Value-added Tax
1188. Second-hand goods
June 2004



The VAT Act allows vendors to claim an input tax deduction where second-hand goods are acquired from a non-registered VAT vendor.


Various aspects dealing with VAT on second-hand goods are outlined below:


Definition of "second-hand goods"

The VAT Act has prescribed a narrow definition to the term and it is important to adhere to the requirements before an input tax deduction is claimed.


Second-hand goods means goods which were previously owned and used, but does not include –


Claiming the input tax deduction

There are many conditions relating to a deduction of notional input tax. For example:


Unfortunately, this provision has led to abuse and, to counteract the abuse, special records have to be created and maintained by purchasers who claim notional VAT input tax.



In order for a vendor to be entitled to a notional input tax deduction, the following records must be retained:


Recent amendments

On 31 March 2004, the Commissioner: SARS released a press statement prescribing further requirements in order to assist vendors to comply with the provisions with regards to the retention of records.


With effect from 1 May 2004, all vendors claiming a notional input tax credit in respect of the acquisition of second-hand goods or repossessed goods are required to complete a VAT 264 form and retain such form for a period of 5 years from the date of sale.


The VAT 264 form is published on the SARS website and can be accessed under the VAT section of the menu under ‘Forms’.


The introduction of the VAT 264 form will assist SARS in its attempts to curb the high incidence of widespread non-compliance relating to second-hand and repossessed goods, more especially in the motor car industry.


The VAT 264 form is designed in a user-friendly manner and will assist VAT vendors to comply with the requirements stipulated in the VAT Act.



For the purpose of the VAT Act, this means the repossession of goods from a debtor under an instalment credit agreement. In accordance with special provisions in the VAT Act, this is a deemed supply made by the relevant debtor to the person exercising his right of repossession e.g. a bank. Where such a debtor is a registered VAT vendor, the supply shall be deemed to be made in the course of his enterprise. The creditor will furnish the debtor with a document containing the particulars required for a valid tax invoice and such document shall be a valid tax invoice required for input tax purposes in the hands of the creditor.


By contrast, should the relevant assets not form part of the assets held or used by the debtor for the purpose of his enterprise, the creditor will be entitled to a notional input tax credit. The requirements with regards to the retention of records as envisaged in the aforementioned paragraphs must be complied with.


Motor dealers

During August 2000, SARS issued a notice to vendors. Motor dealers, in particular, were warned that additional assessments will be raised where the requirements for the retention of information with regards to notional input tax have not been complied with.


It is therefore important to comply with the new regulations where a motor dealer purchases or trades in a vehicle from a non-vendor. The same is true for a VAT vendor who was not entitled to an input tax deduction when he acquired the vehicle e.g. motor car. In addition, the notice also prescribed that the motor dealer should obtain a statement from the seller declaring that the supply is not a taxable supply.


Again it should be noted that purchases or trade-ins from registered vendors should be accompanied by a valid tax invoice.


Grant Thornton / Horwath Zeller Karro / Deloitte


VAT Act:S 1, definition "input tax",

VAT Act:S 17,

VAT Act:S 20(8)