SARS and claiming Input VAT on Entertainment

The general rule with regard to entertainment expenses and input tax (i.e. claiming VAT back from SARS), is that you (a registered VAT vendor) are not entitled to claim Input VAT where the goods or services are for the purposes of providing entertainment.

Examples of entertainment that cannot be claimed as per the general rule (exceptions are listed in the next section):

  • Food and other ingredients purchased in order to provide meals to staff, clients and business associates.Year-end lunches and parties, hiring of venues for those functions, as well as expenses incurred for the provision of complimentary staff refreshments (for example tea, coffee and other beverages or snacks provided to staff).

  • Business lunches or other entertainment of customers and clients in restaurants, theatres, night clubs or sporting events.

  • Goods and services acquired for providing employees with meals and beverages at workplace canteens if the price charged by the employer does not cover the direct and indirect costs of providing those benefits and facilities or is not equal to the market value of such meals and beverages (for example catering services, furniture, equipment and utensils used in kitchens, canteens and dining rooms).

  • Beverages, meals, entertainment shows, amusements or other hospitality supplied to customers and clients at product launches and promotional events.

  • Capital goods such as fridges, coffee machines, hospitality boxes, holiday houses, yachts and private aircraft which are used for entertainment.

Exceptions to the general disallowance rule above include (i.e. when VAT can be claimed on entertainment):

  • If you are in the business of entertainment. For example, restaurants, hotels, night clubs.

  • The price charged for the entertainment goods or services at least covers all the direct and indirect costs of making that supply of entertainment, or at least be equal to the open market value thereof. For example, canteens that either charge market-related prices or recover all direct and indirect costs, seminars or training sessions where the price charged includes meals and beverages.

  • Expenditure relating to hotel accommodation, meals and beverages provided to the employee whilst away from their usual place of residence and usual working-place for at least one night on business for the employer.