax on certain legal and accounting expenses.
Holding firms have typically been deducting expenses such as exchange listing fees, printing costs of annual financial statements and costs related to investor relations activities. However, SARS has ruled that these do not amount to business expenses as defined by the VAT Act, and therefore cannot be deducted.
According to the South African Sunday Times, SARS spokesman Jacob Dlamini confirmed that VAT vendors were only permitted to deduct VAT incurred as input tax if the expense was directly related to the making of taxable supplies.
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