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VAT 101 – Reimbursements from Clients

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Please note that this pertains to South African VAT (Value Added Tax) regulations and Best Practice requirements.

As VAT vendors we cannot claim VAT on invoices that pertain to accommodation for ourselves or our staff. But what happens if we book and pay for accommodation for our clients and then we need to be reimbursed by the client?

Here’s the story.

Mike owns a training and facilitation company.

Mike is holding a two-day workshop at a local conference centre but in view of the fact that Mike has extended the invitation to attend his workshop to his entire database, there are clients coming from all over the country.

Mike has committed to booking his ‘out of town’ clients into several B & B type establishments that are close to the conference centre.

All of these B & B’s are VAT registered and Mike is obliged to pay VAT across. Now, how does he charge his clients for this and can he claim this VAT back?

Well let me answer the second half of the question first. Yes he can claim the VAT back.

Now back to the “how” he gets reimbursed by the client.

Let’s say for example that the B & B’s in the area charges R200.00 plus VAT at 15%. The total cost for each delegate would then be R230.00.

Mike’s invoice to his client would look something like:

Cost of two-day workshop per delegate R2 000.00
Cost of B & B                                               R    200.00
 R2 200.00
VAT                                                               R     330.00
Total Due                                               R2   530.00

At the end of Mike’s VAT period, Mike would be able to claim the full R330.00 as an offset to his input/output calculation because the accommodation part was paid for on behalf of his clients. R300 of this would be the VAT portion pertaining to the cost of his workshop and the balance of R30.00, which of course was the VAT portion that he paid for the delegate’s accommodation on behalf of his client.

If Mike had also paid for the client’s travel to and from the venue in terms of airfare or even bus and/or rail travel, the VAT of this too could be claimed back in the same way.

Please don’t always assume that you cannot claim things back. If you are not sure, contact your nearest SARS office and ask. Be sure to give them all the correct facts and you will often be surprised at exactly what can be claimed back. Remember to get the person’s name that you spoke to and if possible a reference number.