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EXPLANATORY GUIDE
Replacing the Companies Act, No. 61 of 1973
© Department of Trade and Industry, 2010.
the dti Campus
77 Meintjies Street
Sunnyside
Pretoria
0002
the dti
Private Bag X84
Pretoria
0001
the dti Customer Contact Centre: 0861 843 384
the dti Website: www.thedti.gov.za
DISCLAIMER
This information booklet serves as an explanatory guide to, and general reference tool about the stipulations of the
Companies Act, No. 71 of 2008. It may not be used as an exhaustive legal reference or substitute for the Act.
CONTENTS
BACKGROUND........................................................................................................................6
MAIN FEATURES OF THE COMPANIES ACT........................................................................ 8
COMPANY LEGISLATION PLAN........................................................................................... 12
INSTITUTIONAL REFORMS.................................................................................................. 14
The Companies and Intellectual Property Commission......................................................... 14
The Take-over Regulation Panel............................................................................................ 15
The Financial Reporting Standards Council........................................................................... 15
The Companies Tribunal........................................................................................................ 15
CATEGORIES OF COMPANIES............................................................................................ 18
Non-Profit Companies............................................................................................................ 18
Profit Companies....................................................................................................................18
Personal Liability Companies................................................................................................. 19
State-Owned Companies....................................................................................................... 19
Public Companies.................................................................................................................. 19
Private Companies................................................................................................................. 19
THE FUTURE OF CLOSE CORPORATIONS........................................................................ 22
COMPANY FORMATION....................................................................................................... 24
COMPANY NAMES................................................................................................................ 26
MEETINGS AND NOTICES................................................................................................... 30
DUTIES OF DIRECTORS...................................................................................................... 32
ACCOUNTABILITY AND TRANSPARENCY.......................................................................... 34
Flexible Regime......................................................................................................................34
Rotation of Auditors................................................................................................................ 34
Audit Committees................................................................................................................... 35
Appointment of a Company Secretary................................................................................... 35
COMPANY FINANCE............................................................................................................. 38
COMPANY GOVERNANCE................................................................................................... 40
BUSINESS RESCUE REGIME.............................................................................................. 42
REMEDIES.............................................................................................................................46
ENFORCEMENT....................................................................................................................48
CONTACT DETAILS............................................................................................................... 50
4 THE COMPANIES ACT, NO. 71 OF 2008
AN EXPLANATORY GUIDE
THE COMPANIES ACT, NO. 71 OF 2008 5
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BACKGROUND
6 THE COMPANIES ACT, NO. 71 OF 2008
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BACKGROUND
The process of developing the Companies Act, No. 71 of 2008 began in earnest over five
years ago. For guidance, the developers looked to South African Company Law for the 21st
Century: Guidelines for Corporate Law Reform (May 2004), a policy document developed by
the Department of Trade and Industry (the dti). The ultimate goal in repealing the Companies
Act, No. 61 of 1973, was to ensure that the regulatory framework for enterprises of all types
and sizes promoted growth, employment, innovation, stability, good governance, confidence
and international competitiveness.
The Companies Act was introduced in Parliament during 2008 and published for general
comment on 27 June 2008 as Bill No. 61 of 2008. The Portfolio Committee on Trade and
Industry received a large volume of written comments, as well as oral representations during
the public hearings on the Companies Bill, in the latter half of 2008. These comments and
representations had a significant influence on the content of the Bill, as finally approved by the
Committee and Parliament in November 2008. The Act was translated into Afrikaans as the
other official language and signed-off by the President in April 2009. Due to a sunset clause in
the Act, the Act could not be put into operation within a period of one year after promulgation. It
is envisaged that the Act will become effective in April 2011, when all sub-delegated legislation
matters, including regulations, have been resolved.
THE COMPANIES ACT, NO. 71 OF 2008 7
AN EXPLANATORY GUIDE
MAIN FEATURES OF THE COMPANIES ACT
8 THE COMPANIES ACT, NO. 71 OF 2008
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MAIN FEATURES OF THE COMPANIES ACT
The main features of the Companies Act, 2008 are as follows:
• It has been modernised and brought into line with international best practices. This
applies in particular to public companies, communications and corporate governance. At
the same time, it has been harmonised with other South African legislation, such as the
Promotion of Access to Information Act (PAIA) and the Electronic Communications and
Transactions (ECT) Act.
• It has been simplified and made less prescriptive to make it easier to understand and
apply, in the following ways:
o It was drafted in plain language and the number of sections has been reduced from
450 to 225.
o The rules relating to pre-incorporation contracts have been simplified, making it
possible for any person to enter into a pre-incorporation contract.
o Fewer statutory forms are required to incorporate a company. Rather than a
memorandum and articles of association, a company’s constitutional documents
will now consist of one document only, the Memorandum of Incorporation (MoI).
The MoI sets out the rights, duties and responsibilities of shareholders, directors
and others in relation to the company. A company may alter certain provisions of
the Act in its MoI, but there are specific provisions that may not be altered that
apply notwithstanding the provisions of the Memorandum of Incorporation. In this
way, certain protections are built into the Act. All current articles and memoranda of
association will automatically be converted to an MoI.
o Companies are allowed to change certain requirements according to their
own circumstances – in addition to the MoI, companies can now make certain
governance rules themselves.
o Different types of companies must comply with different rules. This
means smaller companies have less arduous responsibilities than
large public companies when it comes to corporate governance and
financial reporting. For instance, smaller companies will be subject
to less taxing financial reporting standards than larger companies.
THE COMPANIES ACT, NO. 71 OF 2008 9
AN EXPLANATORY GUIDE
• The regulatory burden on companies has been reduced, but there are stricter
accountability and transparency requirements for state-owned and public companies.
Shareholders have extensive rights to obtain information from the company, including
access to the securities register and minutes of directors meetings. Greater director
accountability and the appropriate participation of all stakeholders ensure improved
transparency.
• High standards of corporate governance are encouraged, with minimum accounting
standards having been set for annual reports. So too, there are stricter provisions
governing directors’ conduct and liability, and their common law duties and liabilities
have now been codified. A new feature is that an act of a company is not void solely
because the company did not have the capacity to do the act or the directors did not
have the authority to perform the act on behalf of the company. No person may rely on
this lack of capacity, power or authority in legal proceedings, except in certain specified
circumstances. A company is specifically prohibited from reckless, negligent or fraudulent
trading, and persons who were knowingly party to such conduct are guilty of an offence.
• The Act contains new structural arrangements, with the introduction of new regulatory
institutions and the transformation of others. Companies are now classified as either
profit or non-profit companies.
• Take-overs and fundamental transactions receive greater attention, with radical changes
to the take-over provisions contained in the Companies Act, 1973. This applies particularly
with regard to minority shareholding and appraisal rights for dissenting minority
shareholders. New rules relate mergers and amalgamations, allowing two companies to
merge into one entity, provided that the solvency and liquidity test is satisfied and certain
approvals are obtained.
• Capital maintenance will now be based on solvency and liquidity rather than a minimum
amount of share capital consisting of par value shares and nominal value shares.
• The concept of business rescue is broadened and formalised, and provision is made for
a modern business rescue regime. Schemes of arrangement are dealt with separately
under the Act.
• There is a move towards the decriminalisation of company law and the establishment of
bodies for the effective enforcement of the legislation. However, minority shareholders
and other stakeholders, such as employees, will have better protection, powers and
remedies under the Act, including the ability to bring class actions.
10 THE COMPANIES ACT, NO. 71 OF 2008
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THE COMPANIES ACT, NO. 71 OF 2008 11
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COMPANY LEGISLATION PLAN
12 THE COMPANIES ACT, NO. 71 OF 2008
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COMPANY LEGISLATION PLAN
All existing close corporations will retain their current status until such time as their members
decide that it is in their interest to convert to a company. Therefore, the Act provides for the
indefinite continued existence of the Close Corporations Act. However, it also provides for the
closing of that Act as an avenue for the incorporation of new entities or for the conversion of
any existing companies into close corporations as of the effective date of the Companies Act.
The Department of Justice and Constitutional Development has informed the dti of proposals
to develop uniform insolvency legislation. If brought to use, this legislation would overlap and
may conflict with the regime set out in the current Companies Act, 1973 for dealing with and
winding up insolvent companies. The Act therefore provides for transitional arrangements that
will retain part of the current regime for the interim until any new uniform insolvency law is
introduced.
THE COMPANIES ACT, NO. 71 OF 2008 13
AN EXPLANATORY GUIDE
INSTITUTIONAL REFORMS
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INSTITUTIONAL REFORMS
The Companies Act proposes the establishment of a new institution, the Companies and
Intellectual Property Commission. It furthermore proposes the transformation of three existing
company law entities, namely the Take-over Regulation Panel, the Financial Reporting
Standards Council and the Companies Tribunal. Together, these four institutions, as discussed
in more detail below, will provide for a more predictable regulatory and enforcement system.
The Companies and Intellectual Property Commission
Chapter 8 of the Act provides for the migration of the Companies and Intellectual Property
Registration Office (CIPRO) into a newly established organ of state with significantly expanded
functions and powers, to be known as the Companies and Intellectual Property Commission
(“the Commission”). The Commission will be a merging of CIPRO and the enforcement division
of the dti, known as the Office of Company and Intellectual Property Enforcement (OCIPE).
In particular, most of the administrative functions currently assigned to the Minister under
the Companies Act, 1973, apart from the appointment of members of the institutions and the
making of regulations, are de-politicised and placed within the jurisdiction of the Commission.
However, the Minister retains the authority to issue policy directives to the Commission.
The main functions of the Commission are as follows:
• Register companies, co-operatives and intellectual property rights and maintain such
register;
• Disclose information on its register;
• Promote education about, and awareness of, company and intellectual property law;
• Promote compliance with the relevant legislation;
• Ensure the efficient and effective enforcement of relevant legislation;
• Monitor compliance with and contraventions of financial reporting standards, and make
recommendations in this regard; and
• Report to, conduct research for, and advise the Minister of Trade and Industry, on matters
of national policy relating to company and intellectual property law.
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The Take-over Regulation Panel
The Act proposes the transformation of the existing Securities Regulation Panel (SRP) into
an independent organ of state, the Take-over Regulation Panel (‘‘the Panel‘‘). The Panel will
have powers similar to those currently vested in the SRP. However, under the Act its authority
to prescribe rules will be exercised in consultation with the Minister, who alone will have final
authority to make regulations.
The Financial Reporting Standards Council
The Financial Reporting Standards Council (FRSC) is to be re-established as an advisory
committee to the Minister. It will be tasked with advising the Minister on regulations
establishing financial reporting standards which will govern the form, content and maintenance
of companies’ financial records and statements.
The Companies Tribunal
The Act provides for one new body, the Companies Tribunal (‘‘the Tribunal’’), which will be an
independent organ of state. The Tribunal will have a dual mandate, first, to serve as a forum
for voluntary alternative dispute resolution in any matter arising under the Act and second, to
carry out reviews of administrative decisions made by the Commission.
Decisions of the Tribunal will be binding on the Commission, but not on any third party,
which has a constitutional right of access to a court for further review. As is the case under
the Companies Act, 1973, the High Court remains the primary medium for the resolution of
disputes and the interpretation and enforcement of the proposed Companies Act.
16 THE COMPANIES ACT, NO. 71 OF 2008
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THE COMPANIES ACT, NO. 71 OF 2008 17
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CATEGORIES OF COMPANIES
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CATEGORIES OF COMPANIES
The Companies Act, 2008 provides for two categories of companies, namely non-profit and
profit companies.
Non-Profit Companies
Non-profit companies take the place of companies limited by guarantee and section 21
companies. Non-profit companies are characterised by the following:
• They are incorporated for a “public benefit purpose”.
• Income and property may not be distributed to the incorporators, members, directors
or officers of a non-profit company, except for reasonable compensation for services
rendered by them.
• The name of a non-profit company will end with “NPC”.
• A minimum of three persons, called incorporators, must complete and sign the MoI.
• A minimum of three directors must be appointed.
• All of a non-profit company’s assets and income must be used to advance its stated
objects, as set out in its MoI.
• Non-profit companies are subject to a varied application of the Act, as set out in section 10.
• A special set of fundamental rules for non-profit companies is set out in Schedule 1 of
the Companies Act, 2008. According to these rules, the objects of non-profit companies
remain subject to the current principles. Furthermore, on their dissolution, non-profit
companies are restricted in terms of the distribution of any residual assets. These special
rules also include various other matters unique to non-profit companies.
Profit Companies
Profit companies are categorised as companies without restrictions on the transferability of
their shares and that do not prohibit offers to the public, i.e. larger public companies, and
companies that do contain restrictions on the transferability of their shares and that prohibit
offers to the public, i.e. smaller private companies. They may take one of four different forms: a
personal liability company, a state-owned company, a public company and a private company.
THE COMPANIES ACT, NO. 71 OF 2008 19
AN EXPLANATORY GUIDE
Personal Liability Companies
A personal liability company is comparable to companies contemplated in section 53(b) of the
Companies Act, 1973. Its name must end with the word “Incorporated” or its abbreviation “Inc.”.
State-Owned Companies
State-owned companies were often incorporated or registered under the Companies Act, 1973,
but were not recognised in that Act as requiring separate legislative treatment in respect of
certain matters to avoid conflict or overlap with other legislation specifically applicable to them,
and not to companies. The name of a state-owned company must end with the expression
“SOE Ltd.”.
Public Companies
Public companies are comparable to companies of the same status under the Companies Act,
1973. They are characterised by the following:
• Their MoI permits them to offer shares to the public but restricts, limits or negates their
right of pre-emption.
• The name of a public company must end with the word “Limited” or its abbreviation, “Ltd.”.
• The incorporators of a public company must consist of at least one person. The word
“person” includes a juristic person, as provided under section 1 of the Act.
• A public company must have at least three directors.
Private Companies
Private companies are comparable to companies of the same status under the Companies
Act, 1973. They are characterised by the following:
• They are subject to fewer disclosure and transparency requirements.
• A private company will still be prohibited from offering its shares to the public and
20 THE COMPANIES ACT, NO. 71 OF 2008
AN EXPLANATORY GUIDE
the transferability of its shares will be restricted, but it may now have more than 50
shareholders.
• The name of a private company must end with the expression “Proprietary Limited” or its
abbreviation “(Pty) Ltd.”.
• The board of a private company must comprise at least one director, or any other minimum
number as stipulated in its MoI. Each incorporator is a first director of the company.
• In a further effort to create a more flexible regime, the Bill makes exceptions for companies
of which –
• All the shares are owned by related persons, so that there is less need to protect minority
shareholders; or
• All of the shareholders are directors, so that there is less need to seek shareholder
approval for certain board actions.
THE COMPANIES ACT, NO. 71 OF 2008 21
AN EXPLANATORY GUIDE
THE FUTURE OF CLOSE CORPORATIONS
22 THE COMPANIES ACT, NO. 71 OF 2008
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THE FUTURE OF CLOSE CORPORATIONS
Under the Act, smaller businesses will no longer automatically be subject to strict financial
reporting and auditing requirements. This allows companies with characteristics very similar
to those of close corporations to be formed. In effect, it means there will be no further need
for close corporations.
Once the Companies Act, 2008 comes into operation, it will not be possible to register any new
close corporations, nor may companies be converted into close corporations.
Existing close corporations will be treated as follows:
• They will exist indefinitely.
• They will be treated as private companies, and the Close Corporations Act will be brought
into line with legislation on private companies.
THE COMPANIES ACT, NO. 71 OF 2008 23
AN EXPLANATORY GUIDE
COMPANY FORMATION
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COMPANY FORMATION
The Act gives effect to the essential core principle that the formation of a company is an action
by persons in the exercise of their constitutional right to freedom of association combined with
their common law right to freedom of contract.
As such, the Act reflects, in both its language and its substance, the principle that the
incorporation of a company is a right, rather than a privilege bestowed by the State. The Act
accordingly places minimal requirements on the act of incorporation.
A company is incorporated by the adoption of an MoI, which is the sole governing document
of the company. The Act imposes certain specific requirements on the content of an MoI which
are necessary to protect the interests of shareholders in the company. It further provides a
number of default rules which companies may accept or alter as they wish to meet their needs
and serve their interests.
In addition, the Act allows for companies to add to the required or default provisions to address
matters not addressed in the Act itself, but every provision of every MoI must be consistent
with the Act, except to the extent that it expressly contemplates otherwise. In other words,
a company cannot fundamentally ‘contract out’ of the Companies Act, 2008. For companies
wishing to, the Act provides for the simplest possible form of incorporation by use of a standard
form of MoI which permits the incorporators to accept the required provisions, as well as the
default provisions with or without alteration.
THE COMPANIES ACT, NO. 71 OF 2008 25
AN EXPLANATORY GUIDE
COMPANY NAMES
26 THE COMPANIES ACT, NO. 71 OF 2008
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COMPANY NAMES
The Companies Act, 2008 retains the broad outlines of the existing regime for company
names. In particular, it continues the practice of name reservation, but this will no longer be
mandatory. The name reservation process will no longer be a separate, formal pre-registration
process. If a proposed name is rejected, then the registration number becomes the name of
the company.
Transitional provisions allow for names registered or reserved under the current regime to
continue to be so registered or reserved under the Act.
With regard to the criteria for acceptable names, the Act proposes that maximum effect be
given to the constitutional right of freedom of expression. To this effect, the Act restricts a
company name only as far as necessary to:
• Protect the public from misleading names which falsely imply an association that does
not in fact exist;
• Protect the interests of the owners of names and other forms of intellectual property from
other persons misappropriating the first person’s reputation and standing; and
• Protect the society as a whole from names that are hateful or otherwise of a negative nature.
Further to the above, the Act, 2008 also contains provisions to prevent ‘name squatting’.
Names can be forwarded to the Human Rights Commission for their approval if any
uncertainty exists as to whether a name is offensive or not.
Except for the restrictions mentioned above, there will be no further administrative discretion
to reject names as is found in the Companies Act, 1973. In particular:
• Symbols will be allowed in company names.
• All languages will be accepted, as well as translations of names.
As regards associated names, the Commission will require proof from the associated company
that a similar name is to be allowed.
THE COMPANIES ACT, NO. 71 OF 2008 27
AN EXPLANATORY GUIDE
It is a criminal offence to contravene the following protective measures:
• A company has to disclose its full name and registration to any person on demand.
• A company may not misstate its name or registration number in such a way that it would
be misleading or likely to deceive anyone.
• No un-authorised person may use the name of a company to create the impression that
that person is acting on behalf of the company.
• No person may use any form of name to create a false impression that that name is the
name of a company.
28 THE COMPANIES ACT, NO. 71 OF 2008
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THE COMPANIES ACT, NO. 71 OF 2008 29
AN EXPLANATORY GUIDE
MEETINGS AND NOTICES
30 THE COMPANIES ACT, NO. 71 OF 2008
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MEETINGS AND NOTICES
Meetings are regulated in terms of section 62 of the Companies Act, 2008.
As regards attendance of meetings, the Act provides that shareholders can be represented
by way of a written proxy, which is valid for one year. Physical attendance is not mandatory,
and meetings may be conducted entirely by electronic communication. Alternatively, some
members may participate in this manner. The requirement is that they must be able to
communicate simultaneously.
Notice periods for meetings are as follows:
• 15 business days for public companies, and
• 10 business days for private companies.
The rights of debenture holders can be altered only by resolution of the debenture holders.
The Act provides that the majority for a special resolution, such as to amend the MoI, is 75%
of shares. The majority for an ordinary resolution is 51%. The MoI can alter these percentages,
but not lower than 65% for a special resolution or higher than 60% for an ordinary resolution.
The quorum for all resolutions is 25% of voting shares.
THE COMPANIES ACT, NO. 71 OF 2008 31
AN EXPLANATORY GUIDE
DUTIES OF DIRECTORS
32 THE COMPANIES ACT, NO. 71 OF 2008
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DUTIES OF DIRECTORS
Directors need to know their rights and must be aware of what is expected of them. They are
subject to the common law as found in court rulings and judgments.
The Companies Act, 2008 introduces a partial codification of directors’ duties. These duties
include both a fiduciary duty and a duty of reasonable care, which operate in addition to the
existing common law duties. Section 76, in particular, requires a director to act in good faith
and for a proper purpose in the best interests of the company. A director should furthermore
act with the degree of care, skill and diligence that may reasonably be expected of a person
carrying out such functions and having the same skill and experience of that director – the
reasonable man/woman test.
Directors are required to disclose any “personal financial interests”. They may not use their
position as director or information gained as a director to make a secret profit or gain advantage
for themselves or someone else or to cause harm or detriment to the company.
The Act deals comprehensively with the election, disqualification, vacancies, removal,
meetings, resolutions and liabilities of directors.
THE COMPANIES ACT, NO. 71 OF 2008 33
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ACCOUNTABILITY AND TRANSPARENCY
34 THE COMPANIES ACT, NO. 71 OF 2008
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ACCOUNTABILITY AND TRANSPARENCY
Flexible regime
The Companies Act, 2008 aims to provide a flexible regime that balances accountability and
transparency, with less of a regulatory burden. To that end, it sets certain common requirements
for all companies. Differentiated requirements depend on the company’s wider responsibility
to the public and the social and economic impact that the company’s operations have. This
flexibility is illustrated by the following provisions:
• All companies must prepare annual financial statements (AFSs), unless the company
can satisfy the Commission that it meets certain criteria.
• Public companies are subjected to a more demanding regime, with the added requirement
that their AFSs have to undergo an annual audit.
• All companies have to file annual returns with the Commission.
• Public companies have to file a copy of their audited AFSs with their annual return.
• Public companies must appoint a company secretary, auditors and an audit committee.
• Certain private companies with a greater responsibility to the wider public as a
consequence of their significant social or economic impact may be required to have their
AFSs audited. All other companies must be either voluntarily audited or independently
reviewed.
