n IMFO : Official Journal of the Institute of Municipal Finance Officers - BTW - hantering van subsidies : meer spesifiek die "equitable share grant"

Volume 6, Issue 3
  • ISSN : 1607-520X



Municipalities receive a variety of grants from national and provincial government. It is evident that uncertainty is still prevalent as to the VAT treatment of these grants. One example of such grant is the so called "equitable share" grant. <BR>Since April 2005 an "equitable share" grant to a municipality constitutes consideration for a deemed supply to the relevant government department to the extent that it is received in respect of the making of taxable supplies to independent third parties. <BR>This zero rating does not apply to:<UL> <LI>Subsidies received as consideration for actual services rendered to the national, provincial or local authority making the payment; </LI> <LI>Equitable share considerations received prior to 1 April 2005. Subsequent to 1 April 2005 subsidies by local authorities also qualify as grants unless they constitute consideration for actual supplies to the local authority.</LI></UL> Where services that are the responsibility of local government are, for example, delegated or subcontracted to independent development agencies, it should be carefully considered whether or not such subsidy is in fact consideration for an actual supply in which instances the zero rate will not apply. <BR>It was proposed during the 2006 Budget Speech that the necessary steps be taken to clarify the current uncertainty surrounding this subject that may result in the cancellation of assessments already issued.

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