Farming is a qualifying activity under the Diesel Refund Scheme. Most farming enterprises would therefore qualify to be registered for the available refund.  To register for the scheme you need to complete and submit a form VAT 101D together with your application to be a VAT vendor, or once you are already registered for VAT.

Note that refunds under the Diesel Refund Scheme are merely processed by utilizing the VAT administrative system.  The concession is actually granted to certain qualifying purchasers in terms of the Customs and Excise Act.  The diesel refunds are therefore offset against any VAT which may be payable for the tax period concerned, or alternatively, will increase any VAT refund if the input tax for the period exceeds the output tax liability.

Any diesel refund which is found to be incorrectly deducted will lead to a shortfall of VAT actually paid for the tax period.  Penalty and interest will be levied on the shortfall.  There may also be additional penalties and interest levied in terms of the Customs and Excise Act if you deduct any diesel refund to which you were not entitled.

Make sure that you actually qualify for the Diesel Refund Scheme before registering, as any incorrect refunds deducted would have to be paid back to SARS, together with penalty and interest (plus additional tax in the case of intentional misrepresentation or fraud).

To claim the active diesel refunds for any period, SARS require the following information and documentation to audit and assess the validity of the said claims.

You are required to keep the following information/documentation in terms of sections 101 and 102 of the Customs and Excise Act No 91 of 1964:

1. Description of the activity / farming products produced;

2. Monthly diesel purchases.  In this regard, you must keep the tax invoice (clearly indicating volumes, price per liters, and delivery address) thereof in respect of each month of the claimed period;

3. Records reflecting the storage and use of the diesel for the claim period, reflecting the following (diesel distribution logbook):
   • The capacity of each tank in which diesel is stored and the receipt and removal from such tanks;
   • The date or period of use;
   • Reference to the assets / equipment used;
   • The quantity and purpose of use;
   • Full particulars of any diesel supplied on a dry basis to any contractor or other person who renders qualifying services to you;

4. Working papers regarding the diesel usage calculation as declared on Vat 201 returns must be retained.

5. Asset register with detailed list of all assets use in each of the primary production activities or a copy of an agreement/contract if the equipment/vehicle is contracted.  It is recommended that a separate log book be kept for each vehicle that is also use for private purposes. By visiting the SARS website, the SARS travel log book can be downloaded to do the necessary recording of the business travel details.

Please note that the description of the activities should be specific such as “spraying of trees” and not mearly “farming activities”.

A specimen of the diesel distribution log book is provided herewith.

You must retain your diesel distribution log book, the calculations, tax invoices and the log book of the vehicle that is use for private purposes for the period of at least five years.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

SOURCE:  SARS WEBSITE