• All financial statements, or a summary thereof, must satisfy the prescribed financial
reporting standards. These standards may vary for different categories of companies
but must be consistent with International Financial Reporting Standards as set by the
International Accounting Standards Board.
• All public and certain private companies must appoint an auditor.
Rotation of Auditors
The same individual may not serve as the auditor or designated auditor of a company for
more than five consecutive financial years. So too, if an individual stops being the auditor or
designated auditor of a company after two or more consecutive years, he or she may not be
appointed as such again for at least five more financial years.
THE COMPANIES ACT, NO. 71 OF 2008 35
AN EXPLANATORY GUIDE
Audit Committees
Public companies and state-owned enterprises must appoint audit committees at each
annual general meeting. The Act prescribes the duties of an audit committee, which include
determining the fees to be paid to the auditor and the auditor’s terms of engagement.
Appointment of a Company Secretary
A private company will generally not need to appoint a company secretary. However, public
companies and state-owned companies are obliged to appoint company secretaries, and the
Act prescribes their duties. These include the following:
• Providing the directors of the company with guidance;
• Making them aware of relevant laws and any failure to comply;
• Recording minutes in accordance with s242;
• Certifying in the annual financial statements of the company that the company has lodged
With the Registrar all returns required of a public company in terms of the Act and that all
such returns are true, correct and up to date;
• Ensuring that a copy of the company’s annual financial statements is sent, in accordance
with section 302, to every person who is entitled thereto; and
• Filing information returns in terms of the annual transparency and accountability report.
If a person is not eligible to be a company secretary in terms of the Act, that person will be
regarded as having resigned when the Act becomes effective. So too, if a company does not
have a secretary as required by the Act, the position must be filled once it becomes effective.
If the company secretary is removed from office, the secretary may require the company
to include a statement by the secretary in that year’s annual financial statements about the
circumstances surrounding the removal.
36 THE COMPANIES ACT, NO. 71 OF 2008
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THE COMPANIES ACT, NO. 71 OF 2008 37
AN EXPLANATORY GUIDE
COMPANY FINANCE
38 THE COMPANIES ACT, NO. 71 OF 2008
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COMPANY FINANCE
The Act provides for a shift from a capital maintenance regime based on par value to one
based on solvency and liquidity. Shares will no longer have a nominal or par value, and the
board may issue authorised shares only for consideration or other benefit to the company.
Existing par value shares remain valid for so long as they are in existence, and regulations
govern the transition of such shares to the new regime.
The solvency and liquidity test consists of two parts:
1. The assets of the company, fairly valued, must equal or exceed its liabilities, fairly valued
2. The company must be able to pay its debts as they become due in the ordinary course
of business for 12 months after the date of the test, or 12 months after a distribution to
shareholders.
The interests of minority shareholders are still protected in that shareholders also have to
approve share and option issues to directors and other specified persons, or financial
assistance for share purchase, or any financial assistance to a director or related person.
The solvency and liquidity test must be satisfied if:
• The company purchases its own shares back from a shareholder.
• A company’s subsidiary purchases shares in its holding company.
• The company provides financial assistance to any person to purchase or subscribe for
any of the company’s shares.
• The company makes a distribution (including the payment of dividends).
• The company provides a director with financial assistance.
• The company becomes party to a statutory merger.
Offers of shares to the public by public companies are subject to some modifications to ensure
closer correlation with stock exchange requirements.
THE COMPANIES ACT, NO. 71 OF 2008 39
AN EXPLANATORY GUIDE
COMPANY GOVERNANCE
40 THE COMPANIES ACT, NO. 71 OF 2008
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COMPANY GOVERNANCE
The Act, 2008 introduces changes to company governance to enhance flexibility, while
retaining much of the existing regime designed to promote transparency and accountability.
In particular, the Act:
• Introduces flexibility in the manner and form of shareholder meetings, the exercise of
proxy rights, and the standards for adoption of ordinary and special resolutions; and
• Retains existing qualifications and disqualifications for directors, with some enhanced
flexibility, particularly for very small companies where the sole shareholder may be the
only director even if otherwise disqualified.
THE COMPANIES ACT, NO. 71 OF 2008 41
AN EXPLANATORY GUIDE
BUSINESS RESCUE REGIME
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BUSINESS RESCUE REGIME
The Act, 2008 replaces the existing regime of judicial administration of failing companies
with a modern business rescue (BR) regime. This regime is largely self-administered by the
company, under independent supervision within constraints set out in the Act, and subject to
court intervention at any time on application by any of the stakeholders.
To ensure the integrity and effectiveness of supervisors contemplated by the Act, provision
has been made for the Minister to designate a suitable association to regulate the functions of
persons seeking to be appointed, or acting as supervisors. The Act recognises the interests
of stakeholders in general, such as shareholders, creditors and employees, and provides for
their respective participation in the development and approval of a BR plan.
Notably, the Act protects the interests of employees and workers by:
• Recognising them as creditors of the company with a voting interest to the extent of any
unpaid remuneration before the commencement of the rescue process;
• Requiring consultation with them in the development of the BR plan;
• Permitting them an opportunity to address creditors before a vote on the plan; and
• Giving them, as a group, the right to buy out any unco-operative creditor or shareholder
who has voted against approving a rescue plan.
BR proceedings begin when the board passes a resolution that the company voluntarily begins
BR proceedings, or when an affected person, such as a shareholder, creditor, employee or
organised labour, applies to court for BR proceedings.
For a company to qualify for the BR process, no liquidation proceedings must have commenced
against the company. The process includes the following steps:
• Within five days after passing the necessary resolution, the company must appoint a BR
practitioner and publish the notice as prescribed.
• The company must then file the appointment of the BR practitioner with the Commission
and inform all affected parties of the appointment.
• During BR proceedings, no legal proceedings may commence or proceed against the
company in any forum.
THE COMPANIES ACT, NO. 71 OF 2008 43
AN EXPLANATORY GUIDE
• BR proceedings end when a court sets aside a resolution or order that began BR
proceedings or converts BR proceedings to liquidation proceedings; the BR practitioner
files a termination notice of BR proceedings; the BR plan has been rejected; or the BR
practitioner has filed a substantial implementation of the plan.
• During BR proceedings, all directors of the company can only act by authority of the BR
practitioner.
44 THE COMPANIES ACT, NO. 71 OF 2008
AN EXPLANATORY GUIDE
THE COMPANIES ACT, NO. 71 OF 2008 45
AN EXPLANATORY GUIDE
REMEDIES
46 THE COMPANIES ACT, NO. 71 OF 2008
AN EXPLANATORY GUIDE
REMEDIES
The High Court remains the principal forum for remedies in terms of the Act.
The Act establishes new general principles, including an extended right to commence an
action on behalf of an aggrieved person and a regime to protect ‘whistle blowers’ who disclose
irregularities or contraventions of the Act. These new principles have been formulated to
harmonise with the protections already afforded to employees under the Protected Disclosures
Act, No. 26 of 2000.
As well as retaining existing remedies, the Act introduces:
• A right to apply to have a director declared delinquent or under probation;
• A right for dissenting shareholders in a fundamental transaction to have their shares
appraised and to be compensated for the fair value of those shares; and
• A codification and streamlining of the right to commence or pursue legal action in the
name of the company, which replaces any common law derivative action.
THE COMPANIES ACT, NO. 71 OF 2008 47
AN EXPLANATORY GUIDE
ENFORCEMENT
48 THE COMPANIES ACT, NO. 71 OF 2008
AN EXPLANATORY GUIDE
ENFORCEMENT
The Act decriminalises company law. The few remaining offences include those arising out of
the falsification of records or documents; the publishing of untrue or misleading information;
the refusal to respond to a summons or give evidence; perjury; and similar matters relating to
the administration of justice in terms of the Act.
Any such offences must be referred by the Commission to the National Prosecuting Authority
(NPA) for trial in the Magistrate’s Court. Generally, the Act uses a system of administrative
enforcement in place of criminal sanctions to ensure compliance with the Act. The Commission
or Panel may receive complaints from any stakeholder or may initiate a complaint itself or act
on a matter as directed by the Minister.
Following an investigation into a complaint, the Commission or Panel may:
• End the matter;
• Urge the parties to attempt the voluntary alternative resolution of their dispute;
• Advise the complainants of any right they may have to seek a remedy in court;
• Commence proceedings in a court on behalf of a complainant, if the complainant so
requests;
• Refer the matter to another regulator if there is a possibility that the matter falls with their
jurisdiction; or
• Issue a compliance notice, but only in respect of a matter for which the complainant does
not otherwise have a remedy in a court.
A compliance order may be issued against a company or against an individual if the individual
was implicated in the contravention of the Act.
A person who has been issued a compliance notice may of course challenge it before the
Companies Tribunal, and in court, but failing that, is obliged to satisfy the conditions of
the notice. If he or she fails to do so, the Commission may either apply to a court for an
administrative fine, or refer the failure to the National Prosecuting Authority as an offence.
THE COMPANIES ACT, NO. 71 OF 2008 49
AN EXPLANATORY GUIDE
In the case of a company that has failed to comply, been fined, and continues to contravene
the Act, the Commission or Panel may apply to a court for an order dissolving the company.
Finally, to improve corporate accountability, the Act proposes that it will be an offence,
punishable by a fine or up to 10 years’ imprisonment, for a person to sign or agree to a false
or misleading set of financial statements or prospectus, or to be reckless in the conduct of a
company’s business.
50 THE COMPANIES ACT, NO. 71 OF 2008
AN EXPLANATORY GUIDE
CONTACT DETAILS
For further information or enquiries related to the Companies Act, Contact:
M Mnyatheli
Chief Director: Office of Company and Intellectual Property Enforcement (OCIPE), the dti
Tel.: (012) 394 1505
Fax: (012) 394 2505
E-mail: MMnyatheli@thedti.gov.za
M Vimba
Director: Education and Capacity Building, OCIPE, the dti
Tel.: (012) 394 1523
Fax: (012) 394 2523
E-mail: MVimba@thedti.gov.zae Bag X84
Pretoria 0001
Thomson VAT and Tax SARS VDP Voluntary Disclosure Help - Tax, Vat and Paye - Submissions - SARS Audits
THOMSON'S TAX
We assist with SARS VDP Voluntary Disclosure Help
Voluntary disclosure programme plagued by delays?
Subscribe to the BDO News newsfeed 
Money Web Tax 24 June 2011
SARS responds, explains why this is not the case.
Having heeded the call for a Voluntary Disclosure Programme (VDP) from SARS many companies are yet to receive any proactive responses or information on the status of their submissions.
Over the last few months starting in November 2011 we have made several online submissions to SARS on behalf of our clients, the last form of communication received was a short automated acknowledgement of the application with a reference number. Other than the acknowledgement no other feedback has been received nor have any of the applications been finalised. This gives the impression that there is a lack of urgency when dealing with VDP matters.
The current legislation dictates that SARS must provide the specified relief if an individual or company comes forward and makes a valid disclosure and concludes a voluntary disclosure agreement with SARS. However, the relief may be withdrawn if, subsequent to the conclusion of the agreement, it is established that the applicant failed to disclose a material matter. Additionally, there is no guarantee that SARS will not target the company in future.
It is this uncertainty and lack of communication which has left clients feeling very uneasy with the whole programme. Clients believe that they have inadvertently exposed themselves to an audit by SARS.
In contrast the exchange control tax clearance programme, which was put into effect at the same time as VDP, been extremely effective with over 80% of the submissions put forward completed timeously.
This observation leads us to believe that there is no sense of urgency from SARS side when dealing with VDP claims and we would urge SARS to make this matter a priority.
Despite the delays in the VDP system companies and individuals should still take advantage of the open window which SARS has created. Many companies may not be aware of having defaulted in the past. The programme will allow them to start on a clean slate with a clear understanding of their tax status with SARS and is particularly important with the implementation of the Companies Act which makes directors directly liable for such tax transgressions."
*Elriette Butler is an associate director at BDO."
VAT submissions as well as high level Audits from SARS. VAT is an item that needs extreme care to be taken at all times as SARS has clamped down heavily on VAT Refunds. Complete the Contact sheet or email me Directly on grant@taxpro.co.za REMEMBER WE COME TO YOU
How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
Guidelines
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits - to check your compliance
* Desk audit - to verify accuracy of data
* Refund audit - that the refund is due
* Field audit - to closely monitor all tax processes.
* Integrated audit - to assess taxpayer compliance.
* Risk audit - to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Creditors
* Debtors
* Salaries & wages
* VAT
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* Purchases
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General - overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments - 5 yrs
* Invoices, sales & purchases - 5 yrs
* Bank statements - 5 yrs
* Year end working papers - 5 yrs
* VAT records - 5 yrs
* Other general documents - 5 yrs
* Salary & wage registers - 5 yrs
* Records of trust monies - indefinitely
* Staff records - 3 yrs
* Cheques & bills of exchange - 6 yrs
* Stock sheets - 6 yrs
* Record for CGT four years after date of tax return - 4 yrs
* Company statutory records - 15 yrs
* All close corporation statutory records - indefinitely
* All financial statements, fixed asset registers, accounting records, etc - 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
South African Voluntary Disclosure Program
The Finance Minister, Pravin Gordham, announced in the budget speech earlier this year that
SARS would implement a voluntary disclosure program.
The voluntary disclosure program would apply to all taxes
(including employees’ tax) and
will run for 12 months from 1 November 2010 to 31 October 2011. The purpose of the VDP is to
give taxpayers the opportunity to regularise their tax affairs (Tax VDP) and/or regularise any
contraventions of the Exchange Control Regulations, 1961 (Regulations) (Excon VDP).
Defaulting taxpayers
who are unaware of any pending or current investigation into their tax
affairs may consider relief under the program, if they make a complete disclosure of a default
that would trigger additional tax or penalty/interest charges. Defaulting taxpayers, in certain
limited circumstances, may also consider using the voluntary disclosure program in situations
when a current investigation is taking place.
The voluntary disclosure program will provide
qualifying taxpayers with certain benefits
ranging from amnesty from any criminal prosecution, to a waiver of additional taxes, penalties
(other than administrative penalties) and interest of up to 100 percent, arising from a previous
default which must have occurred prior to 17 February 2010.
The VDP is a window of opportunity
for any South African residents (i.e., individual/sole
proprietor/partnership/deceased estate(s)/insolvent estate(s)/South African trust(s)/former South
African residents/company/close corporation) to regularise their exchange control affairs, and
provide SARS and SARB with details of foreign assets and/or structures (of whatever nature
excluding bearer instruments) individuals and/or corporate entities to disclose and regularise
their tax and/or exchange control affairs.
The VDP is an internationally accepted mechanism
to broaden compliance with tax and
exchange control requirements. It flows from the efforts around the globe to end bank secrecy
and recognises the greater access to information enjoyed by SARS both domestically and
internationally.
South African residents who have contravened the Regulations
, are assured that where a full
disclosure is made in the prescribed manner and administrative relief is granted by FinSurv, no
further action against the South African resident involved in such contraventions will be taken or
initiated by FinSurv.
HOW DOES A VDP AFFECT ME ?
General information
If you currently have tax defaults or if have contravened the Regulations and choose not to make
use of the VDP, then the law will take its course. This could mean that SARS will apply various
sanctions, including the payment of outstanding taxes, penalties and interest, and criminal
prosecution. FinSurv could apply various sanctions, including the attachment of assets, blocking
of funds, interest being charged and/or criminal prosecution.
In the event that you have previously made a disclosure under the 2003 amnesty, then you can
apply again under the current VDP?
HOW CAN OSIRIS HELP ?
We at Osiris can play an important role in ensuring the success of a tax VDP or Excon VDP by
assisting clients to make use of the VDP. We will however need to establish and verify clients’
identities and keeping of records in terms of FICA. Our obligation to report suspicious or
unusual transactions
does not arise where clients are assisted in regularising their affairs by
making use of the VDP in connection with income and/or foreign assets that were derived from
legitimate sources.
ANONYMITY
Osiris can on behalf of an applicant first obtain an indication of the possible relief that may be
granted, by submitting an application that does not reveal any identifying information. Based on
this, SARS may then issue a non-binding opinion indicating whether or not the applicant would
qualify for any relief and, if so, to what extent. However this non-binding opinion is conditional
upon the factual disclosure made, and can only be used as a guideline.
SARS can only then commit to the final granting of any relief in the case of an anonymous
application, after the identity of the applicant has been disclosed, so that all the facts of the
disclosure (more specifically establishing whether there was a pending audit or investigation)
have been verified. The anonymous applicant may decide not to proceed with the application for
relief. Such applicants, however, remain at risk of SARS independently identifying any defaults,
leading to the normal course of events to unfold, which may include penalties, additional taxes
and interest charges, in addition to the criminal law taking its course.
4. The Tax VDP
The APPLICATION PROCESS
Applicants must complete an application form for relief under the Tax VDP or Excon VDP.
Regarding an anonymous disclosure, the applicant or a duly authorised representative (OSIRIS)
may engage with SARS. In order to support the application, the following information must be
submitted:-
• The name, address (including email), telephone number, identity number, company or trust
registration number, and any identification tax number assigned by SARS to the applicant (if
applicable)
• The address of the applicant’s authorised representative, including telephone and fax numbers
(if applicable)
• The tax year(s), reporting period(s) or tax period(s) involved in the disclosure
• Amount of the disclosure (if applicable)
• Tax type(s)
• Type of return(s) involved (IT type return, VAT, etc.)
• Type of omission or default (understatement of tax; overstatement of refund or any other
non-compliance resulting in outstanding tax)
• Reason for the omission or other non-compliance resulting in outstanding tax
• Primary business activity
• An explanation of how the applicant considers that the requirements have been met.
In order to assist you with some of the terminology we have highlighted below some of the
key issues in the event that either a tax VDP or Excon VDP may be suitable to your
circumstances :-
1. What is meant by a tax default?
A tax default means
• the submission of inaccurate or incomplete information to the Commissioner;
• the failure to submit information; or
•assumptions presented to SARS about one’s tax liability, where such submission, nonsubmission,
or assumptions resulted in
(a) the applicant not being assessed for the correct amount of tax;
(b) the correct amount of tax not being paid by the taxpayer; or
(c) an incorrect refund being made by the Commissioner.
2. Who may apply for relief under the Tax VDP?
Any person may apply, whether in a personal, representative, withholding or other capacity,
for defaults prior to 17 February 2010.
3. What tax types are covered under the Tax VDP?
All types of tax administered by SARS are included under the VDP. Some of these are:
Income tax, pay as you earn (PAYE) (employee’s tax), value-added tax (VAT), diesel refunds,
customs duties, excise duties and levies, donations tax, estate duty, mineral and petroleum
resource royalties, royalties, secondary tax on companies (STC), stamp duty, securities transfer
tax (STT), transfer duty, turnover tax and uncertified securities tax (UST).
4. Can parties who are being audited, or are being investigated, or are
the subject of an enforcement action by SARS submit an application?
SARS may accept their applications if their default would not have been detected during the
audit or investigation, and the application would be in the interest of good management of the tax
system and the best use of SARS resources. In these cases, however, they will need permission
from the Commissioner to apply and they will be charged 50 per cent (half) of the interest that
would otherwise be due.
5. What are the minimum requirements to qualify for VDP?
A defaulting taxpayer will be granted relief under the programme if the application meets the
following requirements:
• The disclosure is complete in all material respects and made in the prescribed form and manner
• SARS was not aware of the default, which must have occurred prior to 17 February 2010
• A penalty or additional tax would have been imposed had SARS discovered the default in the
normal course of business
• It would not result in a refund due by the Commissioner.
6. What relief is offered under the Tax VDP?
If SARS accepts that your application is a disclosure that meets the conditions set out in the
legislation, it will be considered a valid disclosure. You will then be able to benefit from the
following relief:
• Penalty relief
You will not be charged penalties, whether a fixed amount or a percentage-based penalty, with
respect to the disclosure. Penalties for late submission of returns and late payments may,
however, be charged.
• Interest relief
50 per cent interest relief for applicants who required permission from the Commissioner to
apply 100 per cent interest relief for all other applicants.
• Additional tax relief
SARS will impose no additional tax.
• Criminal prosecution relief
SARS will not initiate criminal prosecution for any Tax Act offence, or related common law
offences.
7. How far back will SARS go to calculate the tax outstanding in terms of the Tax VDP?
Strictly speaking, SARS should go back for as many years as the tax default has occurred.
SARS, however, appreciates that record keeping and other difficulties may arise in doing so.
Bearing in mind the record keeping requirements in the legislation SARS administers and the
objectives of this VDP, if the default is one that involves a small proportion of the applicant’s
income or transactions, SARS will generally not go back further than five years in calculating the
tax outstanding in terms of the Tax VDP.
If the default involves extraordinary income or transactions that occurred more than five years
back, SARS will take the extraordinary income or transactions into account in calculating the tax
outstanding. Thus, by way of example, if an applicant entered into an extraordinary transaction
to evade tax in 2000 and invested the income in a secret offshore bank account bearing nominal
interest, SARS will calculate the tax outstanding on the extraordinary transaction in 2000 and the
interest income from 2005 to 2010. Where an applicant requires further guidance with regard to
this question Osiris can either contact the VDP Unit on your behalf and/or make an anonymous
application.
The Excon VDP Process
8.1. Who may apply under the Excon VDP?
• Individual, sole proprietor, partnership, deceased estate(s), insolvent estate(s), South African
trust(s), former South African residents, companies and close corporations that have contravened
the Regulations, prior to 28 February 2010; and • South African residents who took funds
offshore illegally and/or who beneficially own any unauthorised foreign assets and/or structures
(of whatever nature, excluding bearer instruments) may apply to the FinSurv (VDP Division).
Note:
For the purpose of determining whether a person is a resident for exchange control
purposes, the nationality or citizenship of that person is irrelevant.
8.2. What are the benefits of the Excon VDP?
Under the Excon VDP successful applicants will be regarded as having regularised their
exchange control affairs in respect of the declared value of all unauthorised foreign assets
disclosed in their application. South African residents who have contravened the Regulations are
assured that where a full disclosure is made in the prescribed manner and administrative relief is
granted by FinSurv (VDP Division), no further action against the South African resident
involved in such contraventions will be taken or initiated by FinSurv.
