Background
The Taxation Laws Amendment Act (31/2013) introduced legislative amendments aimed at streamlining the value added tax (VAT) registration process as contained in the Value Added Tax Act (89/1991).
In the 2013 Budget Minister of Finance Pravin Gordhan indicated that there would be efforts to reorganise the VAT registration process in order to ease the compliance burden of the registration requirements. This culminated in amendments being made to Sections 23(3)(b)(ii) and 23(3)(d) of the VAT Act, respectively.
The VAT Act requires any person that carried on an enterprise in South Africa to register as a VAT vendor where the total value of the taxable supplies made from the carrying on of such an enterprise exceeded, or was reasonably expected to exceed, R1 million in a 12-month period.
Prior to the amendments, Section 23(3)(b)(ii) of the VAT Act allowed persons that did not meet this R1 million threshold to register voluntarily as VAT vendors where the total value of taxable supplies made from the carrying on of an enterprise had already exceeded R50,000 in a 12-month period and it was expected that the value of such taxable supplies would exceed R50,000 in future.
Also, Section 23(3)(d) of the VAT Act provided that a person that continuously and regularly carried on an activity which could reasonably be expected to result in taxable supplies being made for consideration only after a period of time, and where the total value of taxable supplies could reasonably be expected to exceed R50,000 in a period of 12 months, was entitled to register as a VAT vendor.
Developments
A South African Revenue Service briefing note on the draft regulations for registration as VAT vendors was released earlier this year and draft regulations in terms of Sections 23(3)(b)(ii) and 23(3)(d) of the VAT Act were published for comment.
In an attempt to “ease the compliance-burden while guarding against fraud”,(1) the following amendments to the VAT registration process have been introduced with effect from April 1 2014:
Section 23(3)(b)(ii) of the VAT Act has been broadened to allow a person to register voluntarily as a VAT vendor where that person has not yet made any taxable supplies or has made taxable supplies which do not exceed R50,000, and there is a reasonable expectation that such a person will make taxable supplies exceeding R50,000 within 12 months from the date of registration.
Section 23(3)(d) now provides that if a person continuously and regularly carries on an activity of a nature set out in the regulations published by the minister and, in consequence of the nature of such activity, is likely to make taxable supplies only after a period of time, such person will be entitled to register as a VAT vendor. The draft regulations provide that these activities include agriculture, forestry, aquaculture, mining, construction, property development and infrastructure.
It will be interesting to see whether promulgation of these regulations will improve the process of VAT registration and ease the compliance burden that prospective VAT vendors have struggled with over the years.
Author: Heinrich Louw