Amendments to schedule 2 part B for fruit and vegetables
It is proposed that items 12 and 13 of part B of schedule 2 of the Value‐Added Tax (VAT) Act (1991) be amended to clarify that the zero‐rating of VAT does not apply to pre‐cut or prepared fruit or vegetables. Amendments to schedule 1 part 1 of the Customs and Excise Act (1964) may also be needed in order to align both the schedules.
VAT treatment of rental stock paid in terms of the National Housing Programme
Amendments to section 8(23) of the VAT Act that came into effect from 1 April 2017 have resulted in confusion about the VAT status of rental stock under the National Housing Programme. It is proposed that amendments be made to the VAT Act to clarify the VAT status of this rental stock.
Providing VAT relief for non‐resident lessors of parts of ships, aircraft or rolling stock required to deregister as a result of recent amendments to the VAT Act
Previously, foreign lessors of parts of ships, aircraft or rolling stock were required to register for VAT because they were not covered under the proviso (xiii) exclusion in the definition of enterprise in section 1(1) of the VAT Act. However, the addition in 2023 of the words or parts directly in connection thereto to proviso (xiii) implied that foreign lessors were now required to deregister. This amendment had the unintended consequence of such vendors now facing an output tax liability under section 8(2). It is proposed that the VAT Act be amended to provide relief from this unintended consequence.
Clarifying the VAT treatment of the Mudaraba Islamic financing arrangement
Section 8A of the VAT Act does not address the VAT treatment of Mudaraba financing arrangements (Islamic financing arrangements, mostly used as an investment or transactional account). This causes disparity with the Income Tax Act and uncertainty as to the VAT treatment thereof. It is proposed that the VAT Act be amended to clarify this.
Clarifying the VAT treatment of supply of services to non‐resident subsidiaries of companies based in the Republic
The definition of resident of the Republic (of South Africa) in section 1(1) of the VAT Act refers to the definition of resident in section 1 of the Income Tax Act. The proviso to this definition in the VAT Act envisages a resident as someone conducting an enterprise in the Republic. Non‐resident subsidiaries of companies based in the country may qualify under the definition of resident in the Income Tax Act (as a result of being effectively managed in the Republic), and hence in the VAT Act as well. As a result, services supplied by the resident to the non‐resident subsidiary may not be zero‐ rated. Since these services will be effectively consumed outside the country, it is proposed that the VAT Act be amended to exclude such subsidiaries from the definition of resident of the Republic.
Reviewing the foreign donor funded project regime
The VAT Act requires each foreign donor funded project, as defined in the VAT Act, to be separately registered for VAT as a branch of the implementing agency. This results in an increased administrative burden for recipients of foreign donor funding. To ease the administrative burden on the implementing agents, it is proposed that the foreign donor funded project regime be reviewed.
Updating the Electronic Services Regulations
Government proposes to revise and update the Electronic Services Regulations (and relevant sections of the VAT Act) to keep up with changes in the digital economy and ease the administrative burden. The scope of the regulations should be limited to only non‐resident vendors supplying electronic services to non‐vendors or end consumers.
Regulations on the domestic reverse charge mechanism relating to valuable metal
Effective from 1 July 2022, government introduced regulations to curb VAT fraud schemes in relation to gold and goods containing gold. The regulations exclude from the definition of valuable metal the gold produced by holders, as defined under the Mineral and Petroleum Resources Development Act (2002), or a person contracted to such holder. It has come to governments attention that these schemes and malpractices have now shifted to the primary gold sector. It is proposed that the regulations be revised to foreclose these schemes.
Accounting for VAT in the gambling industry
In 2019 changes were made to section 72 of the VAT Act, which deals with the SARS Commissioners discretion to make arrangements or decisions regarding the application of the act to specific situations where the manner in which a vendor or class of vendors conducts their business leads to difficulties, anomalies or incongruities. These changes affected the arrangements or decisions made on or before 21 July 2019. Government has reviewed the impact of these decisions to ascertain whether they should be discontinued or incorporated into the VAT Act. The amended section 72 affected the gambling industry and more specifically table games of chance, which previously accounted for VAT in terms of a section 72 arrangement or decision with SARS. It is proposed that this specific ruling relating to accounting for VAT for table games of chance be incorporated into the VAT Act.
Prescription period for input tax claims
To ease the administrative burden on both taxpayers and SARS, it is proposed that the VAT Act be amended in relation to the tax period in which past unclaimed input tax credits may be claimed. To ensure ease of audit functions and clarity of returns in this regard, it is also proposed that the act be amended to clarify that such deductions be made in the original period in which the entitlement to that deduction arose.
VAT claw‐back on irrecoverable debts subsequently recovered
The current provisions of the VAT Act entitle a recipient of an account receivable at face value on a non‐recourse basis to a deduction of the tax amounts written off as irrecoverable. However, the act does not provide for any claw‐back of these deductions on amounts subsequently recovered. It is proposed that the VAT Act be amended to provide for this.
Supplies by educational institutions to third parties
It has come to governments attention that the VAT treatment of supplies provided by educational institutions to third parties is unclear, resulting in differing treatment of these supplies. It is proposed that the VAT Act be amended to clarify the policy intention relating to these supplies.