8.3. Minimum requirements to qualify for the Excon VDP
An applicant will be granted relief for VDP, if he/she/it meets the following requirements:
• The applicant must have contravened the Regulations prior to 28 February 2010
• The disclosure is complete
8.4. What relief is offered under the Excon VDP?
Applicants who are granted administrative relief in respect of unauthorised foreign assets and/or
structures (of whatever nature, excluding bearer instruments) may have to pay a levy on the
market value thereof.
• A levy of
10 per cent calculated on the market value of the unauthorised foreign asset
disclosed as at 28 February 2010. This levy must be paid from foreign-sourced funds.
• A levy of
12 per cent calculated on the market value of the unauthorised foreign asset
disclosed as at 28 February 2010, where no foreign funds are available.
• The amount levied in the case of an individual is reduced by R4 million of the foreign
capital allowance or any remaining portion thereof, and may not be reduced by any fees
or commissions.
8.5. When and where must the VDP levy be paid?
The levy must be paid within three months of the date of approval of the application,
.
8.6. What supporting information or documentation needs to be submitted?
The following supporting documentation must accompany the applicant’s original signed
application form:
• Cash:
Declaration giving a description and the value of the money, as at 28 February 2010
• Bank accounts, call deposits or time (term) deposits, or any other short-term foreign
asset:
Original or a certified copy of a statement of account from the foreign institution
concerned, as at 28 February 2010
• Financial instruments listed on a recognised exchange, such as shares, stock, bonds or
debentures:
Original or a certified copy of a statement of account and price as quoted on the
exchange, as at 28 February 2010
• Other financial instruments not listed on a recognised exchange or unlisted shares:
Valuation certificate from a foreign valuator, as at 28 February 2010
• Fixed property:
A valuation certificate issued by a valuator, or by a sphere of government of
the country where that foreign asset is located, as at 28 February 2010
• Foreign insurance policies:
A valuation certificate from your insurer, as at 28 February 2010
• An investment in a collective scheme, such as a unit trust:
A statement by the management
company of the scheme, as at 28 February 2010
• Intangible assets, such as a patent or copyright:
A valuation certificate by a valuator of the
country where that foreign asset is located or registered, as at 28 February 2010
• Other foreign assets:
A written declaration.
referenced from:
http://www.osiristrust.com/whatsnew/South%20African%20Voluntary%20Disclosure%20Program.pdf
THOMSONS TAX
Have an outstanding balance with SARS on your personal or business account for Tax, VAT, PAYE etc. and you have no idea where it comes from? Thomson Accountants can analyze and determine where this balance originated, if it is indeed correct and assist you with the objection if found that it is necessary. Complete the Contact sheet or email me Directly on grant@taxpro.co.za REMEMBER WE COME TO YOU
IT 88 - DO NOT ignore this document from SARS
The ITA88 system from SARS is here.
What is the ITA 88 system
With effect from the 1 September 2010 SARS will appoint employers as collection agents for Administrative penalties and unpaid taxes. You as the employer will be obliged to deduct the full amount from the employee’s salary and pay this over to the receiver with your next EMP 201 submission.
-
Penalties will be levied on the following offences:
-
Not registering as a tax payer
-
Not informing SARS of a change of address or other important details – employer as well
-
Not submitting a return or related documents
-
Not submitting a monthly return – employer
-
Not providing details of an employee – employer
-
Delivery of tax certificates before reconciling and returning to SARS – employer
-
Any other non-compliance with an obligation according to SARS
-
-
Basic information
-
Penalties are from R250 – R16000 depending on the assessment by SARS.
-
The employee would have received an ITP34 penalty assessment stating the offence, penalty, payment due date and payment procedure
-
This penalty can be disputed by remedying the problem and completing a Request for Remission form (RFR)
-
Penalties will be raised EVERY month until it’s sorted – consultation with employee is essential!
-
SARS rule – pay now, argue later
-
The following is the procedure that will have to be followed:
-
Employee fails to respond to ITP34 notice
-
SARS appoints the employer as agent (section 99 of the income tax act) and issues the ITA88 form to the employer to appoint him as agent (These notices will be issued electronically and via email – to be administered through Easyfile) – the employer is legally bound to obey and deduct the money
-
Employer administers the deduction from the payroll. This can be done over 3 months depending on employee’s affordability and the money will be paid over to SARS with your next EMP 201 submission
-
No interest applies if there is a payment plan(3 months) for the ITA88 penalty
-
Legal priority of deductions should there be limited funds then the employer must first deduct:
-
PAYE
-
UIF
-
Pension or provident Fund
-
Medical aid deductions
-
Special provisions for Garnishee/maintenance payments.
-
Existing garnishees must “stand back” for ITA88 deductions – The collecting agents/attorneys must be informed in writing.
Finally it is in the interest of the employer to help the employee resolve these outstanding issues. If the employer does not comply then SARS will hold the employer liable for the outstanding amounts.
THOMSONS TAX
I am a Master Tax Practitioner (Private and Public Practice) and Former Tax Auditor at SARS Johannesburg - If I can't help you, you probably can't be helped.
This is an Advanced Level service to the Public, Tax Practitioners, Customers, Auditors, Accountants and Lawyers in private practice. Complete the Contact sheet or email me Directly on grant@taxpro.co.za - Hedley Grant Thomson - Master Tax Practitioner SAIT(SA) REMEMBER WE COME TO YOU
How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
Guidelines
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits - to check your compliance
* Desk audit - to verify accuracy of data
* Refund audit - that the refund is due
* Field audit - to closely monitor all tax processes.
* Integrated audit - to assess taxpayer compliance.
* Risk audit - to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Creditors
* Debtors
* Salaries & wages
* VAT
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* Purchases
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General - overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments - 5 yrs
* Invoices, sales & purchases - 5 yrs
* Bank statements - 5 yrs
* Year end working papers - 5 yrs
* VAT records - 5 yrs
* Other general documents - 5 yrs
* Salary & wage registers - 5 yrs
* Records of trust monies - indefinitely
* Staff records - 3 yrs
* Cheques & bills of exchange - 6 yrs
* Stock sheets - 6 yrs
* Record for CGT four years after date of tax return - 4 yrs
* Company statutory records - 15 yrs
* All close corporation statutory records - indefinitely
* All financial statements, fixed asset registers, accounting records, etc - 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
2009/02/25 SPC V2.000
VAT 404
Value-Added Tax
Guide for Vendors
www.sars.gov.za1
10 IMPORTANT PRINCIPLES
1.
All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies).
2.
Vendors collect VAT on behalf of the State – please make sure that you pay it over on time, otherwise penalties and interest will be charged.
3.
VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable.
4.
You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.
5.
Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic.
6.
You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.
7.
You are required to advise the South African Revenue Service (SARS) within 21 days of any changes in your registered particulars, including any change in your authorised representative, business address, banking details, trading name, or if you cease trading.
8.
If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect.
9.
You can pay your VAT by using various electronic methods, including eFiling, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks.
10.
Report fraudulent activities to SARS by calling the Fraud and Anti-Corruption Hotline on 0800 00 28 70. You may report an incident anonymously if you wish.
VAT 404 – Guide for Vendors Contents
2
FOREWORD
The VAT 404 is a basic guide where technical and legal terminology has been avoided wherever possible. Although fairly comprehensive, the guide does not deal with all the legal detail associated with VAT and is not intended for legal reference. All references to "the VAT Act" or "the Act" are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. The terms "Republic", "South Africa" or the abbreviation "RSA", are used interchangeably in this document as a reference to the sovereign territory of the Republic of South Africa, as set out in the definition of "Republic" in section 1 of the VAT Act. You will also find a number of specific terms used throughout the guide which are defined in the Value–Added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference.
The information in this guide is based on the VAT legislation (as amended) as at the time of publishing and includes the amendments contained in the
Taxation Laws Amendment Act 7 of 2010 and the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act 8 of 2010 both of which were promulgated on 2 November 2010 (as per GG 33726 and GG 33727 respectively). Below is a brief synopsis of some of the most important changes affecting the administration of VAT since the previous issue of this Guide:
1.
Remission of interest – With effect from 1 April 2010 the Commissioner’s discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor’s control. Interpretation Note No. 61: Remission of interest in terms of section 39(7)(a) was issued on 29 March 2011 to provide further guidance in this regard. The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010.
2.
Registration requirements – The documentary requirements with which a person must comply in order to obtain a VAT registration number were clarified. Any person that applies to register for VAT must ensure that the correct supporting documents as set out in the policy document AS-VAT-08 - Guide for Completion of VAT Registration Application Forms are submitted.
3.
Tax invoices – A supplier is not obliged to issue a tax invoice in cases where the consideration for a taxable supply is less than R50, but the recipient must nevertheless be in possession of a source document such as an invoice or till slip as proof that the expense has been incurred before an input tax deduction will be allowed.
4.
Second-hand goods – Vendors are required to maintain the prescribed records (form VAT 264) in respect of any second-hand goods acquired. Previously this was only required for purchases where the consideration was R1 000 or more. The proof of payment as well as the date on which payment was made is also required as part of the vendor’s records to validate any input tax deduction for second-hand goods acquired.
5.
Foreign-going ships and aircraft – The scope of the definitions "foreign-going aircraft" and "foreign-going ship" was widened so that the supply of consumables and repairs to certain military craft may qualify as zero rated exports as in the case of commercial foreign-going ships and aircrafts.
6.
Time of supply – The VAT law was amended to make it clear that the time of supply rule which is applicable to machines, meters or other devices that are operated by means of coins or tokens, is also applicable to machines that operate with paper currency. The time of supply for the supplier is when the coins, tokens or paper currency is removed from the machine or device. However, when payment is made via the machine or device by electronic means by credit or debit card, the normal time of supply rule applies (i.e. the earlier of the date of payment or the date that an invoice is issued).
VAT 404 – VAT Guide for Vendors Foreword
3
7.
VAT 201 return, modernisation and imported services – New fields were added to the VAT 201 return which came into operation on 28 June 2010. The changes were aimed mainly at addressing certain compliance aspects with regard to the import and export of goods – in particular fraudulent VAT refunds linked to exports. The new fields are 2A, 14A, 15A and the Customs Code. The effect of these changes is that vendors must distinguish between the value of zero-rated exports and other zero-rated supplies on their returns. Input tax in relation to the importation of goods must now also be indicated separately from other taxable supplies. Further, with effect from 1 February 2011, the VAT on any imported services must be declared on the VAT 201 in the case where the person is a vendor instead on form VAT 215. In April 2011, further modernisation changes came into effect in the form of a new look VAT 201 return which is in landscape format and contains additional demographic fields with certain pre-populated fields. Part of the changes are that VAT 201 returns are on no longer mailed in bulk to vendors, but instead must be requested by the vendor on eFiling or from a SARS office. It is expected that more modernisation changes will be implemented in phases in 2011. Vendors are therefore advised to check the SARS website for the latest information, as well as the new publication called VAT Connect which will be sent directly to vendors.
8.
Carbon Dioxide (CO) emission levy – An environmental levy (CO levy) was introduced with effect from 1 September 2010 on new passenger cars, including SUVs and other motor vehicles manufactured in, or imported into, the Republic which are principally designed to carry a maximum of nine passengers. As with all excise duties, the levy amount is built into the price that the manufacturer or importer charges the client. The value on which VAT is calculated must therefore include any environmental levy which is applicable.
9.
Tax Administration Bill (TAB) – The TAB is in the final stages of completion and was published for a second round of public comment in October 2010. The TAB seeks to provide a single body of law that outlines common procedures, rights and remedies. It is expected that the TAB will become an Act of Parliament in the latter part of 2011. Once in effect the TAB will have a major impact on the administration of all taxes in general. The effect from a VAT perspective is that a number of administrative type provisions which are currently in the VAT Act will be deleted or amended. The corresponding provisions in the TAB will then apply from the effective date. Schedule A – Schedule of Amendments reflects the proposed consequential amendments to the various tax acts which were necessary to align them with the TAB. The TAB is available on the SARS website under "Draft Bills" on the Legal and Policy page.
10.
Voluntary disclosure programme (VDP) – The VDP has been implemented to provide taxpayers with an opportunity to voluntarily apply to SARS to disclose their defaults and regularise their tax affairs. The period within which VDP applications can be made to SARS is prescribed by the Commissioner and runs from 5 November 2010 to 31 October 2011. The VDP applies for various taxes including VAT.
The following guides have also been issued and may be referred to for more information relating to the specific VAT topics:
•AS-VAT-08 - Guide for Registration of VAT Vendors
•Trade Classification Guide (VAT 403)
•Guide for Fixed Property and Construction (VAT 409)
•Guide for Accommodation, Catering and Entertainment (VAT 411)
•Share Block Schemes (VAT 412)
•Deceased Estates (VAT 413)
•Guide for Associations not for Gain and Welfare Organisations (VAT 414)
•Diesel Refund Guide (VAT 415)
•AS-VAT-10 - Quick Reference Guide (Small Vendors) (VAT 417)
•AS-VAT-02 - Quick Reference Guide (Diplomatic Refunds)
•Guide for Municipalities (VAT 419)
•Guide for Motor Dealers (VAT 420)
•VAT treatment of entities affiliated to FIFA Part 2 entities
•VAT treatment of entities affiliated to FIFA Part 3 entities
VAT 404 – VAT Guide for Vendors Foreword
4
The information in this guide is issued for guidance only and does not constitute a binding general ruling as contemplated in section 76P of the Income Tax Act, No. 58 of 1962 and sections 41A and 41B of the VAT Act unless otherwise indicated. All previous editions of the Guide for Vendors (VAT 404) are withdrawn with effect from 6 September 2011. Should there be any aspects relating to VAT which are not clear or not dealt with in this guide, or should you require further information or a specific ruling on a legal issue, you may:
•contact your local South African Revenue Service (SARS) branch;
•visit the SARS website at
www.sars.gov.za;
•contact your own tax advisors;
•if calling locally, contact the SARS National Call Centre on 0800 00 7277; or
•if calling from abroad, contact the SARS National Call Centre on +27 11 602 2093.
Comments and/or suggestions regarding this guide may be sent to the following e-mail address:
policycomments@sars.gov.za.
Prepared by
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
6 September 2011
VAT 404 – Guide for Vendors Contents 5
|
CONTENTS CHAPTER 1 : INTRODUCTION |
9 |
|
1.1 What is VAT? |
9 |
|
1.2 How does VAT work? |
9 |
|
CHAPTER 2 : REGISTERING YOUR BUSINESS |
12 |
|
2.1 When do I become liable to register for VAT? |
12 |
|
2.2 Where must I register? |
12 |
|
2.3 What documents must I submit with my application? |
13 |
|
2.4 How do I calculate the value of taxable supplies? |
14 |
|
2.5 Voluntary registration |
15 |
|
2.6 Refusal of a voluntary registration application |
16 |
|
2.7 Separate registration (branches, divisions and separate enterprises) |
16 |
|
2.8 Cancellation of registration |
17 |
|
CHAPTER 3 : TAX PERIODS |
20 |
|
3.1 Which tax periods are available? |
20 |
|
3.2 Allocation and change of tax periods |
21 |
|
3.3 The 10-day rule |
22 |
|
CHAPTER 4 : ACCOUNTING BASIS |
23 |
|
4.1 Introduction |
23 |
|
4.2 Invoice basis |
23 |
|
4.3 Payments basis |
24 |
|
4.4 Change of accounting basis |
25 |
|
4.5 Special cases |
26 |
|
CHAPTER 5 : TAXABLE SUPPLIES |
27 |
|
5.1 Introduction |
27 |
|
5.2 Standard rated supplies |
27 |
|
5.3 Zero-rated supplies |
28 |
|
5.4 Deemed supplies |
31 |
|
5.5 Time of supply |
32 |
|
5.6 Value of supply |
34 |
THOMSONS TAX
I am a Master Tax Practitioner (Private and Public Practice) and Former Tax Auditor at SARS Johannesburg - If I can't help you, you probably can't be helped.
This is an Advanced Level service to the Public, Tax Practitioners, Customers, Auditors, Accountants and Lawyers in private practice. Complete the Contact sheet or email me Directly on grant@taxpro.co.za - Hedley Grant Thomson - Master Tax Practitioner SAIT(SA) REMEMBER WE COME TO YOU
How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
Guidelines
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits - to check your compliance
* Desk audit - to verify accuracy of data
* Refund audit - that the refund is due
* Field audit - to closely monitor all tax processes.
* Integrated audit - to assess taxpayer compliance.
* Risk audit - to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Creditors
* Debtors
* Salaries & wages
* VAT
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* Purchases
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General - overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments - 5 yrs
* Invoices, sales & purchases - 5 yrs
* Bank statements - 5 yrs
* Year end working papers - 5 yrs
* VAT records - 5 yrs
* Other general documents - 5 yrs
* Salary & wage registers - 5 yrs
* Records of trust monies - indefinitely
* Staff records - 3 yrs
* Cheques & bills of exchange - 6 yrs
* Stock sheets - 6 yrs
* Record for CGT four years after date of tax return - 4 yrs
* Company statutory records - 15 yrs
* All close corporation statutory records - indefinitely
* All financial statements, fixed asset registers, accounting records, etc - 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
2009/02/25 SPC V2.000
VAT 404
Value-Added Tax
Guide for Vendors
www.sars.gov.za1
10 IMPORTANT PRINCIPLES
1.
All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies).
2.
Vendors collect VAT on behalf of the State – please make sure that you pay it over on time, otherwise penalties and interest will be charged.
3.
VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable.
4.
You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.
5.
Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic.
6.
You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.
7.
You are required to advise the South African Revenue Service (SARS) within 21 days of any changes in your registered particulars, including any change in your authorised representative, business address, banking details, trading name, or if you cease trading.
8.
If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect.
9.
You can pay your VAT by using various electronic methods, including eFiling, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks.
10.
Report fraudulent activities to SARS by calling the Fraud and Anti-Corruption Hotline on 0800 00 28 70. You may report an incident anonymously if you wish.
VAT 404 – Guide for Vendors Contents
2
FOREWORD
The VAT 404 is a basic guide where technical and legal terminology has been avoided wherever possible. Although fairly comprehensive, the guide does not deal with all the legal detail associated with VAT and is not intended for legal reference. All references to "the VAT Act" or "the Act" are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. The terms "Republic", "South Africa" or the abbreviation "RSA", are used interchangeably in this document as a reference to the sovereign territory of the Republic of South Africa, as set out in the definition of "Republic" in section 1 of the VAT Act. You will also find a number of specific terms used throughout the guide which are defined in the Value–Added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference.
The information in this guide is based on the VAT legislation (as amended) as at the time of publishing and includes the amendments contained in the
Taxation Laws Amendment Act 7 of 2010 and the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act 8 of 2010 both of which were promulgated on 2 November 2010 (as per GG 33726 and GG 33727 respectively). Below is a brief synopsis of some of the most important changes affecting the administration of VAT since the previous issue of this Guide:
1.
Remission of interest – With effect from 1 April 2010 the Commissioner’s discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor’s control. Interpretation Note No. 61: Remission of interest in terms of section 39(7)(a) was issued on 29 March 2011 to provide further guidance in this regard. The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010.
2.
Registration requirements – The documentary requirements with which a person must comply in order to obtain a VAT registration number were clarified. Any person that applies to register for VAT must ensure that the correct supporting documents as set out in the policy document AS-VAT-08 - Guide for Completion of VAT Registration Application Forms are submitted.
3.
Tax invoices – A supplier is not obliged to issue a tax invoice in cases where the consideration for a taxable supply is less than R50, but the recipient must nevertheless be in possession of a source document such as an invoice or till slip as proof that the expense has been incurred before an input tax deduction will be allowed.
4.
Second-hand goods – Vendors are required to maintain the prescribed records (form VAT 264) in respect of any second-hand goods acquired. Previously this was only required for purchases where the consideration was R1 000 or more. The proof of payment as well as the date on which payment was made is also required as part of the vendor’s records to validate any input tax deduction for second-hand goods acquired.
5.
Foreign-going ships and aircraft – The scope of the definitions "foreign-going aircraft" and "foreign-going ship" was widened so that the supply of consumables and repairs to certain military craft may qualify as zero rated exports as in the case of commercial foreign-going ships and aircrafts.
6.
Time of supply – The VAT law was amended to make it clear that the time of supply rule which is applicable to machines, meters or other devices that are operated by means of coins or tokens, is also applicable to machines that operate with paper currency. The time of supply for the supplier is when the coins, tokens or paper currency is removed from the machine or device. However, when payment is made via the machine or device by electronic means by credit or debit card, the normal time of supply rule applies (i.e. the earlier of the date of payment or the date that an invoice is issued).
VAT 404 – VAT Guide for Vendors Foreword
3
7.
VAT 201 return, modernisation and imported services – New fields were added to the VAT 201 return which came into operation on 28 June 2010. The changes were aimed mainly at addressing certain compliance aspects with regard to the import and export of goods – in particular fraudulent VAT refunds linked to exports. The new fields are 2A, 14A, 15A and the Customs Code. The effect of these changes is that vendors must distinguish between the value of zero-rated exports and other zero-rated supplies on their returns. Input tax in relation to the importation of goods must now also be indicated separately from other taxable supplies. Further, with effect from 1 February 2011, the VAT on any imported services must be declared on the VAT 201 in the case where the person is a vendor instead on form VAT 215. In April 2011, further modernisation changes came into effect in the form of a new look VAT 201 return which is in landscape format and contains additional demographic fields with certain pre-populated fields. Part of the changes are that VAT 201 returns are on no longer mailed in bulk to vendors, but instead must be requested by the vendor on eFiling or from a SARS office. It is expected that more modernisation changes will be implemented in phases in 2011. Vendors are therefore advised to check the SARS website for the latest information, as well as the new publication called VAT Connect which will be sent directly to vendors.
