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.
Following on the 2018 budget review in which the Minister increased the VAT rate to 15%, no further significant VAT amendments were announced. Clearing of VAT refund backlog In October 2018, the Minister stated in the Medium Term Budget Policy Statement that VAT refunds owing to vendors amounted to massive R41.8 billion. SARS made an effort to pay the outstanding refunds since then, which now stands at R31 billion. However, according to a SARS estimate, the outstanding refunds should be about R22 billion if uncompleted verifications and refunds withheld due to suspected fraud is taken into consideration. This effectively means that by reducing the VAT refund backlog from R41.8 billion to an acceptable R22 billion, the total expected additional revenue resulting from the increase in the VAT rate in the first year following the increase on 1 April 2018, is applied to pay outstanding VAT refunds.
Authors: Seelan Muthayan and Ayanda Masina (BDO South Africa). Increase in the VAT rate The Minister of Finance in the budget speech announced an increase in the VAT rate to 15%. The much anticipated increase is the first increase in the VAT rate since 1993. The VAT rate will increase with effect 1 April 2018. The provisions of the VAT Act relating to the application of an increase in the tax rate will apply to transactions where the applicable tax rates overlap. To counter the effect of the increase in the VAT rate, relief will be granted in the form of the current zero rating of basic foodstuff and an above average increase in social grants. Electronic Services Amendment of the Regulations In 2014, National Treasury brought electronic services provided by foreign businesses/ non-residents to South African residents into the South African VAT net. This new activity/type of supply was Read More …
Author: Gerhard Badenhorst (Director at Cliffe Dekker Hofmeyr). Many residential property developers will kick off 2018 with a major cash flow challenge as a result of a substantial value added tax (VAT) liability which they may face in respect of the temporary letting of residential units which have been developed for resale.
Author: Varusha Moodaley (Senior Associate at Cliffe Dekker Hofmeyr). Human beings crave certainty even when it limits them. Robin S. Sharma. In practice, circumstances or proposed transactions may arise in terms of which the value-added tax (VAT) implications flowing therefrom are not always clear. It is a persons very desire for certainty that underlies the provisions of the Value-Added Tax Act, No 89 of 1991 (VAT Act) and the Tax Administration Act, No 28 of 2011 (TAA) that enables the Commissioner of the South African Revenue Service (SARS) to issue rulings regarding the VAT treatment of supplies made to or by a vendor in the course or furtherance of his enterprise.
Author: Varusha Moodaley. Subjection to certain exceptions, the Value-Added Tax Act, No 89 of 1991 (VAT Act) entitles a vendor to claim a notional input tax deduction in respect of second-hand goods acquired under a non-taxable supply, where such second-hand goods are acquired from a resident of the Republic for the purpose of consumption, use or supply in the course of making taxable supplies.
Author: Varusha Moodaley (Senior Associate at Cliffe Dekker Hofmeyr). An input tax deduction may be claimed when VAT is incurred on goods and services acquired for the purpose of consumption, use or supply in the course of making taxable supplies. The entitlement of a vendor to claim input tax deductions in respect of expenses incurred is generally not disputed where a vendor makes wholly taxable supplies. VAT is therefore generally not considered to be a large component of a businesss cost base as most VAT registered businesses will be entitled to claim a credit or refund of VAT paid to the extent that they conduct an enterprise that makes taxable supplies.
Author: Beric Croome and Gerhard Badenhorst (Tax Executives at ENSafrica). The South African National Treasury indicated in the 2016 Budget Review that there are differing views as to whether the remuneration paid to a non-executive director (NED) is subject to employees tax, that is, pay-as-you-earn (PAYE) and whether a NED should register for value-added tax (VAT). It was suggested that these issues be investigated to provide clarity. In its final response document on the Taxation Laws Amendment Bill, 2016, National Treasury and the South African Revenue Service (SARS) proposed that SARS address the uncertainties relating to VAT and PAYE in relation to NED remuneration in an interpretation note.
Author: Seelan Muthayan, VAT Director, BDO SA. Expanding the VAT Base In order to expand the current VAT base, it is proposed in 2018/19 that the supply of fuel will no longer be zero rated. This will no doubt have a direct impact on transport costs. Government will look at either freezing or reducing fuel levies in order to reduce the impact on transport cost. As part of the focus globally to deal with base erosion and profit shifting, more attention will be given to businesses providing foreign electronic services to South African Consumers. As previously mentioned in the 2015 budget the regulations dealing with which electronic services are subject to VAT will be updated with a view to removing any uncertainties and current practical difficulties being experienced.
Author: Heinrich Louw. On 21 October 2016 judgment was handed down by the High Court (Gauteng Division, Pretoria) in the matter of BMW South Africa (Pty) Ltd v The Commissioner of the South African Revenue Service (as yet unreported). Briefly, the applicant (Applicant) was a vendor for purposes of Value-added Tax (VAT). The respondent, being the South African Revenue Service (SARS), had made a finding that the Applicant did not pay certain amounts of VAT due in respect of the October 2011 to February 2012 VAT periods.