Recently, we have been asked to consider an often overlooked VAT
exposure, namely, the potential taxable supplies involved in low or
nil cost intra-group financing and security transactions.
Everyday intra-group financing arrangements such as, for
example, provision of interest free loans, and the provision of
intra-group guarantees, suretyships and/or subordination
agreements, may constitute the supply of taxable services for VAT
purposes, even if for no or low consideration.
These services may be deemed to be supplied for market value
consideration in terms of section 10(4) of the VAT Act if:
- the supplier and the recipient are
“connected persons” in relation to one another;
and