8.
Carbon Dioxide (CO) emission levy – An environmental levy (CO levy) was introduced with effect from 1 September 2010 on new passenger cars, including SUVs and other motor vehicles manufactured in, or imported into, the Republic which are principally designed to carry a maximum of nine passengers. As with all excise duties, the levy amount is built into the price that the manufacturer or importer charges the client. The value on which VAT is calculated must therefore include any environmental levy which is applicable.
9.
Tax Administration Bill (TAB) – The TAB is in the final stages of completion and was published for a second round of public comment in October 2010. The TAB seeks to provide a single body of law that outlines common procedures, rights and remedies. It is expected that the TAB will become an Act of Parliament in the latter part of 2011. Once in effect the TAB will have a major impact on the administration of all taxes in general. The effect from a VAT perspective is that a number of administrative type provisions which are currently in the VAT Act will be deleted or amended. The corresponding provisions in the TAB will then apply from the effective date. Schedule A – Schedule of Amendments reflects the proposed consequential amendments to the various tax acts which were necessary to align them with the TAB. The TAB is available on the SARS website under "Draft Bills" on the Legal and Policy page.
10.
Voluntary disclosure programme (VDP) – The VDP has been implemented to provide taxpayers with an opportunity to voluntarily apply to SARS to disclose their defaults and regularise their tax affairs. The period within which VDP applications can be made to SARS is prescribed by the Commissioner and runs from 5 November 2010 to 31 October 2011. The VDP applies for various taxes including VAT.
The following guides have also been issued and may be referred to for more information relating to the specific VAT topics:
•AS-VAT-08 - Guide for Registration of VAT Vendors
•Trade Classification Guide (VAT 403)
•Guide for Fixed Property and Construction (VAT 409)
•Guide for Accommodation, Catering and Entertainment (VAT 411)
•Share Block Schemes (VAT 412)
•Deceased Estates (VAT 413)
•Guide for Associations not for Gain and Welfare Organisations (VAT 414)
•Diesel Refund Guide (VAT 415)
•AS-VAT-10 - Quick Reference Guide (Small Vendors) (VAT 417)
•AS-VAT-02 - Quick Reference Guide (Diplomatic Refunds)
•Guide for Municipalities (VAT 419)
•Guide for Motor Dealers (VAT 420)
•VAT treatment of entities affiliated to FIFA Part 2 entities
•VAT treatment of entities affiliated to FIFA Part 3 entities
VAT 404 – VAT Guide for Vendors Foreword
4
The information in this guide is issued for guidance only and does not constitute a binding general ruling as contemplated in section 76P of the Income Tax Act, No. 58 of 1962 and sections 41A and 41B of the VAT Act unless otherwise indicated. All previous editions of the Guide for Vendors (VAT 404) are withdrawn with effect from 6 September 2011. Should there be any aspects relating to VAT which are not clear or not dealt with in this guide, or should you require further information or a specific ruling on a legal issue, you may:
•contact your local South African Revenue Service (SARS) branch;
•visit the SARS website at
www.sars.gov.za;
•contact your own tax advisors;
•if calling locally, contact the SARS National Call Centre on 0800 00 7277; or
•if calling from abroad, contact the SARS National Call Centre on +27 11 602 2093.
Comments and/or suggestions regarding this guide may be sent to the following e-mail address:
policycomments@sars.gov.za.
Prepared by
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
6 September 2011
VAT 404 – Guide for Vendors Contents 5
|
CONTENTS CHAPTER 1 : INTRODUCTION |
9 |
|
1.1 What is VAT? |
9 |
|
1.2 How does VAT work? |
9 |
|
CHAPTER 2 : REGISTERING YOUR BUSINESS |
12 |
|
2.1 When do I become liable to register for VAT? |
12 |
|
2.2 Where must I register? |
12 |
|
2.3 What documents must I submit with my application? |
13 |
|
2.4 How do I calculate the value of taxable supplies? |
14 |
|
2.5 Voluntary registration |
15 |
|
2.6 Refusal of a voluntary registration application |
16 |
|
2.7 Separate registration (branches, divisions and separate enterprises) |
16 |
|
2.8 Cancellation of registration |
17 |
|
CHAPTER 3 : TAX PERIODS |
20 |
|
3.1 Which tax periods are available? |
20 |
|
3.2 Allocation and change of tax periods |
21 |
|
3.3 The 10-day rule |
22 |
|
CHAPTER 4 : ACCOUNTING BASIS |
23 |
|
4.1 Introduction |
23 |
|
4.2 Invoice basis |
23 |
|
4.3 Payments basis |
24 |
|
4.4 Change of accounting basis |
25 |
|
4.5 Special cases |
26 |
|
CHAPTER 5 : TAXABLE SUPPLIES |
27 |
|
5.1 Introduction |
27 |
|
5.2 Standard rated supplies |
27 |
|
5.3 Zero-rated supplies |
28 |
|
5.4 Deemed supplies |
31 |
|
5.5 Time of supply |
32 |
|
5.6 Value of supply |
34 |
THOMSONS TAX
Have an outstanding balance with SARS on your personal or business account for Tax, VAT, PAYE etc. and you have no idea where it comes from? Thomson Accountants can analyze and determine where this balance originated, if it is indeed correct and assist you with the objection if found that it is necessary. Complete the Contact sheet or email me Directly on grant@taxpro.co.za REMEMBER WE COME TO YOU
IT 88 - DO NOT ignore this document from SARS
The ITA88 system from SARS is here.
What is the ITA 88 system
With effect from the 1 September 2010 SARS will appoint employers as collection agents for Administrative penalties and unpaid taxes. You as the employer will be obliged to deduct the full amount from the employee’s salary and pay this over to the receiver with your next EMP 201 submission.
-
Penalties will be levied on the following offences:
-
Not registering as a tax payer
-
Not informing SARS of a change of address or other important details – employer as well
-
Not submitting a return or related documents
-
Not submitting a monthly return – employer
-
Not providing details of an employee – employer
-
Delivery of tax certificates before reconciling and returning to SARS – employer
-
Any other non-compliance with an obligation according to SARS
-
-
Basic information
-
Penalties are from R250 – R16000 depending on the assessment by SARS.
-
The employee would have received an ITP34 penalty assessment stating the offence, penalty, payment due date and payment procedure
-
This penalty can be disputed by remedying the problem and completing a Request for Remission form (RFR)
-
Penalties will be raised EVERY month until it’s sorted – consultation with employee is essential!
-
SARS rule – pay now, argue later
-
The following is the procedure that will have to be followed:
-
Employee fails to respond to ITP34 notice
-
SARS appoints the employer as agent (section 99 of the income tax act) and issues the ITA88 form to the employer to appoint him as agent (These notices will be issued electronically and via email – to be administered through Easyfile) – the employer is legally bound to obey and deduct the money
-
Employer administers the deduction from the payroll. This can be done over 3 months depending on employee’s affordability and the money will be paid over to SARS with your next EMP 201 submission
-
No interest applies if there is a payment plan(3 months) for the ITA88 penalty
-
Legal priority of deductions should there be limited funds then the employer must first deduct:
-
PAYE
-
UIF
-
Pension or provident Fund
-
Medical aid deductions
-
Special provisions for Garnishee/maintenance payments.
-
Existing garnishees must “stand back” for ITA88 deductions – The collecting agents/attorneys must be informed in writing.
Finally it is in the interest of the employer to help the employee resolve these outstanding issues. If the employer does not comply then SARS will hold the employer liable for the outstanding amounts.
THOMSONS TAX
I am a Master Tax Practitioner (Private and Public Practice) and Former Tax Auditor at SARS Johannesburg - If I can't help you, you probably can't be helped.
This is an Advanced Level service to the Public, Tax Practitioners, Customers, Auditors, Accountants and Lawyers in private practice. Complete the Contact sheet or email me Directly on grant@taxpro.co.za - Hedley Grant Thomson - Master Tax Practitioner SAIT(SA) REMEMBER WE COME TO YOU
How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
Guidelines
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits - to check your compliance
* Desk audit - to verify accuracy of data
* Refund audit - that the refund is due
* Field audit - to closely monitor all tax processes.
* Integrated audit - to assess taxpayer compliance.
* Risk audit - to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Creditors
* Debtors
* Salaries & wages
* VAT
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* Purchases
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General - overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments - 5 yrs
* Invoices, sales & purchases - 5 yrs
* Bank statements - 5 yrs
* Year end working papers - 5 yrs
* VAT records - 5 yrs
* Other general documents - 5 yrs
* Salary & wage registers - 5 yrs
* Records of trust monies - indefinitely
* Staff records - 3 yrs
* Cheques & bills of exchange - 6 yrs
* Stock sheets - 6 yrs
* Record for CGT four years after date of tax return - 4 yrs
* Company statutory records - 15 yrs
* All close corporation statutory records - indefinitely
* All financial statements, fixed asset registers, accounting records, etc - 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
2009/02/25 SPC V2.000
VAT 404
Value-Added Tax
Guide for Vendors
www.sars.gov.za1
10 IMPORTANT PRINCIPLES
1.
All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies).
2.
Vendors collect VAT on behalf of the State – please make sure that you pay it over on time, otherwise penalties and interest will be charged.
3.
VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable.
4.
You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.
5.
Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic.
6.
You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.
7.
You are required to advise the South African Revenue Service (SARS) within 21 days of any changes in your registered particulars, including any change in your authorised representative, business address, banking details, trading name, or if you cease trading.
8.
If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect.
9.
You can pay your VAT by using various electronic methods, including eFiling, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks.
10.
Report fraudulent activities to SARS by calling the Fraud and Anti-Corruption Hotline on 0800 00 28 70. You may report an incident anonymously if you wish.
VAT 404 – Guide for Vendors Contents
2
FOREWORD
The VAT 404 is a basic guide where technical and legal terminology has been avoided wherever possible. Although fairly comprehensive, the guide does not deal with all the legal detail associated with VAT and is not intended for legal reference. All references to "the VAT Act" or "the Act" are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. The terms "Republic", "South Africa" or the abbreviation "RSA", are used interchangeably in this document as a reference to the sovereign territory of the Republic of South Africa, as set out in the definition of "Republic" in section 1 of the VAT Act. You will also find a number of specific terms used throughout the guide which are defined in the Value–Added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference.
The information in this guide is based on the VAT legislation (as amended) as at the time of publishing and includes the amendments contained in the
Taxation Laws Amendment Act 7 of 2010 and the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act 8 of 2010 both of which were promulgated on 2 November 2010 (as per GG 33726 and GG 33727 respectively). Below is a brief synopsis of some of the most important changes affecting the administration of VAT since the previous issue of this Guide:
1.
Remission of interest – With effect from 1 April 2010 the Commissioner’s discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor’s control. Interpretation Note No. 61: Remission of interest in terms of section 39(7)(a) was issued on 29 March 2011 to provide further guidance in this regard. The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010.
2.
Registration requirements – The documentary requirements with which a person must comply in order to obtain a VAT registration number were clarified. Any person that applies to register for VAT must ensure that the correct supporting documents as set out in the policy document AS-VAT-08 - Guide for Completion of VAT Registration Application Forms are submitted.
3.
Tax invoices – A supplier is not obliged to issue a tax invoice in cases where the consideration for a taxable supply is less than R50, but the recipient must nevertheless be in possession of a source document such as an invoice or till slip as proof that the expense has been incurred before an input tax deduction will be allowed.
4.
Second-hand goods – Vendors are required to maintain the prescribed records (form VAT 264) in respect of any second-hand goods acquired. Previously this was only required for purchases where the consideration was R1 000 or more. The proof of payment as well as the date on which payment was made is also required as part of the vendor’s records to validate any input tax deduction for second-hand goods acquired.
5.
Foreign-going ships and aircraft – The scope of the definitions "foreign-going aircraft" and "foreign-going ship" was widened so that the supply of consumables and repairs to certain military craft may qualify as zero rated exports as in the case of commercial foreign-going ships and aircrafts.
6.
Time of supply – The VAT law was amended to make it clear that the time of supply rule which is applicable to machines, meters or other devices that are operated by means of coins or tokens, is also applicable to machines that operate with paper currency. The time of supply for the supplier is when the coins, tokens or paper currency is removed from the machine or device. However, when payment is made via the machine or device by electronic means by credit or debit card, the normal time of supply rule applies (i.e. the earlier of the date of payment or the date that an invoice is issued).
VAT 404 – VAT Guide for Vendors Foreword
3
7.
VAT 201 return, modernisation and imported services – New fields were added to the VAT 201 return which came into operation on 28 June 2010. The changes were aimed mainly at addressing certain compliance aspects with regard to the import and export of goods – in particular fraudulent VAT refunds linked to exports. The new fields are 2A, 14A, 15A and the Customs Code. The effect of these changes is that vendors must distinguish between the value of zero-rated exports and other zero-rated supplies on their returns. Input tax in relation to the importation of goods must now also be indicated separately from other taxable supplies. Further, with effect from 1 February 2011, the VAT on any imported services must be declared on the VAT 201 in the case where the person is a vendor instead on form VAT 215. In April 2011, further modernisation changes came into effect in the form of a new look VAT 201 return which is in landscape format and contains additional demographic fields with certain pre-populated fields. Part of the changes are that VAT 201 returns are on no longer mailed in bulk to vendors, but instead must be requested by the vendor on eFiling or from a SARS office. It is expected that more modernisation changes will be implemented in phases in 2011. Vendors are therefore advised to check the SARS website for the latest information, as well as the new publication called VAT Connect which will be sent directly to vendors.
8.
Carbon Dioxide (CO) emission levy – An environmental levy (CO levy) was introduced with effect from 1 September 2010 on new passenger cars, including SUVs and other motor vehicles manufactured in, or imported into, the Republic which are principally designed to carry a maximum of nine passengers. As with all excise duties, the levy amount is built into the price that the manufacturer or importer charges the client. The value on which VAT is calculated must therefore include any environmental levy which is applicable.
9.
Tax Administration Bill (TAB) – The TAB is in the final stages of completion and was published for a second round of public comment in October 2010. The TAB seeks to provide a single body of law that outlines common procedures, rights and remedies. It is expected that the TAB will become an Act of Parliament in the latter part of 2011. Once in effect the TAB will have a major impact on the administration of all taxes in general. The effect from a VAT perspective is that a number of administrative type provisions which are currently in the VAT Act will be deleted or amended. The corresponding provisions in the TAB will then apply from the effective date. Schedule A – Schedule of Amendments reflects the proposed consequential amendments to the various tax acts which were necessary to align them with the TAB. The TAB is available on the SARS website under "Draft Bills" on the Legal and Policy page.
10.
Voluntary disclosure programme (VDP) – The VDP has been implemented to provide taxpayers with an opportunity to voluntarily apply to SARS to disclose their defaults and regularise their tax affairs. The period within which VDP applications can be made to SARS is prescribed by the Commissioner and runs from 5 November 2010 to 31 October 2011. The VDP applies for various taxes including VAT.
The following guides have also been issued and may be referred to for more information relating to the specific VAT topics:
•AS-VAT-08 - Guide for Registration of VAT Vendors
•Trade Classification Guide (VAT 403)
•Guide for Fixed Property and Construction (VAT 409)
•Guide for Accommodation, Catering and Entertainment (VAT 411)
•Share Block Schemes (VAT 412)
•Deceased Estates (VAT 413)
•Guide for Associations not for Gain and Welfare Organisations (VAT 414)
•Diesel Refund Guide (VAT 415)
•AS-VAT-10 - Quick Reference Guide (Small Vendors) (VAT 417)
•AS-VAT-02 - Quick Reference Guide (Diplomatic Refunds)
•Guide for Municipalities (VAT 419)
•Guide for Motor Dealers (VAT 420)
•VAT treatment of entities affiliated to FIFA Part 2 entities
•VAT treatment of entities affiliated to FIFA Part 3 entities
VAT 404 – VAT Guide for Vendors Foreword
4
The information in this guide is issued for guidance only and does not constitute a binding general ruling as contemplated in section 76P of the Income Tax Act, No. 58 of 1962 and sections 41A and 41B of the VAT Act unless otherwise indicated. All previous editions of the Guide for Vendors (VAT 404) are withdrawn with effect from 6 September 2011. Should there be any aspects relating to VAT which are not clear or not dealt with in this guide, or should you require further information or a specific ruling on a legal issue, you may:
•contact your local South African Revenue Service (SARS) branch;
•visit the SARS website at
www.sars.gov.za;
•contact your own tax advisors;
•if calling locally, contact the SARS National Call Centre on 0800 00 7277; or
•if calling from abroad, contact the SARS National Call Centre on +27 11 602 2093.
Comments and/or suggestions regarding this guide may be sent to the following e-mail address:
policycomments@sars.gov.za.
Prepared by
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
6 September 2011
VAT 404 – Guide for Vendors Contents 5
|
CONTENTS CHAPTER 1 : INTRODUCTION |
9 |
|
1.1 What is VAT? |
9 |
|
1.2 How does VAT work? |
9 |
|
CHAPTER 2 : REGISTERING YOUR BUSINESS |
12 |
|
2.1 When do I become liable to register for VAT? |
12 |
|
2.2 Where must I register? |
12 |
|
2.3 What documents must I submit with my application? |
13 |
|
2.4 How do I calculate the value of taxable supplies? |
14 |
|
2.5 Voluntary registration |
15 |
|
2.6 Refusal of a voluntary registration application |
16 |
|
2.7 Separate registration (branches, divisions and separate enterprises) |
16 |
|
2.8 Cancellation of registration |
17 |
|
CHAPTER 3 : TAX PERIODS |
20 |
|
3.1 Which tax periods are available? |
20 |
|
3.2 Allocation and change of tax periods |
21 |
|
3.3 The 10-day rule |
22 |
|
CHAPTER 4 : ACCOUNTING BASIS |
23 |
|
4.1 Introduction |
23 |
|
4.2 Invoice basis |
23 |
|
4.3 Payments basis |
24 |
|
4.4 Change of accounting basis |
25 |
|
4.5 Special cases |
26 |
|
CHAPTER 5 : TAXABLE SUPPLIES |
27 |
|
5.1 Introduction |
27 |
|
5.2 Standard rated supplies |
27 |
|
5.3 Zero-rated supplies |
28 |
|
5.4 Deemed supplies |
31 |
|
5.5 Time of supply |
32 |
|
5.6 Value of supply |
34 |
THOMSONS TAX
I am a Master Tax Practitioner (Private and Public Practice) and Former Tax Auditor at SARS Johannesburg - If I can't help you, you probably can't be helped.
This is an Advanced Level service to the Public, Tax Practitioners, Customers, Auditors, Accountants and Lawyers in private practice. Complete the Contact sheet or email me Directly on grant@taxpro.co.za - Hedley Grant Thomson - Master Tax Practitioner SAIT(SA) REMEMBER WE COME TO YOU
How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
Guidelines
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits - to check your compliance
* Desk audit - to verify accuracy of data
* Refund audit - that the refund is due
* Field audit - to closely monitor all tax processes.
* Integrated audit - to assess taxpayer compliance.
* Risk audit - to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Creditors
* Debtors
* Salaries & wages
* VAT
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* Purchases
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General - overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments - 5 yrs
* Invoices, sales & purchases - 5 yrs
* Bank statements - 5 yrs
* Year end working papers - 5 yrs
* VAT records - 5 yrs
* Other general documents - 5 yrs
* Salary & wage registers - 5 yrs
* Records of trust monies - indefinitely
* Staff records - 3 yrs
* Cheques & bills of exchange - 6 yrs
* Stock sheets - 6 yrs
* Record for CGT four years after date of tax return - 4 yrs
* Company statutory records - 15 yrs
* All close corporation statutory records - indefinitely
* All financial statements, fixed asset registers, accounting records, etc - 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
2009/02/25 SPC V2.000
VAT 404
Value-Added Tax
Guide for Vendors
www.sars.gov.za1
10 IMPORTANT PRINCIPLES
1.
All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies).
2.
Vendors collect VAT on behalf of the State – please make sure that you pay it over on time, otherwise penalties and interest will be charged.
3.
VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable.
4.
You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.
5.
Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic.
6.
You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.
7.
You are required to advise the South African Revenue Service (SARS) within 21 days of any changes in your registered particulars, including any change in your authorised representative, business address, banking details, trading name, or if you cease trading.
8.
If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect.
9.
You can pay your VAT by using various electronic methods, including eFiling, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks.
10.
Report fraudulent activities to SARS by calling the Fraud and Anti-Corruption Hotline on 0800 00 28 70. You may report an incident anonymously if you wish.
VAT 404 – Guide for Vendors Contents
2
FOREWORD
The VAT 404 is a basic guide where technical and legal terminology has been avoided wherever possible. Although fairly comprehensive, the guide does not deal with all the legal detail associated with VAT and is not intended for legal reference. All references to "the VAT Act" or "the Act" are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. The terms "Republic", "South Africa" or the abbreviation "RSA", are used interchangeably in this document as a reference to the sovereign territory of the Republic of South Africa, as set out in the definition of "Republic" in section 1 of the VAT Act. You will also find a number of specific terms used throughout the guide which are defined in the Value–Added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference.
The information in this guide is based on the VAT legislation (as amended) as at the time of publishing and includes the amendments contained in the
Taxation Laws Amendment Act 7 of 2010 and the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act 8 of 2010 both of which were promulgated on 2 November 2010 (as per GG 33726 and GG 33727 respectively). Below is a brief synopsis of some of the most important changes affecting the administration of VAT since the previous issue of this Guide:
1.
Remission of interest – With effect from 1 April 2010 the Commissioner’s discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor’s control. Interpretation Note No. 61: Remission of interest in terms of section 39(7)(a) was issued on 29 March 2011 to provide further guidance in this regard. The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010.
2.
Registration requirements – The documentary requirements with which a person must comply in order to obtain a VAT registration number were clarified. Any person that applies to register for VAT must ensure that the correct supporting documents as set out in the policy document AS-VAT-08 - Guide for Completion of VAT Registration Application Forms are submitted.
