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Automatic VAT registrations · Tax Break: South African tax for professionals

• 0:11
  Welcome and thank you for joining me for Tax Break.
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  This is a podcast about South African tax for South African
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  tax professionals and practitioners.
• 0:19
  My name is Peter Venezuelan and in episode Ashima thoughts with
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  you on a topic or a development in South African text.
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  And I tried to keep the episode short enough that you can listen
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  to them hopefully learn something in whatever time
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  you've got available. Now something that seems to be
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  happening more in practice than than it used to at least, is
• 0:41
  entities being automatically registered for VAT purposes.
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  So the the entity or the practitioner might pick up that
• 0:49
  they are non compliant because they haven't submitted VAT
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  returns, while in their minds they're not registered for VAT.
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  Or it may be that the entity receives a letter to say that
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  you are registered for VAT from ex date.
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  The question is can this be done now?
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  I think the great provision to look at is Section 23 of the VAT
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  Act and that provision deals with the that provides the
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  registration requirements in the legislation.
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  So section 23, one deals with requirements to register, in
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  other words when you become liable to register and it makes
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  provision for two scenarios. 1 is the entity made taxable
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  supplies exceeding 1,000,000 rent in the last 12 months.
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  The other is that the entity has got contractual obligations
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  where it will make taxable supplies of more than 1,000,000
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  ranked in the next 12 months. There are of course some
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  exceptions where activities are for temporary nature, that kind
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  of thing. With it, they may not have to to
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  register. Also implicit do this definition
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  is that you need to look at is the entity actually making
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  taxable supplies, does it conduct an enterprise?
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  Those kind of things to do. It's not just any transactions
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  of more than 1,000,000 Rand in the last 12 months.
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  Then moving on through section 2323, two and 2A deals with non
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  residents who become liable to register.
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  So I don't think that's the provision we we we're dealing
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  with here. And then 23, three deals with
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  voluntary registrations. So again you need to apply to be
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  registered on a voluntary basis and this provision gives some
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  minimum thresholds and it also provides guidance for
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  regulations to be issued for certain entities in certain
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  industries to be to be registered.
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  I think the critical provision here is section 23 four and it's
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  if we look at the first paragraph A, it says where
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  you've applied to be registered as a vendor and so should
• 2:54
  satisfied that you are eligible, then from a date determined by
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  the Commissioner you will be a vendor.
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  So that's not the one I think we're looking at.
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  In most cases here the person involved or the entity has not
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  applied. The key provision is the in
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  paragraph B, and what that paragraph says is that if you
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  have not applied to be a VAT vendor, the Commissioner is
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  satisfied that you are liable to register as a bad vendor.
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  Then this person will be a VAT vendor from the date it first
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  became liable to register and such may determine a later date
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  if equitable. Now I think the critical part is
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  that such must be satisfied that the person was liable to
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  register. And from from our experience, it
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  seems that that's where the the the process might have fall
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  short in some cases in that the registration seems to happen
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  without much consultation or gathering all the facts to to be
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  satisfied that the person should have been registered as a VAT
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  vendor. Now, being registered as a VAT
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  vendor without applying has got real insignificant implications
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  for entities. If you, especially if the date
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  goes back a while, you may have a liability to pay output tax
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  that you've not recovered from your customers that you may have
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  no ability to recover. I think the second point is that
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  your ability to claim input tax you the, the certain
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  requirements that you need to meet, including documentation
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  that you need to have and whether you would actually meet
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  that or not is debatable. So I think it's uncertain
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  whether you'd be able to claim your input tax.
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  Then you probably looking at penalties because you are paying
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  the VAT a lot later than you were supposed to.
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  Now that you've learned that you are a VAT vendor from some date
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  in instances a few years ago. And there's also so interest on
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  these VAT payments. So some cases it may be that the
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  entity should have interested and touches using the provision
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  in exactly the way it was intended, but they could also be
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  cases where the tax payer does not agree with Sash.
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  So then the question comes up, what now?
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  What are your remedies? So the idea in the podcast is
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  not really to give advice or say that this is your checklist of
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  remedies that you can follow. I would like to share a few
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  thoughts with you that could maybe guide your own thinking in
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  this regard. Now, if we look at section 32 of
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  the VAT Act, it gives a list of decisions that are subject to
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  objection and appeal. Section 23 four is not listed
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  there. So that means that this specific
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  decision by the Commissioner is not subject to objection and,
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  and, and the bill. So do ideas from our side.
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  There's now this could be resolved and what I've seen some
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  other practitioners doing the 1 and in in my view, probably the
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  most correct way of doing this is that the Tax Administration
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  Act caters for process where if there's been a decision by by
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  such official or notice has been issued, where you can request
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  for that decision or notice to be either withdrawn or amended.
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  So in my mind, the correct way or the the first way I would
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  would consider would be to see if you can, especially if the
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  the decision isn't factually sound.
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  So let's say you don't conduct an enterprise, for example, do
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  to get to do, do, do to try to to get that decision or the
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  notice withdrawn. The other route that I've seen
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  some in some instances being used, and I think there could
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  perhaps be some merit to it, is to follow the process in Section
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  24 of the VAT Act. So that's the cancel the
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  registration. My one concern with this
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  approach is that it then implies that the entity was actually a
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  registered VAT vendor, at least possibly for a period of time,
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  and that could leave you with some exposure.
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  So I think if you follow this route, it's absolutely critical
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  to make sure that you that that whatever your end date is, is
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  exactly the same as your start date.
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  Now that's something that's governed by Section 24/2.
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  And again the search is determination of your end date
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  in Section 24 two is not listed as something that's subject to
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  objection and appeal. So you may well be back to the
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  process do then try to get that decision withdrawn or amended in
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  this case if you want to get an amendment off the end date.
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  So it might and that's why I'm saying my, my, my, my, my, my
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  Preference would probably be to, to just do that process to get
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  the original decision or notice withdrawn in the 1st place
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  rather than to, to, to follow the route of, of Section 24.
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  So in summary, do you think there is a legal basis?
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  However, this legal basis in Section 23 requires that the
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  Commissioner must be satisfied that the person was liable to
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  be, to be, to register as a vendor.
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  And as I've already mentioned, it seems stuck in some cases
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  that the process to be satisfied of this is is lacking or that
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  that is very little if any consultation with taxpayers.
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  So if you find yourself in that position where you are
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  registered as a vendor, where you in your view, you shouldn't
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  be, I think it is definitely advisable to consult on it, to
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  look at all the facts and circumstances and then consider
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  the best course of action in the case of your in your in your
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  facts and circumstances. That's it for today's episode.
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  If you've got any questions, comments, feedback, ideas for
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  future episodes, please send me an e-mail.
• 9:08
  My e-mail address is in the show notes.
• 9:11
  If you like the podcast, please subscribe on your favorite
• 9:14
  podcast platform and tell your friends and colleagues about it.
• 9:18
  Just reminder, as always, that the podcast is not intended to
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  be tax advice or replacement for fact specific tax advice,
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  especially as to what the correct course of action would
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  be in this case. If you've got, if you, if you're
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  looking at and you're sitting with this, this problem, you
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  need to get tax advice to look at to to, to to decide on what
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  is the best course of action in your specific facts and
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  circumstances. Until next time, goodbye.