Author: Ben Strauss. Until recently it was smaller investors who bought and let residential property. But nowadays even listed Real Estate Investment Trusts (REITs) are building, buying and letting large portfolios of residential property. No doubt the investors are looking to satisfy the demand for residential property, and to realise better yields than may be achieved in commercial property. The value-added tax (VAT) rules on the building, buying, letting and selling of residential properties are not simple. It is worthwhile recapping some of the general principles that apply.
Category: VAT
VAT falling on small business
Author: Keith Engel (Moneyweb). Government needs to understand importance of not disrupting cash-flow. The South African government has consistently expressed its support for small business. This support includes tax incentives. However, the point consistently missed is the critical need for the government not to disrupt cash-flow, which is far more important than any of the so-called tax incentives to date.
Delayed VAT refunds ‘causing cash flow woes for small business’
Author: Amanda Visser (BDlive). Delayed refunds on Value-Added Tax (VAT) have increased significantly, causing cash flow problems for especially small and medium-sized enterprises. This is according to tax practitioners interviewed this week, who said it was also increasing the cost of doing business as businesses need to pay professionals to get back what had been rightfully theirs in the first place. Victor Terblanche, chairman of the South African Institute of Tax Professionals’ (SAIT’s) VAT committee, said the VAT Act did not provide for a timeframe for the payment of VAT refunds, or a timeframe for the finalisation of audits.
FORMER SARS OFFICIAL ARRESTED FOR R5-MILLION VAT FRAUD
Pretoria, 27 November 2015 – A chartered accountant and former SARS employee was arrested for alleged VAT fraud of more than R5-million at her place of work in Centurion earlier today. The fraud happened over a nine year period. The female suspect is a director of a closed corporation (cc) that provides consultancy and bookkeeping services. She is alleged to have submitted false VAT invoices and bank statements to SARS between 2007 and 2015 to substantiate VAT refund claims amounting to R5, 1 million. The investigation commenced after SARS’ risk engines identified the taxpayer for an audit due to the unusual refund trend that emerged over the years. Upon requesting supporting documentation, SARS’s investigators established through third party verification that fictional invoices had been submitted to SARS. They also found that bank statements that were submitted to substantiate refund claims were not authentic.
Contradictory legislation: VAT zero-rating of supplies to custom controlled areas / IDZ operators
Generally speaking, the export of movable goods qualifies for VAT zero-rating. The term ‘export’ is defined in the Value Added Tax Act, 1991 (“VAT Act) as inter alia that which is consigned or delivered by the vendor to the recipient at an address in an export country. An exception to the above zero-rating can be found in section 11(1)(m) of the VAT Act, where movable goods are supplied to a customs controlled area enterprise or an Industrial Development Zone (IDZ) operator in South Africa. According to this section of the Act, the VAT zero rating would be applicable if the goods are physically delivered to the enterprise or operator either by:
OECD delivers international standard for collection of VAT on cross-border sales
Governments have taken an important step towards ensuring that consumption taxes on cross-border transactions are effectively paid in the jurisdiction where products are consumed, while minimizing the risks that uncoordinated tax rules distort international trade. The decision by representatives of more than 100 countries and jurisdictions to endorse the new OECD International VAT/GST Guidelines as the preferred international standard for coherent and efficient application of Value Added Tax/Goods and Services Tax to the international trade in services was one of the highlights of the annual meeting of the OECD Global Forum on VAT on 5-6 November, in Paris, France. See Statement of Outcomes here.
VAT Refund Administrator (“VRA”) – VAT Refund Claims
The VRA is an entity appointed by the South African Revenue Services (“SARS”) to administer VAT refund claims on movable goods purchased and exported from South Africa, by qualifying purchasers not registered for VAT. Qualifying purchasers generally include foreign businesses purchasing movable goods from South African suppliers on which VAT at 14% was charged, and where the foreign purchaser is responsible for exporting the goods from South Africa via road, rail, sea or air through a designated commercial port. Where movable goods of a qualifying purchaser are exported from South Africa by a cartage contractor, the qualifying purchaser is not required to present themselves at the port of exportation.
VAT hike for SA ‘a matter of when’
Author: Roy Cokayne (IOL) An increase in VAT in South Africa was inevitable, said Citibank economist Gina Schoeman. The only question mark was about the timing of an increase in the VAT rate, she told a Ford breakfast yesterday. Schoeman stressed that South Africa had one of the lowest VAT rates in the world and one of the most efficient VAT collection streams. She said an increase in the VAT rate from 14 to 16 percent would add R30 billion to South Africa’s tax revenue and narrow the deficit by 4 percentage points. However, Schoeman said an increase in the VAT rate was hurtful to the consumer, which was the reason government was not keen on doing it as soon as most expected.
Claiming VAT prior to Registration
Author: Seelan Muthayan, Director of VAT at BDO South Africa Taxpayers are often unaware of their VAT registration liabilities, which can result in a retrospective VAT registration. This regularly leads to a liability for output tax on supplies made as amounts charged are generally deemed to be VAT inclusive. On the other hand, taxpayers may have incurred expenses during this period and may not be in a position to claim input tax deductions as they would not be in possession of valid tax invoices. This is as a result of them being registered for VAT when they incurred the expenses, with the tax invoices being rendered invalid as they would not contain the taxpayer’s VAT registration number.
Supreme court of appeal considers imprisonment for fraudulent VAT claims
By Esther van Schalkwyk (BDO South Africa) The Supreme Court of Appeal (SCA) recently handed down judgment in Grundling v The State and gave a prison sentence due to contraventions of the Value-Added Tax (VAT) Act. The appellant, Ms Grundling, was sentenced to 10 years in prison by the Pretoria Regional Magistrate’s Court, after pleading guilty to 30 counts of contravening the VAT Act. On appeal to the High Court, her sentence was reduced to 8 years. Her appeal to the SCA concerned the suitability of the sentence.