3.
Tax invoices – A supplier is not obliged to issue a tax invoice in cases where the consideration for a taxable supply is less than R50, but the recipient must nevertheless be in possession of a source document such as an invoice or till slip as proof that the expense has been incurred before an input tax deduction will be allowed.
4.
Second-hand goods – Vendors are required to maintain the prescribed records (form VAT 264) in respect of any second-hand goods acquired. Previously this was only required for purchases where the consideration was R1 000 or more. The proof of payment as well as the date on which payment was made is also required as part of the vendor’s records to validate any input tax deduction for second-hand goods acquired.
5.
Foreign-going ships and aircraft – The scope of the definitions "foreign-going aircraft" and "foreign-going ship" was widened so that the supply of consumables and repairs to certain military craft may qualify as zero rated exports as in the case of commercial foreign-going ships and aircrafts.
6.
Time of supply – The VAT law was amended to make it clear that the time of supply rule which is applicable to machines, meters or other devices that are operated by means of coins or tokens, is also applicable to machines that operate with paper currency. The time of supply for the supplier is when the coins, tokens or paper currency is removed from the machine or device. However, when payment is made via the machine or device by electronic means by credit or debit card, the normal time of supply rule applies (i.e. the earlier of the date of payment or the date that an invoice is issued).
VAT 404 – VAT Guide for Vendors Foreword
3
7.
VAT 201 return, modernisation and imported services – New fields were added to the VAT 201 return which came into operation on 28 June 2010. The changes were aimed mainly at addressing certain compliance aspects with regard to the import and export of goods – in particular fraudulent VAT refunds linked to exports. The new fields are 2A, 14A, 15A and the Customs Code. The effect of these changes is that vendors must distinguish between the value of zero-rated exports and other zero-rated supplies on their returns. Input tax in relation to the importation of goods must now also be indicated separately from other taxable supplies. Further, with effect from 1 February 2011, the VAT on any imported services must be declared on the VAT 201 in the case where the person is a vendor instead on form VAT 215. In April 2011, further modernisation changes came into effect in the form of a new look VAT 201 return which is in landscape format and contains additional demographic fields with certain pre-populated fields. Part of the changes are that VAT 201 returns are on no longer mailed in bulk to vendors, but instead must be requested by the vendor on eFiling or from a SARS office. It is expected that more modernisation changes will be implemented in phases in 2011. Vendors are therefore advised to check the SARS website for the latest information, as well as the new publication called VAT Connect which will be sent directly to vendors.
8.
Carbon Dioxide (CO) emission levy – An environmental levy (CO levy) was introduced with effect from 1 September 2010 on new passenger cars, including SUVs and other motor vehicles manufactured in, or imported into, the Republic which are principally designed to carry a maximum of nine passengers. As with all excise duties, the levy amount is built into the price that the manufacturer or importer charges the client. The value on which VAT is calculated must therefore include any environmental levy which is applicable.
9.
Tax Administration Bill (TAB) – The TAB is in the final stages of completion and was published for a second round of public comment in October 2010. The TAB seeks to provide a single body of law that outlines common procedures, rights and remedies. It is expected that the TAB will become an Act of Parliament in the latter part of 2011. Once in effect the TAB will have a major impact on the administration of all taxes in general. The effect from a VAT perspective is that a number of administrative type provisions which are currently in the VAT Act will be deleted or amended. The corresponding provisions in the TAB will then apply from the effective date. Schedule A – Schedule of Amendments reflects the proposed consequential amendments to the various tax acts which were necessary to align them with the TAB. The TAB is available on the SARS website under "Draft Bills" on the Legal and Policy page.
10.
Voluntary disclosure programme (VDP) – The VDP has been implemented to provide taxpayers with an opportunity to voluntarily apply to SARS to disclose their defaults and regularise their tax affairs. The period within which VDP applications can be made to SARS is prescribed by the Commissioner and runs from 5 November 2010 to 31 October 2011. The VDP applies for various taxes including VAT.
The following guides have also been issued and may be referred to for more information relating to the specific VAT topics:
•AS-VAT-08 - Guide for Registration of VAT Vendors
•Trade Classification Guide (VAT 403)
•Guide for Fixed Property and Construction (VAT 409)
•Guide for Accommodation, Catering and Entertainment (VAT 411)
•Share Block Schemes (VAT 412)
•Deceased Estates (VAT 413)
•Guide for Associations not for Gain and Welfare Organisations (VAT 414)
•Diesel Refund Guide (VAT 415)
•AS-VAT-10 - Quick Reference Guide (Small Vendors) (VAT 417)
•AS-VAT-02 - Quick Reference Guide (Diplomatic Refunds)
•Guide for Municipalities (VAT 419)
•Guide for Motor Dealers (VAT 420)
•VAT treatment of entities affiliated to FIFA Part 2 entities
•VAT treatment of entities affiliated to FIFA Part 3 entities
VAT 404 – VAT Guide for Vendors Foreword
4
The information in this guide is issued for guidance only and does not constitute a binding general ruling as contemplated in section 76P of the Income Tax Act, No. 58 of 1962 and sections 41A and 41B of the VAT Act unless otherwise indicated. All previous editions of the Guide for Vendors (VAT 404) are withdrawn with effect from 6 September 2011. Should there be any aspects relating to VAT which are not clear or not dealt with in this guide, or should you require further information or a specific ruling on a legal issue, you may:
•contact your local South African Revenue Service (SARS) branch;
•visit the SARS website at
www.sars.gov.za;
•contact your own tax advisors;
•if calling locally, contact the SARS National Call Centre on 0800 00 7277; or
•if calling from abroad, contact the SARS National Call Centre on +27 11 602 2093.
Comments and/or suggestions regarding this guide may be sent to the following e-mail address:
policycomments@sars.gov.za.
Prepared by
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
6 September 2011
VAT 404 – Guide for Vendors Contents 5
|
CONTENTS CHAPTER 1 : INTRODUCTION |
9 |
|
1.1 What is VAT? |
9 |
|
1.2 How does VAT work? |
9 |
|
CHAPTER 2 : REGISTERING YOUR BUSINESS |
12 |
|
2.1 When do I become liable to register for VAT? |
12 |
|
2.2 Where must I register? |
12 |
|
2.3 What documents must I submit with my application? |
13 |
|
2.4 How do I calculate the value of taxable supplies? |
14 |
|
2.5 Voluntary registration |
15 |
|
2.6 Refusal of a voluntary registration application |
16 |
|
2.7 Separate registration (branches, divisions and separate enterprises) |
16 |
|
2.8 Cancellation of registration |
17 |
|
CHAPTER 3 : TAX PERIODS |
20 |
|
3.1 Which tax periods are available? |
20 |
|
3.2 Allocation and change of tax periods |
21 |
|
3.3 The 10-day rule |
22 |
|
CHAPTER 4 : ACCOUNTING BASIS |
23 |
|
4.1 Introduction |
23 |
|
4.2 Invoice basis |
23 |
|
4.3 Payments basis |
24 |
|
4.4 Change of accounting basis |
25 |
|
4.5 Special cases |
26 |
|
CHAPTER 5 : TAXABLE SUPPLIES |
27 |
|
5.1 Introduction |
27 |
|
5.2 Standard rated supplies |
27 |
|
5.3 Zero-rated supplies |
28 |
|
5.4 Deemed supplies |
31 |
|
5.5 Time of supply |
32 |
|
5.6 Value of supply |
34 |
Thomson VAT and Tax SARS VDP Voluntary Disclosure Help - Tax, Vat and Paye - Submissions - SARS Audits
THOMSON'S TAX
We assist with SARS VDP Voluntary Disclosure Help
Voluntary disclosure programme plagued by delays?
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Money Web Tax 24 June 2011
SARS responds, explains why this is not the case.
Having heeded the call for a Voluntary Disclosure Programme (VDP) from SARS many companies are yet to receive any proactive responses or information on the status of their submissions.
Over the last few months starting in November 2011 we have made several online submissions to SARS on behalf of our clients, the last form of communication received was a short automated acknowledgement of the application with a reference number. Other than the acknowledgement no other feedback has been received nor have any of the applications been finalised. This gives the impression that there is a lack of urgency when dealing with VDP matters.
The current legislation dictates that SARS must provide the specified relief if an individual or company comes forward and makes a valid disclosure and concludes a voluntary disclosure agreement with SARS. However, the relief may be withdrawn if, subsequent to the conclusion of the agreement, it is established that the applicant failed to disclose a material matter. Additionally, there is no guarantee that SARS will not target the company in future.
It is this uncertainty and lack of communication which has left clients feeling very uneasy with the whole programme. Clients believe that they have inadvertently exposed themselves to an audit by SARS.
In contrast the exchange control tax clearance programme, which was put into effect at the same time as VDP, been extremely effective with over 80% of the submissions put forward completed timeously.
This observation leads us to believe that there is no sense of urgency from SARS side when dealing with VDP claims and we would urge SARS to make this matter a priority.
Despite the delays in the VDP system companies and individuals should still take advantage of the open window which SARS has created. Many companies may not be aware of having defaulted in the past. The programme will allow them to start on a clean slate with a clear understanding of their tax status with SARS and is particularly important with the implementation of the Companies Act which makes directors directly liable for such tax transgressions."
*Elriette Butler is an associate director at BDO."
VAT submissions as well as high level Audits from SARS. VAT is an item that needs extreme care to be taken at all times as SARS has clamped down heavily on VAT Refunds. Complete the Contact sheet or email me Directly on grant@taxpro.co.za REMEMBER WE COME TO YOU
How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
Guidelines
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits - to check your compliance
* Desk audit - to verify accuracy of data
* Refund audit - that the refund is due
* Field audit - to closely monitor all tax processes.
* Integrated audit - to assess taxpayer compliance.
* Risk audit - to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Creditors
* Debtors
* Salaries & wages
* VAT
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* Purchases
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General - overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments - 5 yrs
* Invoices, sales & purchases - 5 yrs
* Bank statements - 5 yrs
* Year end working papers - 5 yrs
* VAT records - 5 yrs
* Other general documents - 5 yrs
* Salary & wage registers - 5 yrs
* Records of trust monies - indefinitely
* Staff records - 3 yrs
* Cheques & bills of exchange - 6 yrs
* Stock sheets - 6 yrs
* Record for CGT four years after date of tax return - 4 yrs
* Company statutory records - 15 yrs
* All close corporation statutory records - indefinitely
* All financial statements, fixed asset registers, accounting records, etc - 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
South African Voluntary Disclosure Program
The Finance Minister, Pravin Gordham, announced in the budget speech earlier this year that
SARS would implement a voluntary disclosure program.
The voluntary disclosure program would apply to all taxes
(including employees’ tax) and
will run for 12 months from 1 November 2010 to 31 October 2011. The purpose of the VDP is to
give taxpayers the opportunity to regularise their tax affairs (Tax VDP) and/or regularise any
contraventions of the Exchange Control Regulations, 1961 (Regulations) (Excon VDP).
Defaulting taxpayers
who are unaware of any pending or current investigation into their tax
affairs may consider relief under the program, if they make a complete disclosure of a default
that would trigger additional tax or penalty/interest charges. Defaulting taxpayers, in certain
limited circumstances, may also consider using the voluntary disclosure program in situations
when a current investigation is taking place.
The voluntary disclosure program will provide
qualifying taxpayers with certain benefits
ranging from amnesty from any criminal prosecution, to a waiver of additional taxes, penalties
(other than administrative penalties) and interest of up to 100 percent, arising from a previous
default which must have occurred prior to 17 February 2010.
The VDP is a window of opportunity
for any South African residents (i.e., individual/sole
proprietor/partnership/deceased estate(s)/insolvent estate(s)/South African trust(s)/former South
African residents/company/close corporation) to regularise their exchange control affairs, and
provide SARS and SARB with details of foreign assets and/or structures (of whatever nature
excluding bearer instruments) individuals and/or corporate entities to disclose and regularise
their tax and/or exchange control affairs.
The VDP is an internationally accepted mechanism
to broaden compliance with tax and
exchange control requirements. It flows from the efforts around the globe to end bank secrecy
and recognises the greater access to information enjoyed by SARS both domestically and
internationally.
South African residents who have contravened the Regulations
, are assured that where a full
disclosure is made in the prescribed manner and administrative relief is granted by FinSurv, no
further action against the South African resident involved in such contraventions will be taken or
initiated by FinSurv.
HOW DOES A VDP AFFECT ME ?
General information
If you currently have tax defaults or if have contravened the Regulations and choose not to make
use of the VDP, then the law will take its course. This could mean that SARS will apply various
sanctions, including the payment of outstanding taxes, penalties and interest, and criminal
prosecution. FinSurv could apply various sanctions, including the attachment of assets, blocking
of funds, interest being charged and/or criminal prosecution.
In the event that you have previously made a disclosure under the 2003 amnesty, then you can
apply again under the current VDP?
HOW CAN OSIRIS HELP ?
We at Osiris can play an important role in ensuring the success of a tax VDP or Excon VDP by
assisting clients to make use of the VDP. We will however need to establish and verify clients’
identities and keeping of records in terms of FICA. Our obligation to report suspicious or
unusual transactions
does not arise where clients are assisted in regularising their affairs by
making use of the VDP in connection with income and/or foreign assets that were derived from
legitimate sources.
ANONYMITY
Osiris can on behalf of an applicant first obtain an indication of the possible relief that may be
granted, by submitting an application that does not reveal any identifying information. Based on
this, SARS may then issue a non-binding opinion indicating whether or not the applicant would
qualify for any relief and, if so, to what extent. However this non-binding opinion is conditional
upon the factual disclosure made, and can only be used as a guideline.
SARS can only then commit to the final granting of any relief in the case of an anonymous
application, after the identity of the applicant has been disclosed, so that all the facts of the
disclosure (more specifically establishing whether there was a pending audit or investigation)
have been verified. The anonymous applicant may decide not to proceed with the application for
relief. Such applicants, however, remain at risk of SARS independently identifying any defaults,
leading to the normal course of events to unfold, which may include penalties, additional taxes
and interest charges, in addition to the criminal law taking its course.
4. The Tax VDP
The APPLICATION PROCESS
Applicants must complete an application form for relief under the Tax VDP or Excon VDP.
Regarding an anonymous disclosure, the applicant or a duly authorised representative (OSIRIS)
may engage with SARS. In order to support the application, the following information must be
submitted:-
• The name, address (including email), telephone number, identity number, company or trust
registration number, and any identification tax number assigned by SARS to the applicant (if
applicable)
• The address of the applicant’s authorised representative, including telephone and fax numbers
(if applicable)
• The tax year(s), reporting period(s) or tax period(s) involved in the disclosure
• Amount of the disclosure (if applicable)
• Tax type(s)
• Type of return(s) involved (IT type return, VAT, etc.)
• Type of omission or default (understatement of tax; overstatement of refund or any other
non-compliance resulting in outstanding tax)
• Reason for the omission or other non-compliance resulting in outstanding tax
• Primary business activity
• An explanation of how the applicant considers that the requirements have been met.
In order to assist you with some of the terminology we have highlighted below some of the
key issues in the event that either a tax VDP or Excon VDP may be suitable to your
circumstances :-
1. What is meant by a tax default?
A tax default means
• the submission of inaccurate or incomplete information to the Commissioner;
• the failure to submit information; or
•assumptions presented to SARS about one’s tax liability, where such submission, nonsubmission,
or assumptions resulted in
(a) the applicant not being assessed for the correct amount of tax;
(b) the correct amount of tax not being paid by the taxpayer; or
(c) an incorrect refund being made by the Commissioner.
2. Who may apply for relief under the Tax VDP?
Any person may apply, whether in a personal, representative, withholding or other capacity,
for defaults prior to 17 February 2010.
3. What tax types are covered under the Tax VDP?
All types of tax administered by SARS are included under the VDP. Some of these are:
Income tax, pay as you earn (PAYE) (employee’s tax), value-added tax (VAT), diesel refunds,
customs duties, excise duties and levies, donations tax, estate duty, mineral and petroleum
resource royalties, royalties, secondary tax on companies (STC), stamp duty, securities transfer
tax (STT), transfer duty, turnover tax and uncertified securities tax (UST).
4. Can parties who are being audited, or are being investigated, or are
the subject of an enforcement action by SARS submit an application?
SARS may accept their applications if their default would not have been detected during the
audit or investigation, and the application would be in the interest of good management of the tax
system and the best use of SARS resources. In these cases, however, they will need permission
from the Commissioner to apply and they will be charged 50 per cent (half) of the interest that
would otherwise be due.
5. What are the minimum requirements to qualify for VDP?
A defaulting taxpayer will be granted relief under the programme if the application meets the
following requirements:
• The disclosure is complete in all material respects and made in the prescribed form and manner
• SARS was not aware of the default, which must have occurred prior to 17 February 2010
• A penalty or additional tax would have been imposed had SARS discovered the default in the
normal course of business
• It would not result in a refund due by the Commissioner.
6. What relief is offered under the Tax VDP?
If SARS accepts that your application is a disclosure that meets the conditions set out in the
legislation, it will be considered a valid disclosure. You will then be able to benefit from the
following relief:
• Penalty relief
You will not be charged penalties, whether a fixed amount or a percentage-based penalty, with
respect to the disclosure. Penalties for late submission of returns and late payments may,
however, be charged.
• Interest relief
50 per cent interest relief for applicants who required permission from the Commissioner to
apply 100 per cent interest relief for all other applicants.
• Additional tax relief
SARS will impose no additional tax.
• Criminal prosecution relief
SARS will not initiate criminal prosecution for any Tax Act offence, or related common law
offences.
7. How far back will SARS go to calculate the tax outstanding in terms of the Tax VDP?
Strictly speaking, SARS should go back for as many years as the tax default has occurred.
SARS, however, appreciates that record keeping and other difficulties may arise in doing so.
Bearing in mind the record keeping requirements in the legislation SARS administers and the
objectives of this VDP, if the default is one that involves a small proportion of the applicant’s
income or transactions, SARS will generally not go back further than five years in calculating the
tax outstanding in terms of the Tax VDP.
If the default involves extraordinary income or transactions that occurred more than five years
back, SARS will take the extraordinary income or transactions into account in calculating the tax
outstanding. Thus, by way of example, if an applicant entered into an extraordinary transaction
to evade tax in 2000 and invested the income in a secret offshore bank account bearing nominal
interest, SARS will calculate the tax outstanding on the extraordinary transaction in 2000 and the
interest income from 2005 to 2010. Where an applicant requires further guidance with regard to
this question Osiris can either contact the VDP Unit on your behalf and/or make an anonymous
application.
The Excon VDP Process
8.1. Who may apply under the Excon VDP?
• Individual, sole proprietor, partnership, deceased estate(s), insolvent estate(s), South African
trust(s), former South African residents, companies and close corporations that have contravened
the Regulations, prior to 28 February 2010; and • South African residents who took funds
offshore illegally and/or who beneficially own any unauthorised foreign assets and/or structures
(of whatever nature, excluding bearer instruments) may apply to the FinSurv (VDP Division).
Note:
For the purpose of determining whether a person is a resident for exchange control
purposes, the nationality or citizenship of that person is irrelevant.
8.2. What are the benefits of the Excon VDP?
Under the Excon VDP successful applicants will be regarded as having regularised their
exchange control affairs in respect of the declared value of all unauthorised foreign assets
disclosed in their application. South African residents who have contravened the Regulations are
assured that where a full disclosure is made in the prescribed manner and administrative relief is
granted by FinSurv (VDP Division), no further action against the South African resident
involved in such contraventions will be taken or initiated by FinSurv.
8.3. Minimum requirements to qualify for the Excon VDP
An applicant will be granted relief for VDP, if he/she/it meets the following requirements:
• The applicant must have contravened the Regulations prior to 28 February 2010
• The disclosure is complete
8.4. What relief is offered under the Excon VDP?
Applicants who are granted administrative relief in respect of unauthorised foreign assets and/or
structures (of whatever nature, excluding bearer instruments) may have to pay a levy on the
market value thereof.
• A levy of
10 per cent calculated on the market value of the unauthorised foreign asset
disclosed as at 28 February 2010. This levy must be paid from foreign-sourced funds.
• A levy of
12 per cent calculated on the market value of the unauthorised foreign asset
disclosed as at 28 February 2010, where no foreign funds are available.
• The amount levied in the case of an individual is reduced by R4 million of the foreign
capital allowance or any remaining portion thereof, and may not be reduced by any fees
or commissions.
8.5. When and where must the VDP levy be paid?
The levy must be paid within three months of the date of approval of the application,
.
8.6. What supporting information or documentation needs to be submitted?
The following supporting documentation must accompany the applicant’s original signed
application form:
• Cash:
Declaration giving a description and the value of the money, as at 28 February 2010
• Bank accounts, call deposits or time (term) deposits, or any other short-term foreign
asset:
Original or a certified copy of a statement of account from the foreign institution
concerned, as at 28 February 2010
• Financial instruments listed on a recognised exchange, such as shares, stock, bonds or
debentures:
Original or a certified copy of a statement of account and price as quoted on the
exchange, as at 28 February 2010
• Other financial instruments not listed on a recognised exchange or unlisted shares:
Valuation certificate from a foreign valuator, as at 28 February 2010
• Fixed property:
A valuation certificate issued by a valuator, or by a sphere of government of
the country where that foreign asset is located, as at 28 February 2010
• Foreign insurance policies:
A valuation certificate from your insurer, as at 28 February 2010
• An investment in a collective scheme, such as a unit trust:
A statement by the management
company of the scheme, as at 28 February 2010
• Intangible assets, such as a patent or copyright:
A valuation certificate by a valuator of the
country where that foreign asset is located or registered, as at 28 February 2010
• Other foreign assets:
A written declaration.
referenced from:
http://www.osiristrust.com/whatsnew/South%20African%20Voluntary%20Disclosure%20Program.pdf
THOMSONS TAX
Have an outstanding balance with SARS on your personal or business account for Tax, VAT, PAYE etc. and you have no idea where it comes from? Thomson Accountants can analyze and determine where this balance originated, if it is indeed correct and assist you with the objection if found that it is necessary. Complete the Contact sheet or email me Directly on grant@taxpro.co.za REMEMBER WE COME TO YOU
IT 88 - DO NOT ignore this document from SARS
The ITA88 system from SARS is here.
