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VAT registrations – What is all the fuss about? – Part 3

Posted by: Ibay | Posted on: June 29th, 2016 | 0 Comments

Voluntary registrations

A taxpayer may choose to voluntarily register for VAT if it is carrying on an enterprise and has already exceeded the minimum threshold of R50,000 supplies made in the past 12-month period. Taxpayers often fret that they would only generate this turnover in a month or two and that they will lose out on the VAT they paid on their start-up investment being the capital goods purchases. Remember the ability to claim this VAT in terms of section 18(4) of the act!

There is however good news for taxpayers who can’t or don’t want to wait that long to enter the VAT net. Section 23 of the act was recently amended to allow a person to register for VAT even if the threshold of R50,000 in taxable supplies in a consecutive 12-month period has not been met. A person who hasn’t made any supplies or their supplies do not yet exceed R50,000 needs to satisfy the Commissioner that it can be reasonably expected that taxable supplies in the following 12-month period commencing from the date of registration will be made.

For a period there was an absence of any communication or regulation from the Finance Minister clarifying what a reasonable expectation for this purpose could be. As one can imagine this caused all sorts of problems when wanting to register at SARS on this basis. What is a reasonable expectation for the taxpayer is not necessarily reasonable for the SARS consultant you are dealing with. The regulation from the Minister that did eventually arrive allows for registration when the following conditions have been met:

  • Value of taxable supplies exceed either an average of R4,200 per month for a minimum of 2 months and a maximum of 11 months immediately preceding the date of registration, or
  • In the case of a person who has made taxable supplies for only one month preceding the date of application for registration, such person proves that the actual value of the taxable supplies made exceed R4,200 in that month, or
  • Where Nil supplies have been made or an average of R4,200 per month has not been exceeded for a minimum of 2 months and a maximum of 11 months immediately preceding the date of registration, but either of the following exist:
    • There is a written contractual obligation to make supplies in excess of R50,000 in the 12 months following the date of registration, or
    • There are finance agreements in place with credit providers where the taxpayer has been provided funds to fund business expenditure, and the total repayments to the credit provider will exceed R50,000 in the 12 months following the date of registration, or
    • Expenditure incurred or to be incurred in connection with the furtherance of the enterprise exceeds R50,000 in the 12 months following the date of registration.

Registering on this basis will cause SARS to register you on the payment basis and not the invoice basis which is presumably a safeguard put in place by SARS to curb fraudulent vendors. The onus will be on the registered vendor to notify SARS as soon as their turnover exceeds the minimum R50,000 threshold and to request that they be placed onto the invoice basis, which is a requirement.