An important objective and design principle of SARSs administrative platform is to balance the ease of VAT registration with the potential risk of abuse that this could give rise to: persons merely seeking to obtain a VAT number in order to claim fraudulent VAT refunds. In aMedia Releaseissued by SARS on 11 May 2023, it noted concern following a trend of suspicious VAT registrations during the month of April. In particular, SARS noted that its sophisticated risk system indicated that there was a significant increase in the number of VAT registrations during April. Upon further analysis by SARS it appears that a large number of such VAT registrations were, in their view, created with the intention of defrauding SARS.
Category: VAT
SCA rules on the imposition of USP where a taxpayer relied on an opinion
The South African Revenue Service (SARS) may impose penalties on taxpayers who make errors in their tax returns, but relief is available under certain circumstances. Understatement penalties (USPs) are levied in terms of section 222(1) of the Tax Administration Act, 2011 (TAA) and provide that in the event of an understatement by a taxpayer, the taxpayer must, in addition to the tax payable, pay a USP, unless it is the consequence of a bona fideinadvertent error. A provision in theTAAfurther states that SARS must remit a penalty imposed for a substantial understatement if it is satisfied that: the taxpayer was in possession of an opinion by an independent registered tax practitioner that was issued by no later than the date the relevant return was due; the opinion was based upon full disclosure of the specific facts and circumstances of the arrangement; and the opinion confirmed that the taxpayers position is Read More …
Another reminder that SARS bears the onus of proving understatement penalties
In the matter ofLance Dickson Construction CC v Commissioner for the South African Revenue Service, the High Court set aside the order of the Tax Court in favour of the South African Revenue Service (SARS) and upheld an appeal by Lance Dickson Construction CC (Taxpayer) with costs. The Taxpayer, in its tax return for the 2017 year of assessment, did not declare any proceeds from the disposal of certain property to a related entity, Kwali Mark Construction CC (KMC), as it believed and as stated in the agreement of sale between the Taxpayer and KMC, that capital gains tax (CGT) would be paid by the Taxpayer when the property was on-sold by KMC to an unrelated third-party and the relevant proceeds were received by the Taxpayer. Because these conditions were not fulfilled in the 2017 year of assessment, the Taxpayer did not declare proceeds on the disposal of the property Read More …
VAT on imported services payable by non-registered VAT vendors and goods sold in execution – the who, what and how of declarations to SARS
Author: Varusha Moodaley. On 1 June 2020, the South African Revenue Service (SARS) issued an external guide titled Manage Declaration for Non-Registered VAT Vendors (SARS Guide). The SARS Guide provides guidance to non-vendor recipients of imported services and in instances where goods are sold in execution of a debt, on how to settle their VAT liabilities with SARS. On 1 June 2020, the South African Revenue Service (SARS) issued an external guide titled Manage Declaration for Non-Registered VAT Vendors (SARS Guide). The SARS Guide provides guidance to non-vendor recipients of imported services and in instances where goods are sold in execution of a debt, on how to settle their VAT liabilities with SARS. The VAT principles applicable to imported services and goods sold in execution of a debt are first briefly described below.
VAT apportionment v direct attribution: A (preliminary) win for the taxpayer
Author: Gerhard Badenhorst. The debate between taxpayers and the South African Revenue Service (SARS) as to what constitutes a fair and appropriate apportionment formula to determine the deductible value added tax (VAT) incurred on expenses where the taxpayer makes both taxable and exempt supplies, is ongoing. However, it is up to the taxpayer to determine whether an expense incurred is wholly attributable to making taxable supplies, in which case the total amount of VAT incurred is deductible. SARS cannot rule beforehand on whether an expense is directly attributable to taxable supplies, by virtue of a notice published in terms of section 80(2) of the Tax Administration Act 28 of 2011 (GN No. 748 24 June 2016), known as the so-called no-rulings list.
Value-added tax & transfer duty: Clarity or confusion?
Author: Varusha Moodaley. Where fixed property is purchased by a VAT vendor from a non-vendor, transfer duty is payable thereon by the purchaser. The fixed property purchased from a non-vendor is regarded as second-hand goods in terms of the VAT, Act 89 of 1991 (VAT Act). To the extent that the property is purchased for the purpose of making taxable supplies, the purchasing VAT vendor is entitled to a notional input tax deduction equal to the tax fraction (15/115) of the lesser of the consideration in money paid by the vendor for the supply of the fixed property, or the open market value thereof.
SA Budget 2020/21 – Value-added tax
Despite much speculation regarding another increase in the VAT rate, it was announced that the VAT rate would remain unchanged. This is on the basis that a further increase in the VAT rate would not be possible without significant relief measures, either in the form of further zero-rated supplies or increased social grants to poor households at the same time as any increase. No further significant VAT amendments were announced.
VAT apportionment: An unintended penalty?
Author: Gerhard Badenhorst. The stated policy of the South African Revenue Service (SARS) not to make value-added tax (VAT) apportionment rulings effective retrospectively to prior financial years has been questioned on several occasions. The matter was recently considered by the Tax Court in the case of Taxpayer v Commissioner for the South African Revenue Service (VAT2063) [2019] ZATC2 (15November2019) where the Tax Court found in favour of SARS.
VAT on Grants versus Consideration for Supplies
Author: Leah Nieman. Non-profit organisations (NPOs) or Public Benefit Organisations (PBOs) often receive funding, payments, or consideration from public authorities or municipalities (Government). This frequently gives rise to uncertainty regarding the treatment of payments received from Government which could result in the VAT vendor treating the receipt incorrectly. If Government engages with a vendor to acquire goods or services, an actual supply is made. However, uncertainty arises if payment received from Government does not relate to the procurement of goods and services.
VAT Cross-Border E-Commerce Rules promulgated
Author: Des Kruger, a Webber Wentzel Consultant. The indirect taxation of cross-border e-commerce transactions have been high on the agenda for tax authorities worldwide. There is clearly a perception that much of these transactions are escaping indirect tax (essentially VAT) because the supplier and consumer are in different jurisdictions. Following the release of the OECD International VAT/GST Guidelines most VAT jurisdictions have adopted new rules for the taxation of cross-border e-commerce.