What is the ITA 88 system
With effect from the 1 September 2010 SARS will appoint employers as collection agents for Administrative penalties and unpaid taxes. You as the employer will be obliged to deduct the full amount from the employee’s salary and pay this over to the receiver with your next EMP 201 submission.
-
Penalties will be levied on the following offences:
-
Not registering as a tax payer
-
Not informing SARS of a change of address or other important details – employer as well
-
Not submitting a return or related documents
-
Not submitting a monthly return – employer
-
Not providing details of an employee – employer
-
Delivery of tax certificates before reconciling and returning to SARS – employer
-
Any other non-compliance with an obligation according to SARS
-
-
Basic information
-
Penalties are from R250 – R16000 depending on the assessment by SARS.
-
The employee would have received an ITP34 penalty assessment stating the offence, penalty, payment due date and payment procedure
-
This penalty can be disputed by remedying the problem and completing a Request for Remission form (RFR)
-
Penalties will be raised EVERY month until it’s sorted – consultation with employee is essential!
-
SARS rule – pay now, argue later
-
The following is the procedure that will have to be followed:
-
Employee fails to respond to ITP34 notice
-
SARS appoints the employer as agent (section 99 of the income tax act) and issues the ITA88 form to the employer to appoint him as agent (These notices will be issued electronically and via email – to be administered through Easyfile) – the employer is legally bound to obey and deduct the money
-
Employer administers the deduction from the payroll. This can be done over 3 months depending on employee’s affordability and the money will be paid over to SARS with your next EMP 201 submission
-
No interest applies if there is a payment plan(3 months) for the ITA88 penalty
-
Legal priority of deductions should there be limited funds then the employer must first deduct:
-
PAYE
-
UIF
-
Pension or provident Fund
-
Medical aid deductions
-
Special provisions for Garnishee/maintenance payments.
-
Existing garnishees must “stand back” for ITA88 deductions – The collecting agents/attorneys must be informed in writing.
Finally it is in the interest of the employer to help the employee resolve these outstanding issues. If the employer does not comply then SARS will hold the employer liable for the outstanding amounts.
THOMSONS TAX
I am a Master Tax Practitioner (Private and Public Practice) and Former Tax Auditor at SARS Johannesburg - If I can't help you, you probably can't be helped.
This is an Advanced Level service to the Public, Tax Practitioners, Customers, Auditors, Accountants and Lawyers in private practice. Complete the Contact sheet or email me Directly on grant@taxpro.co.za - Hedley Grant Thomson - Master Tax Practitioner SAIT(SA) REMEMBER WE COME TO YOU
How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
Guidelines
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits - to check your compliance
* Desk audit - to verify accuracy of data
* Refund audit - that the refund is due
* Field audit - to closely monitor all tax processes.
* Integrated audit - to assess taxpayer compliance.
* Risk audit - to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Creditors
* Debtors
* Salaries & wages
* VAT
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* Purchases
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General - overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments - 5 yrs
* Invoices, sales & purchases - 5 yrs
* Bank statements - 5 yrs
* Year end working papers - 5 yrs
* VAT records - 5 yrs
* Other general documents - 5 yrs
* Salary & wage registers - 5 yrs
* Records of trust monies - indefinitely
* Staff records - 3 yrs
* Cheques & bills of exchange - 6 yrs
* Stock sheets - 6 yrs
* Record for CGT four years after date of tax return - 4 yrs
* Company statutory records - 15 yrs
* All close corporation statutory records - indefinitely
* All financial statements, fixed asset registers, accounting records, etc - 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
2009/02/25 SPC V2.000
VAT 404
Value-Added Tax
Guide for Vendors
www.sars.gov.za1
10 IMPORTANT PRINCIPLES
1.
All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies).
2.
Vendors collect VAT on behalf of the State – please make sure that you pay it over on time, otherwise penalties and interest will be charged.
3.
VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable.
4.
You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.
5.
Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic.
6.
You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.
7.
You are required to advise the South African Revenue Service (SARS) within 21 days of any changes in your registered particulars, including any change in your authorised representative, business address, banking details, trading name, or if you cease trading.
8.
If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect.
9.
You can pay your VAT by using various electronic methods, including eFiling, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks.
10.
Report fraudulent activities to SARS by calling the Fraud and Anti-Corruption Hotline on 0800 00 28 70. You may report an incident anonymously if you wish.
VAT 404 – Guide for Vendors Contents
2
FOREWORD
The VAT 404 is a basic guide where technical and legal terminology has been avoided wherever possible. Although fairly comprehensive, the guide does not deal with all the legal detail associated with VAT and is not intended for legal reference. All references to "the VAT Act" or "the Act" are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. The terms "Republic", "South Africa" or the abbreviation "RSA", are used interchangeably in this document as a reference to the sovereign territory of the Republic of South Africa, as set out in the definition of "Republic" in section 1 of the VAT Act. You will also find a number of specific terms used throughout the guide which are defined in the Value–Added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference.
The information in this guide is based on the VAT legislation (as amended) as at the time of publishing and includes the amendments contained in the
Taxation Laws Amendment Act 7 of 2010 and the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act 8 of 2010 both of which were promulgated on 2 November 2010 (as per GG 33726 and GG 33727 respectively). Below is a brief synopsis of some of the most important changes affecting the administration of VAT since the previous issue of this Guide:
1.
Remission of interest – With effect from 1 April 2010 the Commissioner’s discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor’s control. Interpretation Note No. 61: Remission of interest in terms of section 39(7)(a) was issued on 29 March 2011 to provide further guidance in this regard. The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010.
2.
Registration requirements – The documentary requirements with which a person must comply in order to obtain a VAT registration number were clarified. Any person that applies to register for VAT must ensure that the correct supporting documents as set out in the policy document AS-VAT-08 - Guide for Completion of VAT Registration Application Forms are submitted.
3.
Tax invoices – A supplier is not obliged to issue a tax invoice in cases where the consideration for a taxable supply is less than R50, but the recipient must nevertheless be in possession of a source document such as an invoice or till slip as proof that the expense has been incurred before an input tax deduction will be allowed.
4.
Second-hand goods – Vendors are required to maintain the prescribed records (form VAT 264) in respect of any second-hand goods acquired. Previously this was only required for purchases where the consideration was R1 000 or more. The proof of payment as well as the date on which payment was made is also required as part of the vendor’s records to validate any input tax deduction for second-hand goods acquired.
5.
Foreign-going ships and aircraft – The scope of the definitions "foreign-going aircraft" and "foreign-going ship" was widened so that the supply of consumables and repairs to certain military craft may qualify as zero rated exports as in the case of commercial foreign-going ships and aircrafts.
6.
Time of supply – The VAT law was amended to make it clear that the time of supply rule which is applicable to machines, meters or other devices that are operated by means of coins or tokens, is also applicable to machines that operate with paper currency. The time of supply for the supplier is when the coins, tokens or paper currency is removed from the machine or device. However, when payment is made via the machine or device by electronic means by credit or debit card, the normal time of supply rule applies (i.e. the earlier of the date of payment or the date that an invoice is issued).
VAT 404 – VAT Guide for Vendors Foreword
3
7.
VAT 201 return, modernisation and imported services – New fields were added to the VAT 201 return which came into operation on 28 June 2010. The changes were aimed mainly at addressing certain compliance aspects with regard to the import and export of goods – in particular fraudulent VAT refunds linked to exports. The new fields are 2A, 14A, 15A and the Customs Code. The effect of these changes is that vendors must distinguish between the value of zero-rated exports and other zero-rated supplies on their returns. Input tax in relation to the importation of goods must now also be indicated separately from other taxable supplies. Further, with effect from 1 February 2011, the VAT on any imported services must be declared on the VAT 201 in the case where the person is a vendor instead on form VAT 215. In April 2011, further modernisation changes came into effect in the form of a new look VAT 201 return which is in landscape format and contains additional demographic fields with certain pre-populated fields. Part of the changes are that VAT 201 returns are on no longer mailed in bulk to vendors, but instead must be requested by the vendor on eFiling or from a SARS office. It is expected that more modernisation changes will be implemented in phases in 2011. Vendors are therefore advised to check the SARS website for the latest information, as well as the new publication called VAT Connect which will be sent directly to vendors.
8.
Carbon Dioxide (CO) emission levy – An environmental levy (CO levy) was introduced with effect from 1 September 2010 on new passenger cars, including SUVs and other motor vehicles manufactured in, or imported into, the Republic which are principally designed to carry a maximum of nine passengers. As with all excise duties, the levy amount is built into the price that the manufacturer or importer charges the client. The value on which VAT is calculated must therefore include any environmental levy which is applicable.
9.
Tax Administration Bill (TAB) – The TAB is in the final stages of completion and was published for a second round of public comment in October 2010. The TAB seeks to provide a single body of law that outlines common procedures, rights and remedies. It is expected that the TAB will become an Act of Parliament in the latter part of 2011. Once in effect the TAB will have a major impact on the administration of all taxes in general. The effect from a VAT perspective is that a number of administrative type provisions which are currently in the VAT Act will be deleted or amended. The corresponding provisions in the TAB will then apply from the effective date. Schedule A – Schedule of Amendments reflects the proposed consequential amendments to the various tax acts which were necessary to align them with the TAB. The TAB is available on the SARS website under "Draft Bills" on the Legal and Policy page.
10.
Voluntary disclosure programme (VDP) – The VDP has been implemented to provide taxpayers with an opportunity to voluntarily apply to SARS to disclose their defaults and regularise their tax affairs. The period within which VDP applications can be made to SARS is prescribed by the Commissioner and runs from 5 November 2010 to 31 October 2011. The VDP applies for various taxes including VAT.
The following guides have also been issued and may be referred to for more information relating to the specific VAT topics:
•AS-VAT-08 - Guide for Registration of VAT Vendors
•Trade Classification Guide (VAT 403)
•Guide for Fixed Property and Construction (VAT 409)
•Guide for Accommodation, Catering and Entertainment (VAT 411)
•Share Block Schemes (VAT 412)
•Deceased Estates (VAT 413)
•Guide for Associations not for Gain and Welfare Organisations (VAT 414)
•Diesel Refund Guide (VAT 415)
•AS-VAT-10 - Quick Reference Guide (Small Vendors) (VAT 417)
•AS-VAT-02 - Quick Reference Guide (Diplomatic Refunds)
•Guide for Municipalities (VAT 419)
•Guide for Motor Dealers (VAT 420)
•VAT treatment of entities affiliated to FIFA Part 2 entities
•VAT treatment of entities affiliated to FIFA Part 3 entities
VAT 404 – VAT Guide for Vendors Foreword
4
The information in this guide is issued for guidance only and does not constitute a binding general ruling as contemplated in section 76P of the Income Tax Act, No. 58 of 1962 and sections 41A and 41B of the VAT Act unless otherwise indicated. All previous editions of the Guide for Vendors (VAT 404) are withdrawn with effect from 6 September 2011. Should there be any aspects relating to VAT which are not clear or not dealt with in this guide, or should you require further information or a specific ruling on a legal issue, you may:
•contact your local South African Revenue Service (SARS) branch;
•visit the SARS website at
www.sars.gov.za;
•contact your own tax advisors;
•if calling locally, contact the SARS National Call Centre on 0800 00 7277; or
•if calling from abroad, contact the SARS National Call Centre on +27 11 602 2093.
Comments and/or suggestions regarding this guide may be sent to the following e-mail address:
policycomments@sars.gov.za.
Prepared by
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
6 September 2011
VAT 404 – Guide for Vendors Contents 5
|
CONTENTS CHAPTER 1 : INTRODUCTION |
9 |
|
1.1 What is VAT? |
9 |
|
1.2 How does VAT work? |
9 |
|
CHAPTER 2 : REGISTERING YOUR BUSINESS |
12 |
|
2.1 When do I become liable to register for VAT? |
12 |
|
2.2 Where must I register? |
12 |
|
2.3 What documents must I submit with my application? |
13 |
|
2.4 How do I calculate the value of taxable supplies? |
14 |
|
2.5 Voluntary registration |
15 |
|
2.6 Refusal of a voluntary registration application |
16 |
|
2.7 Separate registration (branches, divisions and separate enterprises) |
16 |
|
2.8 Cancellation of registration |
17 |
|
CHAPTER 3 : TAX PERIODS |
20 |
|
3.1 Which tax periods are available? |
20 |
|
3.2 Allocation and change of tax periods |
21 |
|
3.3 The 10-day rule |
22 |
|
CHAPTER 4 : ACCOUNTING BASIS |
23 |
|
4.1 Introduction |
23 |
|
4.2 Invoice basis |
23 |
|
4.3 Payments basis |
24 |
|
4.4 Change of accounting basis |
25 |
|
4.5 Special cases |
26 |
|
CHAPTER 5 : TAXABLE SUPPLIES |
27 |
|
5.1 Introduction |
27 |
|
5.2 Standard rated supplies |
27 |
|
5.3 Zero-rated supplies |
28 |
|
5.4 Deemed supplies |
31 |
|
5.5 Time of supply |
32 |
|
5.6 Value of supply |
34 |
THOMSONS TAX
I am a Master Tax Practitioner (Private and Public Practice) and Former Tax Auditor at SARS Johannesburg - If I can't help you, you probably can't be helped.
This is an Advanced Level service to the Public, Tax Practitioners, Customers, Auditors, Accountants and Lawyers in private practice. Complete the Contact sheet or email me Directly on grant@taxpro.co.za - Hedley Grant Thomson - Master Tax Practitioner SAIT(SA) REMEMBER WE COME TO YOU
How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
Guidelines
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits - to check your compliance
* Desk audit - to verify accuracy of data
* Refund audit - that the refund is due
* Field audit - to closely monitor all tax processes.
* Integrated audit - to assess taxpayer compliance.
* Risk audit - to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Creditors
* Debtors
* Salaries & wages
* VAT
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* Purchases
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General - overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments - 5 yrs
* Invoices, sales & purchases - 5 yrs
* Bank statements - 5 yrs
* Year end working papers - 5 yrs
* VAT records - 5 yrs
* Other general documents - 5 yrs
* Salary & wage registers - 5 yrs
* Records of trust monies - indefinitely
* Staff records - 3 yrs
* Cheques & bills of exchange - 6 yrs
* Stock sheets - 6 yrs
* Record for CGT four years after date of tax return - 4 yrs
* Company statutory records - 15 yrs
* All close corporation statutory records - indefinitely
* All financial statements, fixed asset registers, accounting records, etc - 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
2009/02/25 SPC V2.000
VAT 404
Value-Added Tax
Guide for Vendors
www.sars.gov.za1
10 IMPORTANT PRINCIPLES
1.
All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies).
2.
Vendors collect VAT on behalf of the State – please make sure that you pay it over on time, otherwise penalties and interest will be charged.
3.
VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable.
4.
You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.
5.
Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic.
6.
You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.
7.
You are required to advise the South African Revenue Service (SARS) within 21 days of any changes in your registered particulars, including any change in your authorised representative, business address, banking details, trading name, or if you cease trading.
8.
If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect.
9.
You can pay your VAT by using various electronic methods, including eFiling, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks.
10.
Report fraudulent activities to SARS by calling the Fraud and Anti-Corruption Hotline on 0800 00 28 70. You may report an incident anonymously if you wish.
VAT 404 – Guide for Vendors Contents
2
FOREWORD
The VAT 404 is a basic guide where technical and legal terminology has been avoided wherever possible. Although fairly comprehensive, the guide does not deal with all the legal detail associated with VAT and is not intended for legal reference. All references to "the VAT Act" or "the Act" are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. The terms "Republic", "South Africa" or the abbreviation "RSA", are used interchangeably in this document as a reference to the sovereign territory of the Republic of South Africa, as set out in the definition of "Republic" in section 1 of the VAT Act. You will also find a number of specific terms used throughout the guide which are defined in the Value–Added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference.
The information in this guide is based on the VAT legislation (as amended) as at the time of publishing and includes the amendments contained in the
Taxation Laws Amendment Act 7 of 2010 and the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act 8 of 2010 both of which were promulgated on 2 November 2010 (as per GG 33726 and GG 33727 respectively). Below is a brief synopsis of some of the most important changes affecting the administration of VAT since the previous issue of this Guide:
1.
Remission of interest – With effect from 1 April 2010 the Commissioner’s discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor’s control. Interpretation Note No. 61: Remission of interest in terms of section 39(7)(a) was issued on 29 March 2011 to provide further guidance in this regard. The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010.
2.
Registration requirements – The documentary requirements with which a person must comply in order to obtain a VAT registration number were clarified. Any person that applies to register for VAT must ensure that the correct supporting documents as set out in the policy document AS-VAT-08 - Guide for Completion of VAT Registration Application Forms are submitted.
3.
Tax invoices – A supplier is not obliged to issue a tax invoice in cases where the consideration for a taxable supply is less than R50, but the recipient must nevertheless be in possession of a source document such as an invoice or till slip as proof that the expense has been incurred before an input tax deduction will be allowed.
4.
Second-hand goods – Vendors are required to maintain the prescribed records (form VAT 264) in respect of any second-hand goods acquired. Previously this was only required for purchases where the consideration was R1 000 or more. The proof of payment as well as the date on which payment was made is also required as part of the vendor’s records to validate any input tax deduction for second-hand goods acquired.
5.
Foreign-going ships and aircraft – The scope of the definitions "foreign-going aircraft" and "foreign-going ship" was widened so that the supply of consumables and repairs to certain military craft may qualify as zero rated exports as in the case of commercial foreign-going ships and aircrafts.
6.
Time of supply – The VAT law was amended to make it clear that the time of supply rule which is applicable to machines, meters or other devices that are operated by means of coins or tokens, is also applicable to machines that operate with paper currency. The time of supply for the supplier is when the coins, tokens or paper currency is removed from the machine or device. However, when payment is made via the machine or device by electronic means by credit or debit card, the normal time of supply rule applies (i.e. the earlier of the date of payment or the date that an invoice is issued).
VAT 404 – VAT Guide for Vendors Foreword
3
7.
VAT 201 return, modernisation and imported services – New fields were added to the VAT 201 return which came into operation on 28 June 2010. The changes were aimed mainly at addressing certain compliance aspects with regard to the import and export of goods – in particular fraudulent VAT refunds linked to exports. The new fields are 2A, 14A, 15A and the Customs Code. The effect of these changes is that vendors must distinguish between the value of zero-rated exports and other zero-rated supplies on their returns. Input tax in relation to the importation of goods must now also be indicated separately from other taxable supplies. Further, with effect from 1 February 2011, the VAT on any imported services must be declared on the VAT 201 in the case where the person is a vendor instead on form VAT 215. In April 2011, further modernisation changes came into effect in the form of a new look VAT 201 return which is in landscape format and contains additional demographic fields with certain pre-populated fields. Part of the changes are that VAT 201 returns are on no longer mailed in bulk to vendors, but instead must be requested by the vendor on eFiling or from a SARS office. It is expected that more modernisation changes will be implemented in phases in 2011. Vendors are therefore advised to check the SARS website for the latest information, as well as the new publication called VAT Connect which will be sent directly to vendors.
8.
Carbon Dioxide (CO) emission levy – An environmental levy (CO levy) was introduced with effect from 1 September 2010 on new passenger cars, including SUVs and other motor vehicles manufactured in, or imported into, the Republic which are principally designed to carry a maximum of nine passengers. As with all excise duties, the levy amount is built into the price that the manufacturer or importer charges the client. The value on which VAT is calculated must therefore include any environmental levy which is applicable.
9.
Tax Administration Bill (TAB) – The TAB is in the final stages of completion and was published for a second round of public comment in October 2010. The TAB seeks to provide a single body of law that outlines common procedures, rights and remedies. It is expected that the TAB will become an Act of Parliament in the latter part of 2011. Once in effect the TAB will have a major impact on the administration of all taxes in general. The effect from a VAT perspective is that a number of administrative type provisions which are currently in the VAT Act will be deleted or amended. The corresponding provisions in the TAB will then apply from the effective date. Schedule A – Schedule of Amendments reflects the proposed consequential amendments to the various tax acts which were necessary to align them with the TAB. The TAB is available on the SARS website under "Draft Bills" on the Legal and Policy page.
10.
Voluntary disclosure programme (VDP) – The VDP has been implemented to provide taxpayers with an opportunity to voluntarily apply to SARS to disclose their defaults and regularise their tax affairs. The period within which VDP applications can be made to SARS is prescribed by the Commissioner and runs from 5 November 2010 to 31 October 2011. The VDP applies for various taxes including VAT.
The following guides have also been issued and may be referred to for more information relating to the specific VAT topics:
•AS-VAT-08 - Guide for Registration of VAT Vendors
•Trade Classification Guide (VAT 403)
•Guide for Fixed Property and Construction (VAT 409)
•Guide for Accommodation, Catering and Entertainment (VAT 411)
•Share Block Schemes (VAT 412)
•Deceased Estates (VAT 413)
•Guide for Associations not for Gain and Welfare Organisations (VAT 414)
•Diesel Refund Guide (VAT 415)
•AS-VAT-10 - Quick Reference Guide (Small Vendors) (VAT 417)
•AS-VAT-02 - Quick Reference Guide (Diplomatic Refunds)
•Guide for Municipalities (VAT 419)
•Guide for Motor Dealers (VAT 420)
•VAT treatment of entities affiliated to FIFA Part 2 entities
•VAT treatment of entities affiliated to FIFA Part 3 entities
VAT 404 – VAT Guide for Vendors Foreword
4
The information in this guide is issued for guidance only and does not constitute a binding general ruling as contemplated in section 76P of the Income Tax Act, No. 58 of 1962 and sections 41A and 41B of the VAT Act unless otherwise indicated. All previous editions of the Guide for Vendors (VAT 404) are withdrawn with effect from 6 September 2011. Should there be any aspects relating to VAT which are not clear or not dealt with in this guide, or should you require further information or a specific ruling on a legal issue, you may:
•contact your local South African Revenue Service (SARS) branch;
•visit the SARS website at
www.sars.gov.za;
•contact your own tax advisors;
•if calling locally, contact the SARS National Call Centre on 0800 00 7277; or
•if calling from abroad, contact the SARS National Call Centre on +27 11 602 2093.
