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.
Since COVID-19, VAT registration applications were electronically submitted to SARS and approved with relative ease. Over time, it appears that this ease of registration has led to abuse.
In order to address the potential for fraud and further illegitimate VAT registrations, SARS is implementing the followingwith immediate effect:
- A more stringent process will apply to all new VAT registration applications which could include the requirement that the applicant present themselves, in person, to their closest SARS branch office for validation and accreditation.
- Should an applicant be expected to visit a SARS branch office, such appointment must be pre-booked on the SARS website.
- All supporting documents required for the validation of registration must be submitted at the SARS branch on the day of the appointment.
- SARS will only register a person for VAT if it is satisfied that the application is lawful
Although SARS notes that more stringent registration requirements may give rise to inconvenience for honest taxpayers, such inconvenience is necessary to address perpetrators who effectively steal from the fiscus leading to an increase in the overall tax burden for honest taxpayers.
SARS reaffirmed that it is committed to paying legitimate VAT refunds to qualifying taxpayers, but made it clear that it will pursue criminal charges against perpetrators falsely registering for VAT and/or fraudulently claiming refunds.
In our view, the critical aspect which should be focussed on by SARS to address this abuse should be to suitably audit VAT refunds as opposed to implementing measures that may delay a VAT registration process. Historically when the registration process was more complex, this gave rise to delays in VAT registrations which impacted on business growth, but fraudulent VAT refund claims remained an issue. The balance sought to be achieved by SARS may, in our view, be better achieved in the interest of economic growth if the focus was more on the audit of a VAT refund rather than the VAT registration process.