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Security around VAT Registrations and administration – Taxation
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| The South African Revenue Service has recently implemented a range of additional security measures to safeguard the VAT system from attempted abuse and fraud.
The new measures include more stringent verification of applications for VAT registration, investigations of existing VAT vendors who are under the turnover threshold and a review of risk measures for refunds. South Africa’s tax system is based on self-declaration and depends to large extent on the integrity of taxpayers to make full, accurate and honest disclosure and pay all tax that is due. The vast majority of VAT vendors are compliant and SARS thank them for making their fair contribution to the fiscus. However, monitoring of VAT registrations and refunds over the past six months by SARS has revealed a disturbing increase in attempted fraudulent registrations and other attempts to defraud the VAT system
As a result, applications must be accompanied by proof of ID, bank particulars and physical address of the business. Where applicants are unable to visit a SARS branch to apply in person or to send a legal representative, applications may be done via post but will require additional verification measures before activation. Where necessary, inspections of business premises will take place to check trading activity before activation of VAT accounts. SARS is also considering implementing additional verifications including the use of biometric tests (fingerprinting of applicants) for VAT and other tax registrations. In South Africa and internationally, the use of biometrics as a safety mechanism is growing in use and SARS is investigating this as a longer term solution.
Value-Added Tax (VAT) is a tax charged and collected by vendors on the sale of most goods or services. It is also charged on goods and some services, imported from places outside South Africa.
VAT is charged at a standard rate, which is 14%, and is paid each time a taxable supply is made. For certain goods and services, a special rate of 0% VAT (zero-rate) is applied, while a limited range of goods and services are exempt. Generally, businesses that are registered as vendors charge VAT on every sale of standard-rated goods and services (output tax) and claim credits for the VAT included in the price of their business purchases (input tax). The broad effect is that businesses are not affected by VAT and the economic cost of the VAT is actually borne by the final consumer, who cannot claim an input tax deduction. Output tax less the input tax in a particular tax period equals the amount payable/refundable to/by SARS.
Compulsory registration – If you are in business and making taxable supplies (i.e. standard-rated and zero-rated supplies), the value of these supplies is your taxable turnover. You must register for VAT within 21 days if your annual taxable turnover exceeds or is expected to exceed R1m
.Voluntary registration – If your annual taxable turnover is less than R1m but more than R20k, you can apply for voluntary registration if you can meet certain other conditions as well.
Calculating your annual turnover – Your annual taxable turnover is the gross business income (not the profit), excluding any: VAT included in your sales to your customers; Exempt supplies you make; and Sales not connected with your business in South Africa.
Commissioner may refuse to register a person for voluntary registration if any of the following requirements are not met by the applicant: The person has no fixed place of residence or business in South Africa; or Does not keep proper accounting records; or Has not opened a banking account in South Africa; or Has previously been registered as a vendor under VAT or General Sales Tax (GST) and failed to perform the duties of a vendor; or Has not met the minimum threshold requirement of R20 000 turnover for the past 12 months.
What does being registered for VAT mean? – If you are registered or required to be registered for VAT, you must – include VAT in the price of most goods and services you sell;
· keep proper VAT records and accounts;
· provide correct and accurate information to SARS;
· submit returns and payments on time;
· include VAT in your prices, advertisements and quotes;
· keep accurate accounting records for 5 years;
· produce relevant documents when required by SARS;
· notify SARS about any changes in your business, namely your address, trading name, partners, bank details and tax periods; and
· Issue tax invoices, debit and credit notes.
Adapted from “VAT – Small Vendors Guide” – SARS”
– Mwendabai –
(011 – 312 3149/ mkalaluka@iabcgroup.co.za)
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