Can a VAT vendor claim notional input tax on second-hand goods bought from a non-vendor?

Direct answer

Possibly, but not simply because the goods are used. A VAT-registered vendor may claim notional input tax where it acquires qualifying second-hand goods under a non-taxable transaction in the course or furtherance of its enterprise and meets the payment and documentary requirements. SARS's guidance requires a completed, signed VAT264 declaration, relevant seller and goods information, and proof of payment.

This is different from a normal input-VAT claim. A normal claim follows a taxable supply by a VAT vendor and uses the relevant tax invoice. A notional-input claim concerns qualifying second-hand goods acquired under a non-taxable transaction.

What this means in practice

Second-hand dealers often buy from private sellers or others who are not charging VAT. The absence of VAT on the seller's invoice does not by itself prevent every VAT deduction, but it does mean that the buyer must use the narrow notional-input rules correctly.

Before recording a claim, establish who the seller is, whether the supply is non-taxable, whether the goods are qualifying second-hand goods, and whether the buyer is using the goods in the course or furtherance of its enterprise. The vendor must then collect the prescribed evidence. A payment promise or an unsigned form is not enough.

SARS says notional input tax may be deducted only to the extent that consideration has been paid. This is especially important for purchases on instalment, trade-in, or delayed-settlement terms. The VAT264 and payment trail must agree with the accounting records and the VAT201 working papers.

Step-by-step

1. Confirm the buyer is a VAT vendor.

The notional-input route is a VAT-vendor claim. Keep the buyer's VAT registration and the transaction's business purpose on file.

1. Confirm the seller and supply type.

Establish that the seller is not making a taxable supply. Obtain the seller's identity or entity details and consider whether the facts really support a non-taxable transaction.

1. Identify and describe the goods accurately.

Record the goods description, quantity, and relevant identifiers. For vehicles or equipment, this may include model, registration, chassis, engine, odometer, or VIN details.

1. Complete the VAT264 declaration.

Have both parties complete and sign the VAT264. Attach the required seller evidence and make sure the form records consideration and payment or trade-in information.

1. Retain proof of payment.

Reconcile the payment reference to the banking record, receipt, or trade-in invoice. Claim only to the extent payment has been made.

1. Prepare the VAT201 calculation.

Use current rate and tax-fraction information only after checking the relevant period. Keep the calculation with the VAT264 and the purchase file.

Documents and records to keep

• Signed VAT264 declaration and seller identity or entity evidence.
• Purchase agreement, receipt, payment proof, or trade-in invoice.
• Goods description and identifying numbers.
• Stock or asset register entry.
• VAT201 working paper and notional-input calculation.

Important limits and exceptions

Not every used-item purchase qualifies. The purchase must be a qualifying acquisition of second-hand goods under a non-taxable transaction in the course or furtherance of the enterprise. A purchase from a VAT vendor under a normal taxable supply is a different input-VAT situation.

Payment timing matters. SARS says the deduction is limited to the extent consideration has been paid. Do not claim the full amount where the business has only made a deposit or has not settled the agreed consideration.

Certain goods and industry circumstances can be excluded or carry additional restrictions. Do not apply this general guide to gold or other potentially excluded goods without current specialist review.

When to get tailored advice

Get advice before claiming where the purchase is high value, involves a trade-in, has connected parties, uses instalment terms, or involves goods with special VAT rules. Also seek help if VAT264 information is incomplete after the transaction, rather than inventing or backdating evidence.

TaxProof can help organise the VAT264, payment trail, asset or stock records, and VAT reconciliation for review. It cannot confirm a claim without the full transaction facts.

Related TaxProof guides

• VAT input tax expenses that are not claimable
• Related upcoming guide: VAT264 declaration, B01-BUS-004

Sources

• SARS VAT Connect Issue 20
• SARS FAQs for VAT vendors