Comments and/or suggestions regarding this guide may be sent to the following e-mail address:
policycomments@sars.gov.za.
Prepared by
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
6 September 2011
VAT 404 – Guide for Vendors Contents 5
|
CONTENTS CHAPTER 1 : INTRODUCTION |
9 |
|
1.1 What is VAT? |
9 |
|
1.2 How does VAT work? |
9 |
|
CHAPTER 2 : REGISTERING YOUR BUSINESS |
12 |
|
2.1 When do I become liable to register for VAT? |
12 |
|
2.2 Where must I register? |
12 |
|
2.3 What documents must I submit with my application? |
13 |
|
2.4 How do I calculate the value of taxable supplies? |
14 |
|
2.5 Voluntary registration |
15 |
|
2.6 Refusal of a voluntary registration application |
16 |
|
2.7 Separate registration (branches, divisions and separate enterprises) |
16 |
|
2.8 Cancellation of registration |
17 |
|
CHAPTER 3 : TAX PERIODS |
20 |
|
3.1 Which tax periods are available? |
20 |
|
3.2 Allocation and change of tax periods |
21 |
|
3.3 The 10-day rule |
22 |
|
CHAPTER 4 : ACCOUNTING BASIS |
23 |
|
4.1 Introduction |
23 |
|
4.2 Invoice basis |
23 |
|
4.3 Payments basis |
24 |
|
4.4 Change of accounting basis |
25 |
|
4.5 Special cases |
26 |
|
CHAPTER 5 : TAXABLE SUPPLIES |
27 |
|
5.1 Introduction |
27 |
|
5.2 Standard rated supplies |
27 |
|
5.3 Zero-rated supplies |
28 |
|
5.4 Deemed supplies |
31 |
|
5.5 Time of supply |
32 |
|
5.6 Value of supply |
34 |
THOMSONS TAX
Have an outstanding balance with SARS on your personal or business account for Tax, VAT, PAYE etc. and you have no idea where it comes from? Thomson Accountants can analyze and determine where this balance originated, if it is indeed correct and assist you with the objection if found that it is necessary. Complete the Contact sheet or email me Directly on grant@taxpro.co.za REMEMBER WE COME TO YOU
IT 88 - DO NOT ignore this document from SARS
The ITA88 system from SARS is here.
What is the ITA 88 system
With effect from the 1 September 2010 SARS will appoint employers as collection agents for Administrative penalties and unpaid taxes. You as the employer will be obliged to deduct the full amount from the employee’s salary and pay this over to the receiver with your next EMP 201 submission.
-
Penalties will be levied on the following offences:
-
Not registering as a tax payer
-
Not informing SARS of a change of address or other important details – employer as well
-
Not submitting a return or related documents
-
Not submitting a monthly return – employer
-
Not providing details of an employee – employer
-
Delivery of tax certificates before reconciling and returning to SARS – employer
-
Any other non-compliance with an obligation according to SARS
-
-
Basic information
-
Penalties are from R250 – R16000 depending on the assessment by SARS.
-
The employee would have received an ITP34 penalty assessment stating the offence, penalty, payment due date and payment procedure
-
This penalty can be disputed by remedying the problem and completing a Request for Remission form (RFR)
-
Penalties will be raised EVERY month until it’s sorted – consultation with employee is essential!
-
SARS rule – pay now, argue later
-
The following is the procedure that will have to be followed:
-
Employee fails to respond to ITP34 notice
-
SARS appoints the employer as agent (section 99 of the income tax act) and issues the ITA88 form to the employer to appoint him as agent (These notices will be issued electronically and via email – to be administered through Easyfile) – the employer is legally bound to obey and deduct the money
-
Employer administers the deduction from the payroll. This can be done over 3 months depending on employee’s affordability and the money will be paid over to SARS with your next EMP 201 submission
-
No interest applies if there is a payment plan(3 months) for the ITA88 penalty
-
Legal priority of deductions should there be limited funds then the employer must first deduct:
-
PAYE
-
UIF
-
Pension or provident Fund
-
Medical aid deductions
-
Special provisions for Garnishee/maintenance payments.
-
Existing garnishees must “stand back” for ITA88 deductions – The collecting agents/attorneys must be informed in writing.
Finally it is in the interest of the employer to help the employee resolve these outstanding issues. If the employer does not comply then SARS will hold the employer liable for the outstanding amounts.
THOMSONS TAX
I am a Master Tax Practitioner (Private and Public Practice) and Former Tax Auditor at SARS Johannesburg - If I can't help you, you probably can't be helped.
This is an Advanced Level service to the Public, Tax Practitioners, Customers, Auditors, Accountants and Lawyers in private practice. Complete the Contact sheet or email me Directly on grant@taxpro.co.za - Hedley Grant Thomson - Master Tax Practitioner SAIT(SA) REMEMBER WE COME TO YOU
How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
Guidelines
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits - to check your compliance
* Desk audit - to verify accuracy of data
* Refund audit - that the refund is due
* Field audit - to closely monitor all tax processes.
* Integrated audit - to assess taxpayer compliance.
* Risk audit - to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Creditors
* Debtors
* Salaries & wages
* VAT
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* Purchases
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General - overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments - 5 yrs
* Invoices, sales & purchases - 5 yrs
* Bank statements - 5 yrs
* Year end working papers - 5 yrs
* VAT records - 5 yrs
* Other general documents - 5 yrs
* Salary & wage registers - 5 yrs
* Records of trust monies - indefinitely
* Staff records - 3 yrs
* Cheques & bills of exchange - 6 yrs
* Stock sheets - 6 yrs
* Record for CGT four years after date of tax return - 4 yrs
* Company statutory records - 15 yrs
* All close corporation statutory records - indefinitely
* All financial statements, fixed asset registers, accounting records, etc - 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
2009/02/25 SPC V2.000
VAT 404
Value-Added Tax
Guide for Vendors
www.sars.gov.za1
10 IMPORTANT PRINCIPLES
1.
All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies).
2.
Vendors collect VAT on behalf of the State – please make sure that you pay it over on time, otherwise penalties and interest will be charged.
3.
VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable.
4.
You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.
5.
Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic.
6.
You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.
7.
You are required to advise the South African Revenue Service (SARS) within 21 days of any changes in your registered particulars, including any change in your authorised representative, business address, banking details, trading name, or if you cease trading.
8.
If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect.
9.
You can pay your VAT by using various electronic methods, including eFiling, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks.
10.
Report fraudulent activities to SARS by calling the Fraud and Anti-Corruption Hotline on 0800 00 28 70. You may report an incident anonymously if you wish.
VAT 404 – Guide for Vendors Contents
2
FOREWORD
The VAT 404 is a basic guide where technical and legal terminology has been avoided wherever possible. Although fairly comprehensive, the guide does not deal with all the legal detail associated with VAT and is not intended for legal reference. All references to "the VAT Act" or "the Act" are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. The terms "Republic", "South Africa" or the abbreviation "RSA", are used interchangeably in this document as a reference to the sovereign territory of the Republic of South Africa, as set out in the definition of "Republic" in section 1 of the VAT Act. You will also find a number of specific terms used throughout the guide which are defined in the Value–Added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference.
The information in this guide is based on the VAT legislation (as amended) as at the time of publishing and includes the amendments contained in the
Taxation Laws Amendment Act 7 of 2010 and the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act 8 of 2010 both of which were promulgated on 2 November 2010 (as per GG 33726 and GG 33727 respectively). Below is a brief synopsis of some of the most important changes affecting the administration of VAT since the previous issue of this Guide:
1.
Remission of interest – With effect from 1 April 2010 the Commissioner’s discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor’s control. Interpretation Note No. 61: Remission of interest in terms of section 39(7)(a) was issued on 29 March 2011 to provide further guidance in this regard. The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010.
2.
Registration requirements – The documentary requirements with which a person must comply in order to obtain a VAT registration number were clarified. Any person that applies to register for VAT must ensure that the correct supporting documents as set out in the policy document AS-VAT-08 - Guide for Completion of VAT Registration Application Forms are submitted.
3.
Tax invoices – A supplier is not obliged to issue a tax invoice in cases where the consideration for a taxable supply is less than R50, but the recipient must nevertheless be in possession of a source document such as an invoice or till slip as proof that the expense has been incurred before an input tax deduction will be allowed.
4.
Second-hand goods – Vendors are required to maintain the prescribed records (form VAT 264) in respect of any second-hand goods acquired. Previously this was only required for purchases where the consideration was R1 000 or more. The proof of payment as well as the date on which payment was made is also required as part of the vendor’s records to validate any input tax deduction for second-hand goods acquired.
5.
Foreign-going ships and aircraft – The scope of the definitions "foreign-going aircraft" and "foreign-going ship" was widened so that the supply of consumables and repairs to certain military craft may qualify as zero rated exports as in the case of commercial foreign-going ships and aircrafts.
6.
Time of supply – The VAT law was amended to make it clear that the time of supply rule which is applicable to machines, meters or other devices that are operated by means of coins or tokens, is also applicable to machines that operate with paper currency. The time of supply for the supplier is when the coins, tokens or paper currency is removed from the machine or device. However, when payment is made via the machine or device by electronic means by credit or debit card, the normal time of supply rule applies (i.e. the earlier of the date of payment or the date that an invoice is issued).
VAT 404 – VAT Guide for Vendors Foreword
3
7.
VAT 201 return, modernisation and imported services – New fields were added to the VAT 201 return which came into operation on 28 June 2010. The changes were aimed mainly at addressing certain compliance aspects with regard to the import and export of goods – in particular fraudulent VAT refunds linked to exports. The new fields are 2A, 14A, 15A and the Customs Code. The effect of these changes is that vendors must distinguish between the value of zero-rated exports and other zero-rated supplies on their returns. Input tax in relation to the importation of goods must now also be indicated separately from other taxable supplies. Further, with effect from 1 February 2011, the VAT on any imported services must be declared on the VAT 201 in the case where the person is a vendor instead on form VAT 215. In April 2011, further modernisation changes came into effect in the form of a new look VAT 201 return which is in landscape format and contains additional demographic fields with certain pre-populated fields. Part of the changes are that VAT 201 returns are on no longer mailed in bulk to vendors, but instead must be requested by the vendor on eFiling or from a SARS office. It is expected that more modernisation changes will be implemented in phases in 2011. Vendors are therefore advised to check the SARS website for the latest information, as well as the new publication called VAT Connect which will be sent directly to vendors.
8.
Carbon Dioxide (CO) emission levy – An environmental levy (CO levy) was introduced with effect from 1 September 2010 on new passenger cars, including SUVs and other motor vehicles manufactured in, or imported into, the Republic which are principally designed to carry a maximum of nine passengers. As with all excise duties, the levy amount is built into the price that the manufacturer or importer charges the client. The value on which VAT is calculated must therefore include any environmental levy which is applicable.
9.
Tax Administration Bill (TAB) – The TAB is in the final stages of completion and was published for a second round of public comment in October 2010. The TAB seeks to provide a single body of law that outlines common procedures, rights and remedies. It is expected that the TAB will become an Act of Parliament in the latter part of 2011. Once in effect the TAB will have a major impact on the administration of all taxes in general. The effect from a VAT perspective is that a number of administrative type provisions which are currently in the VAT Act will be deleted or amended. The corresponding provisions in the TAB will then apply from the effective date. Schedule A – Schedule of Amendments reflects the proposed consequential amendments to the various tax acts which were necessary to align them with the TAB. The TAB is available on the SARS website under "Draft Bills" on the Legal and Policy page.
10.
Voluntary disclosure programme (VDP) – The VDP has been implemented to provide taxpayers with an opportunity to voluntarily apply to SARS to disclose their defaults and regularise their tax affairs. The period within which VDP applications can be made to SARS is prescribed by the Commissioner and runs from 5 November 2010 to 31 October 2011. The VDP applies for various taxes including VAT.
The following guides have also been issued and may be referred to for more information relating to the specific VAT topics:
•AS-VAT-08 - Guide for Registration of VAT Vendors
•Trade Classification Guide (VAT 403)
•Guide for Fixed Property and Construction (VAT 409)
•Guide for Accommodation, Catering and Entertainment (VAT 411)
•Share Block Schemes (VAT 412)
•Deceased Estates (VAT 413)
•Guide for Associations not for Gain and Welfare Organisations (VAT 414)
•Diesel Refund Guide (VAT 415)
•AS-VAT-10 - Quick Reference Guide (Small Vendors) (VAT 417)
•AS-VAT-02 - Quick Reference Guide (Diplomatic Refunds)
•Guide for Municipalities (VAT 419)
•Guide for Motor Dealers (VAT 420)
•VAT treatment of entities affiliated to FIFA Part 2 entities
•VAT treatment of entities affiliated to FIFA Part 3 entities
VAT 404 – VAT Guide for Vendors Foreword
4
The information in this guide is issued for guidance only and does not constitute a binding general ruling as contemplated in section 76P of the Income Tax Act, No. 58 of 1962 and sections 41A and 41B of the VAT Act unless otherwise indicated. All previous editions of the Guide for Vendors (VAT 404) are withdrawn with effect from 6 September 2011. Should there be any aspects relating to VAT which are not clear or not dealt with in this guide, or should you require further information or a specific ruling on a legal issue, you may:
•contact your local South African Revenue Service (SARS) branch;
•visit the SARS website at
www.sars.gov.za;
•contact your own tax advisors;
•if calling locally, contact the SARS National Call Centre on 0800 00 7277; or
•if calling from abroad, contact the SARS National Call Centre on +27 11 602 2093.
Comments and/or suggestions regarding this guide may be sent to the following e-mail address:
policycomments@sars.gov.za.
Prepared by
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
6 September 2011
VAT 404 – Guide for Vendors Contents 5
|
CONTENTS CHAPTER 1 : INTRODUCTION |
9 |
|
1.1 What is VAT? |
9 |
|
1.2 How does VAT work? |
9 |
|
CHAPTER 2 : REGISTERING YOUR BUSINESS |
12 |
|
2.1 When do I become liable to register for VAT? |
12 |
|
2.2 Where must I register? |
12 |
|
2.3 What documents must I submit with my application? |
13 |
|
2.4 How do I calculate the value of taxable supplies? |
14 |
|
2.5 Voluntary registration |
15 |
|
2.6 Refusal of a voluntary registration application |
16 |
|
2.7 Separate registration (branches, divisions and separate enterprises) |
16 |
|
2.8 Cancellation of registration |
17 |
|
CHAPTER 3 : TAX PERIODS |
20 |
|
3.1 Which tax periods are available? |
20 |
|
3.2 Allocation and change of tax periods |
21 |
|
3.3 The 10-day rule |
22 |
|
CHAPTER 4 : ACCOUNTING BASIS |
23 |
|
4.1 Introduction |
23 |
|
4.2 Invoice basis |
23 |
|
4.3 Payments basis |
24 |
|
4.4 Change of accounting basis |
25 |
|
4.5 Special cases |
26 |
|
CHAPTER 5 : TAXABLE SUPPLIES |
27 |
|
5.1 Introduction |
27 |
|
5.2 Standard rated supplies |
27 |
|
5.3 Zero-rated supplies |
28 |
|
5.4 Deemed supplies |
31 |
|
5.5 Time of supply |
32 |
|
5.6 Value of supply |
34 |
THOMSONS TAX
I am a Master Tax Practitioner (Private and Public Practice) and Former Tax Auditor at SARS Johannesburg - If I can't help you, you probably can't be helped.
This is an Advanced Level service to the Public, Tax Practitioners, Customers, Auditors, Accountants and Lawyers in private practice. Complete the Contact sheet or email me Directly on grant@taxpro.co.za - Hedley Grant Thomson - Master Tax Practitioner SAIT(SA) REMEMBER WE COME TO YOU
How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
Guidelines
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits - to check your compliance
* Desk audit - to verify accuracy of data
* Refund audit - that the refund is due
* Field audit - to closely monitor all tax processes.
* Integrated audit - to assess taxpayer compliance.
* Risk audit - to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Creditors
* Debtors
* Salaries & wages
* VAT
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* Purchases
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General - overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments - 5 yrs
* Invoices, sales & purchases - 5 yrs
* Bank statements - 5 yrs
* Year end working papers - 5 yrs
* VAT records - 5 yrs
* Other general documents - 5 yrs
* Salary & wage registers - 5 yrs
* Records of trust monies - indefinitely
* Staff records - 3 yrs
* Cheques & bills of exchange - 6 yrs
* Stock sheets - 6 yrs
* Record for CGT four years after date of tax return - 4 yrs
* Company statutory records - 15 yrs
* All close corporation statutory records - indefinitely
* All financial statements, fixed asset registers, accounting records, etc - 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
2009/02/25 SPC V2.000
VAT 404
Value-Added Tax
Guide for Vendors
www.sars.gov.za1
10 IMPORTANT PRINCIPLES
1.
All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies).
2.
Vendors collect VAT on behalf of the State – please make sure that you pay it over on time, otherwise penalties and interest will be charged.
3.
VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable.
4.
You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.
5.
Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic.
6.
You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.
7.
You are required to advise the South African Revenue Service (SARS) within 21 days of any changes in your registered particulars, including any change in your authorised representative, business address, banking details, trading name, or if you cease trading.
8.
If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect.
9.
You can pay your VAT by using various electronic methods, including eFiling, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks.
10.
Report fraudulent activities to SARS by calling the Fraud and Anti-Corruption Hotline on 0800 00 28 70. You may report an incident anonymously if you wish.
VAT 404 – Guide for Vendors Contents
2
FOREWORD
The VAT 404 is a basic guide where technical and legal terminology has been avoided wherever possible. Although fairly comprehensive, the guide does not deal with all the legal detail associated with VAT and is not intended for legal reference. All references to "the VAT Act" or "the Act" are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. The terms "Republic", "South Africa" or the abbreviation "RSA", are used interchangeably in this document as a reference to the sovereign territory of the Republic of South Africa, as set out in the definition of "Republic" in section 1 of the VAT Act. You will also find a number of specific terms used throughout the guide which are defined in the Value–Added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference.
The information in this guide is based on the VAT legislation (as amended) as at the time of publishing and includes the amendments contained in the
Taxation Laws Amendment Act 7 of 2010 and the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act 8 of 2010 both of which were promulgated on 2 November 2010 (as per GG 33726 and GG 33727 respectively). Below is a brief synopsis of some of the most important changes affecting the administration of VAT since the previous issue of this Guide:
1.
Remission of interest – With effect from 1 April 2010 the Commissioner’s discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor’s control. Interpretation Note No. 61: Remission of interest in terms of section 39(7)(a) was issued on 29 March 2011 to provide further guidance in this regard. The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010.
2.
Registration requirements – The documentary requirements with which a person must comply in order to obtain a VAT registration number were clarified. Any person that applies to register for VAT must ensure that the correct supporting documents as set out in the policy document AS-VAT-08 - Guide for Completion of VAT Registration Application Forms are submitted.
3.
Tax invoices – A supplier is not obliged to issue a tax invoice in cases where the consideration for a taxable supply is less than R50, but the recipient must nevertheless be in possession of a source document such as an invoice or till slip as proof that the expense has been incurred before an input tax deduction will be allowed.
4.
Second-hand goods – Vendors are required to maintain the prescribed records (form VAT 264) in respect of any second-hand goods acquired. Previously this was only required for purchases where the consideration was R1 000 or more. The proof of payment as well as the date on which payment was made is also required as part of the vendor’s records to validate any input tax deduction for second-hand goods acquired.
5.
Foreign-going ships and aircraft – The scope of the definitions "foreign-going aircraft" and "foreign-going ship" was widened so that the supply of consumables and repairs to certain military craft may qualify as zero rated exports as in the case of commercial foreign-going ships and aircrafts.
6.
Time of supply – The VAT law was amended to make it clear that the time of supply rule which is applicable to machines, meters or other devices that are operated by means of coins or tokens, is also applicable to machines that operate with paper currency. The time of supply for the supplier is when the coins, tokens or paper currency is removed from the machine or device. However, when payment is made via the machine or device by electronic means by credit or debit card, the normal time of supply rule applies (i.e. the earlier of the date of payment or the date that an invoice is issued).
VAT 404 – VAT Guide for Vendors Foreword
3
7.
VAT 201 return, modernisation and imported services – New fields were added to the VAT 201 return which came into operation on 28 June 2010. The changes were aimed mainly at addressing certain compliance aspects with regard to the import and export of goods – in particular fraudulent VAT refunds linked to exports. The new fields are 2A, 14A, 15A and the Customs Code. The effect of these changes is that vendors must distinguish between the value of zero-rated exports and other zero-rated supplies on their returns. Input tax in relation to the importation of goods must now also be indicated separately from other taxable supplies. Further, with effect from 1 February 2011, the VAT on any imported services must be declared on the VAT 201 in the case where the person is a vendor instead on form VAT 215. In April 2011, further modernisation changes came into effect in the form of a new look VAT 201 return which is in landscape format and contains additional demographic fields with certain pre-populated fields. Part of the changes are that VAT 201 returns are on no longer mailed in bulk to vendors, but instead must be requested by the vendor on eFiling or from a SARS office. It is expected that more modernisation changes will be implemented in phases in 2011. Vendors are therefore advised to check the SARS website for the latest information, as well as the new publication called VAT Connect which will be sent directly to vendors.
