Second-hand goods notional input VAT — a plain-English guide

If you're a VAT vendor and you buy second-hand goods from someone who isn't a VAT vendor — a private person selling their car, a household selling a fridge, an estate selling jewellery — you're allowed to claim notional input VAT on that purchase. For motor dealers, this is one of the most valuable deductions in the VAT Act, and one of the most commonly bungled.

This guide is a plain-English walk-through: what notional input VAT actually is, the 15/115 calculation, the paperwork SARS expects, and the mistakes that get input VAT clawed back during a verification.

The problem the scheme solves

Normal VAT works like this: when one VAT vendor sells to another, the seller charges output VAT, the buyer claims it back as input VAT, and at the end of the chain only the final consumer pays VAT. Clean.

Second-hand goods break that chain. When a private person sells their used car to a dealer, the private person can't charge VAT (they aren't registered for it). But the price they're asking already includes the embedded VAT they originally paid when the car was new. If the dealer then resells the car and charges output VAT on the full selling price, VAT has effectively been charged twice on the same underlying value.

The second-hand goods scheme fixes that. It lets the buying vendor claim a notional input VAT — “notional” meaning “as if” — equal to 15/115ths of what they paid the non-vendor. The double-VAT effect is cancelled out and VAT only sits on the actual gross profit margin the dealer adds.

The 15/115 calculation

South Africa's VAT rate is 15%. To extract the VAT portion from a VAT-inclusive amount, you multiply by 15 and divide by 115.

That number goes into your next VAT201 return as input VAT and reduces the VAT you owe SARS for that period.

What qualifies as “second-hand goods”

The VAT Act's definition is broader than most people realise. Second-hand goods are goods that were previously owned and used. For motor dealers, that obviously includes used cars, but the scheme also applies to:

• Used commercial vehicles, bakkies, trucks, trailers.
• Used parts and spares bought from non-vendors.
• Demo and ex-rental vehicles bought from non-vendors.

It does not apply to:

• Animals (livestock has its own rules).
• Gold and goods containing gold (a separate anti-avoidance regime applies).
• Goods bought from another VAT vendor — those come with a tax invoice and normal input VAT.

The four conditions for claiming

You can claim notional input VAT only if all four of these hold:

1. You're a registered VAT vendor at the time of the purchase.
2. The goods are second-hand as defined in the Act.
3. The supplier is not a registered VAT vendor in respect of the transaction. (You can ask — they must declare this on the VAT264.)
4. The goods will be used to make taxable supplies. You're going to resell, hire out, or otherwise apply them in your taxable business.

Miss any one of those and the deduction is not available.

The paperwork you must have

SARS will not take your word for it. The deduction is supported by a single document called the VAT264 declaration, which the seller signs. Without a properly completed VAT264, the input VAT claim falls over the moment it's audited.

The form must capture:

• The seller's full name, ID number and physical address.
• A declaration by the seller that they are not registered for VAT in respect of the goods.
• The seller's signature and date.
• A description of the goods detailed enough to identify them — for a vehicle: year, make, model, variant, VIN and registration.
• The purchase price (the consideration actually paid).
• Your details as the buying vendor: name, VAT number, address.
• The date you acquired the goods.

You retain the original or a SARS-accepted digital copy for at least five years.

The timing rule — only claim when you've paid

This is the rule that catches a lot of new dealers off guard. Notional input VAT is claimable only in the tax period in which payment is actually made to the seller, not in the period the goods were physically delivered.

Three common scenarios:

• Cash purchase, same day: You pay R150,000 EFT on 12 March. You claim notional input VAT in your March/April VAT period. Simple.
• Trade-in against a new sale: The customer's R80,000 trade-in is credited against their new R350,000 purchase. The trade-in is treated as paid on the date the new vehicle deal closes. Claim in that period.
• Staged payments: You agree R200,000 for a used car but pay it in two tranches — R100,000 now, R100,000 in 60 days. You claim half the notional input VAT now and the other half in the period the second payment goes out.

Where dealers most often slip up

1. No ID number on the VAT264

The seller didn't want to share it, or it got skipped in the rush. SARS treats a missing ID number as a fatal defect in the declaration. The notional input VAT is disallowed in full.

2. Claiming before paying

The vehicle is on the lot, the deal is “done”, the accountant claims the VAT — but the seller hasn't actually been paid yet. SARS reverses the claim and may impose penalties.

3. Treating a VAT-registered seller as a non-vendor

A small business owner sells their company bakkie. They're VAT-registered. The dealer should be raising the deal off a tax invoice from the seller, not a VAT264. Filing the wrong form and the wrong claim type can trigger penalties on both sides.

4. Buying for resale but using the vehicle yourself

If a director takes the vehicle home as their daily driver instead of selling it, the “intended use for taxable supplies” condition is broken. SARS can claw the notional input VAT back.

5. Vehicle description too thin to identify the goods

“Used Toyota” on a VAT264 is not enough. The VIN on the form must match the VIN on the natis. The price on the form must match the EFT to the seller. Reviewers will cross-reference all of it.

6. Losing the originals

The five-year retention rule applies. A signed PDF in a structured DMS is acceptable; a phone photo lost in WhatsApp history is not.

Notional input VAT and your selling price

The scheme doesn't change what you charge the customer. When you later resell the second-hand vehicle, you charge output VAT at 15% on the full selling price in the normal way. The notional input VAT you already claimed simply reduces the net VAT you hand over to SARS.

A worked example pulling it together:

• You buy a used vehicle from a private seller for R230,000. You claim notional input VAT of R230,000 × 15÷115 = R30,000.
• You sell the vehicle on for R287,500 incl VAT. Output VAT on the sale is R287,500 × 15÷115 = R37,500.
• Net VAT paid to SARS on this vehicle: R37,500 − R30,000 = R7,500.
• That R7,500 is exactly 15÷115 of your R57,500 gross profit — which is the scheme working as intended.

If you're a small business buying second-hand goods (not just cars)

The scheme applies to any VAT vendor buying second-hand goods from a non-vendor, with the same rules:

• A coffee shop buying a used espresso machine from a private seller can claim notional input VAT.
• An office buying second-hand desks from a household can claim notional input VAT.
• A repair shop buying used parts from a non-vendor can claim notional input VAT.

The VAT264 and the 15/115 calculation are the same. The only specifics that change are the description fields — instead of year/make/model/VIN, you describe the goods at a level that uniquely identifies them.

For the formal SARS guidance, see the VAT 420 Guide for Motor Dealers, the VAT 404 Vendors Guide and the VAT 264 declaration form, all on the SARS website. Confirm specific transactions with a registered tax practitioner.