Increase in voluntary Value-Added Tax (“VAT”) registration threshold
The VAT legislation presently requires an enterprise to make taxable supplies in excess of R20 000 over a 12 month period in order for the person to voluntarily register as a vendor. This threshold was introduced to prevent an abuse of the VAT refund structure. It is proposed that the voluntary registration threshold be increased from R20 000 to R50 000 from 1 March 2010. SARS is of the view that a business with taxable supplies under R50 000 over a 12 month period is unlikely to be viable.
As a consequence of the proposed amendment, vendors who have been previously registered for VAT, who do not make taxable supplies in excess of R50 000 over a 12 month period, would be required to deregister for VAT and account for output tax on the open market value of the assets held in the enterprise prior to deregistration.
This may have an adverse effect on persons who registered entities that own fixed property rented out as holiday accommodation.
False statements to SARS
An amendment is proposed which would render false statements made in any VAT form submitted to SARS as an offence. The purpose of such an amendment would be to hold those who submit forms to SARS accountable for the declarations made on such forms.
As an example, persons who overstate their turnover in order to qualify to register for VAT will be guilty of an offence.
Verification of persons registering for VAT
In an effort to further deter VAT fraud that occurs when applicants illegitimately register for VAT, it is proposed that biometric measures be put in place to verify applicants.
It is envisaged that measures such as fingerprint identification will be introduced to further enhance the controls of the VAT registration process. We envisage that different rules will have to apply to foreign entities to facilitate the registration process.
Implications of reorganisations
Historically, relief provisions have been put into place to facilitate reorganisations. These provisions have subsequently resulted in interpretational issues relating particularly to change in use adjustments and the claiming of input tax credits on expenses relating to the actual restructuring (e.g. legal costs). An interpretation note will be issued to clarify the VAT treatment where the transfer of assets involves entities that make both taxable and exempt supplies.
Vendors who are involved in reorganisations where they make both taxable and exempt supplies should make a VAT adjustment on the assets transferred, where there is an increase or decrease in the taxable use of the assets.
Interest charges on late payments
The VAT legislation imposes interest on late payments made or excessive refunds claimed by vendors. Where a late payment is made or an excessive refund is claimed, SARS has the discretion to grant full or partial relief to the taxpayer on the interest due, where there was no loss to the state or where the taxpayer did not have a financial benefit. This discretion has not been used consistently and therefore clarification is required.
We foresee that the clarification needed would cover situations where for example supplies made between companies within the same group, both making taxable supplies, were processed without accounting for the output or input tax. In such an instance the fiscus has not suffered any financial loss and the group as a whole has not obtained a financial benefit. In these circumstances SARS has a discretion to remit the said interest partially or in full.
Share block schemes
Share block schemes provide for a specific interest in fixed property in the form of shares. Where a transfer of these shares takes place, it may potentially result in a liability for VAT or transfer duty. The legislation will be clarified to ensure that at least one indirect tax will be applicable upon the transfer of the shares.
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