THERE is no special dispensation regarding exemption from VAT on the purchase of the new taxi vehicles, Transport Minister Jeff Radebe has reported.

However, Radebe said that capital gains or income tax would not apply to the scrapping allowance which will be provided to taxi operators.

In reply to a parliamentary question from Democratic Alliance (DA) transport spokesman Stuart Farrow, the minister said operators would be expected to pay the applicable VAT "as part of the normal sales process".

"Government has already created an opportunity for taxi operators to regularise their outstanding tax affairs … with the South African Revenue Service.

"It should, however, be noted that the transport department had discussions with the National Treasury regarding the non-taxation of the R50 000 scrapping allowance payable to taxi operators who successfully apply for the scrapping of their old taxi vehicles through the taxi recapitalisation project."

"During the discussions … a commitment has been secured whereby the scrapping allowance will not be subject to taxation, as such a move would summarily reduce the actual monetary value of the allowance."

Radebe noted that Finance Minister Trevor Manuel had pledged in the Medium Term Budget Policy Statement in October that the full benefit of the allowances would be ensured and that the scrapping payments would "not trigger any income or capital gains tax".
 http://www.businessday.co.za/articles/national.aspx?ID=BD4A324350