VAT Registrations to be simplified
In his 2013 National Budget Announcement the Minister of Finance indicated there will be a move towards streamlining the VAT registration process.
While this was mentioned as part of the tax administration section of the budget the proposal has now become a tangible solution to a serious administrative burden for taxpayers, says Dirk Kotze, tax partner at global audit, tax and advisory firm Mazars.
The Taxation Laws Amendment Bill, 2013 (“TLAB”), published by National Treasury on 4 July 2013, describes a simplified registration process that should be the saving grace of many tax practitioners who have had to go through the ordeal of registering clients for VAT under the current regulations.
“For some years now taxpayers opting and, those required by law, to be registered for VAT have had to endure the pain of a VAT registration process that sometimes seemed to be contrary to business development. The VAT registration process was almost used as the gatekeeper to the VAT system,” says Kotze.
“Given the complexity of the registration process, clients often question whether Sars actually wants them in the VAT system – surely entry should be made easy and, once inside, Sars can actively police and ensure compliance,” he says. The answer provided in the Explanatory Memorandum to the TLAB is – too many persons wished to enter the VAT system for personal gain or to operate as an entry point for fraudulent VAT practices.
“The ever increasing burden of proof for applicants was necessitated by the attempts of these persons to take advantage of the VAT system. While the tighter controls and access to the system, to some extent, is serving its purpose it has also hindered many legitimate business and prevented timely VAT registration,” says Kotze.
Sars has indicated that there will be changes to the VAT registration process. From 1 January 2014 there will effectively be three types of VAT registration.
- For businesses that meet or will exceed the R1 million taxable supply levels in a twelve month period – the registration requirement will basically remain the same
- Taxpayers that are municipalities, parastatals, welfare organisations or taxpayers with a minimum R5 million up front level of expenditure – a standard VAT registration process will apply but without the requirement to submit proof of income
- Voluntary registration – typically required by start-up businesses for the purposes of tendering, claiming VAT inputs on large capital outlays etc. This is where the main changes will take place,
“As this last type of VAT registration especially poses a risk to the fiscus it will come with the restriction on input taxes being limited to output taxes with any potential VAT refunds being deferred until such time as total taxable supplies exceed R100 000 in a 12 month period,” Kotze advises.
Under all types of voluntary registration Sars retains the power to deregister the vendor if there is a lack of business activity. While the requirement to provide proof of income seems to have been addressed by these proposals, applicants are still cautioned to ensure all other paperwork required for registration is in order so as not to default as a result of an error with the supporting documentation.
Kotze concludes that, while the proof of the pudding for this new system will be in the eating (implementation) there appears to be a sense that Sars realizes it must play a role in stimulating the economy, despite its role as collector of public funds to allow the effective functioning of Government.