8.
Carbon Dioxide (CO) emission levy – An environmental levy (CO levy) was introduced with effect from 1 September 2010 on new passenger cars, including SUVs and other motor vehicles manufactured in, or imported into, the Republic which are principally designed to carry a maximum of nine passengers. As with all excise duties, the levy amount is built into the price that the manufacturer or importer charges the client. The value on which VAT is calculated must therefore include any environmental levy which is applicable.
9.
Tax Administration Bill (TAB) – The TAB is in the final stages of completion and was published for a second round of public comment in October 2010. The TAB seeks to provide a single body of law that outlines common procedures, rights and remedies. It is expected that the TAB will become an Act of Parliament in the latter part of 2011. Once in effect the TAB will have a major impact on the administration of all taxes in general. The effect from a VAT perspective is that a number of administrative type provisions which are currently in the VAT Act will be deleted or amended. The corresponding provisions in the TAB will then apply from the effective date. Schedule A – Schedule of Amendments reflects the proposed consequential amendments to the various tax acts which were necessary to align them with the TAB. The TAB is available on the SARS website under "Draft Bills" on the Legal and Policy page.
10.
Voluntary disclosure programme (VDP) – The VDP has been implemented to provide taxpayers with an opportunity to voluntarily apply to SARS to disclose their defaults and regularise their tax affairs. The period within which VDP applications can be made to SARS is prescribed by the Commissioner and runs from 5 November 2010 to 31 October 2011. The VDP applies for various taxes including VAT.
The following guides have also been issued and may be referred to for more information relating to the specific VAT topics:
•AS-VAT-08 - Guide for Registration of VAT Vendors
•Trade Classification Guide (VAT 403)
•Guide for Fixed Property and Construction (VAT 409)
•Guide for Accommodation, Catering and Entertainment (VAT 411)
•Share Block Schemes (VAT 412)
•Deceased Estates (VAT 413)
•Guide for Associations not for Gain and Welfare Organisations (VAT 414)
•Diesel Refund Guide (VAT 415)
•AS-VAT-10 - Quick Reference Guide (Small Vendors) (VAT 417)
•AS-VAT-02 - Quick Reference Guide (Diplomatic Refunds)
•Guide for Municipalities (VAT 419)
•Guide for Motor Dealers (VAT 420)
•VAT treatment of entities affiliated to FIFA Part 2 entities
•VAT treatment of entities affiliated to FIFA Part 3 entities
VAT 404 – VAT Guide for Vendors Foreword
4
The information in this guide is issued for guidance only and does not constitute a binding general ruling as contemplated in section 76P of the Income Tax Act, No. 58 of 1962 and sections 41A and 41B of the VAT Act unless otherwise indicated. All previous editions of the Guide for Vendors (VAT 404) are withdrawn with effect from 6 September 2011. Should there be any aspects relating to VAT which are not clear or not dealt with in this guide, or should you require further information or a specific ruling on a legal issue, you may:
•contact your local South African Revenue Service (SARS) branch;
•visit the SARS website at
www.sars.gov.za;
•contact your own tax advisors;
•if calling locally, contact the SARS National Call Centre on 0800 00 7277; or
•if calling from abroad, contact the SARS National Call Centre on +27 11 602 2093.
Comments and/or suggestions regarding this guide may be sent to the following e-mail address:
policycomments@sars.gov.za.
Prepared by
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
6 September 2011
VAT 404 – Guide for Vendors Contents 5
|
CONTENTS CHAPTER 1 : INTRODUCTION |
9 |
|
1.1 What is VAT? |
9 |
|
1.2 How does VAT work? |
9 |
|
CHAPTER 2 : REGISTERING YOUR BUSINESS |
12 |
|
2.1 When do I become liable to register for VAT? |
12 |
|
2.2 Where must I register? |
12 |
|
2.3 What documents must I submit with my application? |
13 |
|
2.4 How do I calculate the value of taxable supplies? |
14 |
|
2.5 Voluntary registration |
15 |
|
2.6 Refusal of a voluntary registration application |
16 |
|
2.7 Separate registration (branches, divisions and separate enterprises) |
16 |
|
2.8 Cancellation of registration |
17 |
|
CHAPTER 3 : TAX PERIODS |
20 |
|
3.1 Which tax periods are available? |
20 |
|
3.2 Allocation and change of tax periods |
21 |
|
3.3 The 10-day rule |
22 |
|
CHAPTER 4 : ACCOUNTING BASIS |
23 |
|
4.1 Introduction |
23 |
|
4.2 Invoice basis |
23 |
|
4.3 Payments basis |
24 |
|
4.4 Change of accounting basis |
25 |
|
4.5 Special cases |
26 |
|
CHAPTER 5 : TAXABLE SUPPLIES |
27 |
|
5.1 Introduction |
27 |
|
5.2 Standard rated supplies |
27 |
|
5.3 Zero-rated supplies |
28 |
|
5.4 Deemed supplies |
31 |
|
5.5 Time of supply |
32 |
|
5.6 Value of supply |
34 |
Thomson VAT and Tax SARS VDP Voluntary Disclosure Help - Tax, Vat and Paye - Submissions - SARS Audits
THOMSON'S TAX
We assist with SARS VDP Voluntary Disclosure Help
Voluntary disclosure programme plagued by delays?
Subscribe to the BDO News newsfeed
Money Web Tax 24 June 2011
SARS responds, explains why this is not the case.
Having heeded the call for a Voluntary Disclosure Programme (VDP) from SARS many companies are yet to receive any proactive responses or information on the status of their submissions.
Over the last few months starting in November 2011 we have made several online submissions to SARS on behalf of our clients, the last form of communication received was a short automated acknowledgement of the application with a reference number. Other than the acknowledgement no other feedback has been received nor have any of the applications been finalised. This gives the impression that there is a lack of urgency when dealing with VDP matters.
The current legislation dictates that SARS must provide the specified relief if an individual or company comes forward and makes a valid disclosure and concludes a voluntary disclosure agreement with SARS. However, the relief may be withdrawn if, subsequent to the conclusion of the agreement, it is established that the applicant failed to disclose a material matter. Additionally, there is no guarantee that SARS will not target the company in future.
It is this uncertainty and lack of communication which has left clients feeling very uneasy with the whole programme. Clients believe that they have inadvertently exposed themselves to an audit by SARS.
In contrast the exchange control tax clearance programme, which was put into effect at the same time as VDP, been extremely effective with over 80% of the submissions put forward completed timeously.
This observation leads us to believe that there is no sense of urgency from SARS side when dealing with VDP claims and we would urge SARS to make this matter a priority.
Despite the delays in the VDP system companies and individuals should still take advantage of the open window which SARS has created. Many companies may not be aware of having defaulted in the past. The programme will allow them to start on a clean slate with a clear understanding of their tax status with SARS and is particularly important with the implementation of the Companies Act which makes directors directly liable for such tax transgressions."
*Elriette Butler is an associate director at BDO."
VAT submissions as well as high level Audits from SARS. VAT is an item that needs extreme care to be taken at all times as SARS has clamped down heavily on VAT Refunds. Complete the Contact sheet or email me Directly on grant@taxpro.co.za REMEMBER WE COME TO YOU
How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
Guidelines
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits - to check your compliance
* Desk audit - to verify accuracy of data
* Refund audit - that the refund is due
* Field audit - to closely monitor all tax processes.
* Integrated audit - to assess taxpayer compliance.
* Risk audit - to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Creditors
* Debtors
* Salaries & wages
* VAT
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* Purchases
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General - overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments - 5 yrs
* Invoices, sales & purchases - 5 yrs
* Bank statements - 5 yrs
* Year end working papers - 5 yrs
* VAT records - 5 yrs
* Other general documents - 5 yrs
* Salary & wage registers - 5 yrs
* Records of trust monies - indefinitely
* Staff records - 3 yrs
* Cheques & bills of exchange - 6 yrs
* Stock sheets - 6 yrs
* Record for CGT four years after date of tax return - 4 yrs
* Company statutory records - 15 yrs
* All close corporation statutory records - indefinitely
* All financial statements, fixed asset registers, accounting records, etc - 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
South African Voluntary Disclosure Program
The Finance Minister, Pravin Gordham, announced in the budget speech earlier this year that
SARS would implement a voluntary disclosure program.
The voluntary disclosure program would apply to all taxes
(including employees’ tax) and
will run for 12 months from 1 November 2010 to 31 October 2011. The purpose of the VDP is to
give taxpayers the opportunity to regularise their tax affairs (Tax VDP) and/or regularise any
contraventions of the Exchange Control Regulations, 1961 (Regulations) (Excon VDP).
Defaulting taxpayers
who are unaware of any pending or current investigation into their tax
affairs may consider relief under the program, if they make a complete disclosure of a default
that would trigger additional tax or penalty/interest charges. Defaulting taxpayers, in certain
limited circumstances, may also consider using the voluntary disclosure program in situations
when a current investigation is taking place.
The voluntary disclosure program will provide
qualifying taxpayers with certain benefits
ranging from amnesty from any criminal prosecution, to a waiver of additional taxes, penalties
(other than administrative penalties) and interest of up to 100 percent, arising from a previous
default which must have occurred prior to 17 February 2010.
The VDP is a window of opportunity
for any South African residents (i.e., individual/sole
proprietor/partnership/deceased estate(s)/insolvent estate(s)/South African trust(s)/former South
African residents/company/close corporation) to regularise their exchange control affairs, and
provide SARS and SARB with details of foreign assets and/or structures (of whatever nature
excluding bearer instruments) individuals and/or corporate entities to disclose and regularise
their tax and/or exchange control affairs.
The VDP is an internationally accepted mechanism
to broaden compliance with tax and
exchange control requirements. It flows from the efforts around the globe to end bank secrecy
and recognises the greater access to information enjoyed by SARS both domestically and
internationally.
South African residents who have contravened the Regulations
, are assured that where a full
disclosure is made in the prescribed manner and administrative relief is granted by FinSurv, no
further action against the South African resident involved in such contraventions will be taken or
initiated by FinSurv.
HOW DOES A VDP AFFECT ME ?
General information
If you currently have tax defaults or if have contravened the Regulations and choose not to make
use of the VDP, then the law will take its course. This could mean that SARS will apply various
sanctions, including the payment of outstanding taxes, penalties and interest, and criminal
prosecution. FinSurv could apply various sanctions, including the attachment of assets, blocking
of funds, interest being charged and/or criminal prosecution.
In the event that you have previously made a disclosure under the 2003 amnesty, then you can
apply again under the current VDP?
HOW CAN OSIRIS HELP ?
We at Osiris can play an important role in ensuring the success of a tax VDP or Excon VDP by
assisting clients to make use of the VDP. We will however need to establish and verify clients’
identities and keeping of records in terms of FICA. Our obligation to report suspicious or
unusual transactions
does not arise where clients are assisted in regularising their affairs by
making use of the VDP in connection with income and/or foreign assets that were derived from
legitimate sources.
ANONYMITY
Osiris can on behalf of an applicant first obtain an indication of the possible relief that may be
granted, by submitting an application that does not reveal any identifying information. Based on
this, SARS may then issue a non-binding opinion indicating whether or not the applicant would
qualify for any relief and, if so, to what extent. However this non-binding opinion is conditional
upon the factual disclosure made, and can only be used as a guideline.
SARS can only then commit to the final granting of any relief in the case of an anonymous
application, after the identity of the applicant has been disclosed, so that all the facts of the
disclosure (more specifically establishing whether there was a pending audit or investigation)
have been verified. The anonymous applicant may decide not to proceed with the application for
relief. Such applicants, however, remain at risk of SARS independently identifying any defaults,
leading to the normal course of events to unfold, which may include penalties, additional taxes
and interest charges, in addition to the criminal law taking its course.
4. The Tax VDP
The APPLICATION PROCESS
Applicants must complete an application form for relief under the Tax VDP or Excon VDP.
Regarding an anonymous disclosure, the applicant or a duly authorised representative (OSIRIS)
may engage with SARS. In order to support the application, the following information must be
submitted:-
• The name, address (including email), telephone number, identity number, company or trust
registration number, and any identification tax number assigned by SARS to the applicant (if
applicable)
• The address of the applicant’s authorised representative, including telephone and fax numbers
(if applicable)
• The tax year(s), reporting period(s) or tax period(s) involved in the disclosure
• Amount of the disclosure (if applicable)
• Tax type(s)
• Type of return(s) involved (IT type return, VAT, etc.)
• Type of omission or default (understatement of tax; overstatement of refund or any other
non-compliance resulting in outstanding tax)
• Reason for the omission or other non-compliance resulting in outstanding tax
• Primary business activity
• An explanation of how the applicant considers that the requirements have been met.
In order to assist you with some of the terminology we have highlighted below some of the
key issues in the event that either a tax VDP or Excon VDP may be suitable to your
circumstances :-
1. What is meant by a tax default?
A tax default means
• the submission of inaccurate or incomplete information to the Commissioner;
• the failure to submit information; or
•assumptions presented to SARS about one’s tax liability, where such submission, nonsubmission,
or assumptions resulted in
(a) the applicant not being assessed for the correct amount of tax;
(b) the correct amount of tax not being paid by the taxpayer; or
(c) an incorrect refund being made by the Commissioner.
2. Who may apply for relief under the Tax VDP?
Any person may apply, whether in a personal, representative, withholding or other capacity,
for defaults prior to 17 February 2010.
3. What tax types are covered under the Tax VDP?
All types of tax administered by SARS are included under the VDP. Some of these are:
Income tax, pay as you earn (PAYE) (employee’s tax), value-added tax (VAT), diesel refunds,
customs duties, excise duties and levies, donations tax, estate duty, mineral and petroleum
resource royalties, royalties, secondary tax on companies (STC), stamp duty, securities transfer
tax (STT), transfer duty, turnover tax and uncertified securities tax (UST).
4. Can parties who are being audited, or are being investigated, or are
the subject of an enforcement action by SARS submit an application?
SARS may accept their applications if their default would not have been detected during the
audit or investigation, and the application would be in the interest of good management of the tax
system and the best use of SARS resources. In these cases, however, they will need permission
from the Commissioner to apply and they will be charged 50 per cent (half) of the interest that
would otherwise be due.
5. What are the minimum requirements to qualify for VDP?
A defaulting taxpayer will be granted relief under the programme if the application meets the
following requirements:
• The disclosure is complete in all material respects and made in the prescribed form and manner
• SARS was not aware of the default, which must have occurred prior to 17 February 2010
• A penalty or additional tax would have been imposed had SARS discovered the default in the
normal course of business
• It would not result in a refund due by the Commissioner.
6. What relief is offered under the Tax VDP?
If SARS accepts that your application is a disclosure that meets the conditions set out in the
legislation, it will be considered a valid disclosure. You will then be able to benefit from the
following relief:
• Penalty relief
You will not be charged penalties, whether a fixed amount or a percentage-based penalty, with
respect to the disclosure. Penalties for late submission of returns and late payments may,
however, be charged.
• Interest relief
50 per cent interest relief for applicants who required permission from the Commissioner to
apply 100 per cent interest relief for all other applicants.
• Additional tax relief
SARS will impose no additional tax.
• Criminal prosecution relief
SARS will not initiate criminal prosecution for any Tax Act offence, or related common law
offences.
7. How far back will SARS go to calculate the tax outstanding in terms of the Tax VDP?
Strictly speaking, SARS should go back for as many years as the tax default has occurred.
SARS, however, appreciates that record keeping and other difficulties may arise in doing so.
Bearing in mind the record keeping requirements in the legislation SARS administers and the
objectives of this VDP, if the default is one that involves a small proportion of the applicant’s
income or transactions, SARS will generally not go back further than five years in calculating the
tax outstanding in terms of the Tax VDP.
If the default involves extraordinary income or transactions that occurred more than five years
back, SARS will take the extraordinary income or transactions into account in calculating the tax
outstanding. Thus, by way of example, if an applicant entered into an extraordinary transaction
to evade tax in 2000 and invested the income in a secret offshore bank account bearing nominal
interest, SARS will calculate the tax outstanding on the extraordinary transaction in 2000 and the
interest income from 2005 to 2010. Where an applicant requires further guidance with regard to
this question Osiris can either contact the VDP Unit on your behalf and/or make an anonymous
application.
The Excon VDP Process
8.1. Who may apply under the Excon VDP?
• Individual, sole proprietor, partnership, deceased estate(s), insolvent estate(s), South African
trust(s), former South African residents, companies and close corporations that have contravened
the Regulations, prior to 28 February 2010; and • South African residents who took funds
offshore illegally and/or who beneficially own any unauthorised foreign assets and/or structures
(of whatever nature, excluding bearer instruments) may apply to the FinSurv (VDP Division).
Note:
For the purpose of determining whether a person is a resident for exchange control
purposes, the nationality or citizenship of that person is irrelevant.
8.2. What are the benefits of the Excon VDP?
Under the Excon VDP successful applicants will be regarded as having regularised their
exchange control affairs in respect of the declared value of all unauthorised foreign assets
disclosed in their application. South African residents who have contravened the Regulations are
assured that where a full disclosure is made in the prescribed manner and administrative relief is
granted by FinSurv (VDP Division), no further action against the South African resident
involved in such contraventions will be taken or initiated by FinSurv.
8.3. Minimum requirements to qualify for the Excon VDP
An applicant will be granted relief for VDP, if he/she/it meets the following requirements:
• The applicant must have contravened the Regulations prior to 28 February 2010
• The disclosure is complete
8.4. What relief is offered under the Excon VDP?
Applicants who are granted administrative relief in respect of unauthorised foreign assets and/or
structures (of whatever nature, excluding bearer instruments) may have to pay a levy on the
market value thereof.
• A levy of
10 per cent calculated on the market value of the unauthorised foreign asset
disclosed as at 28 February 2010. This levy must be paid from foreign-sourced funds.
• A levy of
12 per cent calculated on the market value of the unauthorised foreign asset
disclosed as at 28 February 2010, where no foreign funds are available.
• The amount levied in the case of an individual is reduced by R4 million of the foreign
capital allowance or any remaining portion thereof, and may not be reduced by any fees
or commissions.
8.5. When and where must the VDP levy be paid?
The levy must be paid within three months of the date of approval of the application,
.
8.6. What supporting information or documentation needs to be submitted?
The following supporting documentation must accompany the applicant’s original signed
application form:
• Cash:
Declaration giving a description and the value of the money, as at 28 February 2010
• Bank accounts, call deposits or time (term) deposits, or any other short-term foreign
asset:
Original or a certified copy of a statement of account from the foreign institution
concerned, as at 28 February 2010
• Financial instruments listed on a recognised exchange, such as shares, stock, bonds or
debentures:
Original or a certified copy of a statement of account and price as quoted on the
exchange, as at 28 February 2010
• Other financial instruments not listed on a recognised exchange or unlisted shares:
Valuation certificate from a foreign valuator, as at 28 February 2010
• Fixed property:
A valuation certificate issued by a valuator, or by a sphere of government of
the country where that foreign asset is located, as at 28 February 2010
• Foreign insurance policies:
A valuation certificate from your insurer, as at 28 February 2010
• An investment in a collective scheme, such as a unit trust:
A statement by the management
company of the scheme, as at 28 February 2010
• Intangible assets, such as a patent or copyright:
A valuation certificate by a valuator of the
country where that foreign asset is located or registered, as at 28 February 2010
• Other foreign assets:
A written declaration.
referenced from:
http://www.osiristrust.com/whatsnew/South%20African%20Voluntary%20Disclosure%20Program.pdf
THOMSONS TAX
Have an outstanding balance with SARS on your personal or business account for Tax, VAT, PAYE etc. and you have no idea where it comes from? Thomson Accountants can analyze and determine where this balance originated, if it is indeed correct and assist you with the objection if found that it is necessary. Complete the Contact sheet or email me Directly on grant@taxpro.co.za REMEMBER WE COME TO YOU
IT 88 - DO NOT ignore this document from SARS
The ITA88 system from SARS is here.
What is the ITA 88 system
With effect from the 1 September 2010 SARS will appoint employers as collection agents for Administrative penalties and unpaid taxes. You as the employer will be obliged to deduct the full amount from the employee’s salary and pay this over to the receiver with your next EMP 201 submission.
-
Penalties will be levied on the following offences:
-
Not registering as a tax payer
-
Not informing SARS of a change of address or other important details – employer as well
-
Not submitting a return or related documents
-
Not submitting a monthly return – employer
-
Not providing details of an employee – employer
-
Delivery of tax certificates before reconciling and returning to SARS – employer
-
Any other non-compliance with an obligation according to SARS
-
-
Basic information
-
Penalties are from R250 – R16000 depending on the assessment by SARS.
-
The employee would have received an ITP34 penalty assessment stating the offence, penalty, payment due date and payment procedure
-
This penalty can be disputed by remedying the problem and completing a Request for Remission form (RFR)
-
Penalties will be raised EVERY month until it’s sorted – consultation with employee is essential!
-
SARS rule – pay now, argue later
-
The following is the procedure that will have to be followed:
-
Employee fails to respond to ITP34 notice
-
SARS appoints the employer as agent (section 99 of the income tax act) and issues the ITA88 form to the employer to appoint him as agent (These notices will be issued electronically and via email – to be administered through Easyfile) – the employer is legally bound to obey and deduct the money
-
Employer administers the deduction from the payroll. This can be done over 3 months depending on employee’s affordability and the money will be paid over to SARS with your next EMP 201 submission
-
No interest applies if there is a payment plan(3 months) for the ITA88 penalty
-
Legal priority of deductions should there be limited funds then the employer must first deduct:
-
PAYE
-
UIF
-
Pension or provident Fund
-
Medical aid deductions
-
Special provisions for Garnishee/maintenance payments.
-
Existing garnishees must “stand back” for ITA88 deductions – The collecting agents/attorneys must be informed in writing.
Finally it is in the interest of the employer to help the employee resolve these outstanding issues. If the employer does not comply then SARS will hold the employer liable for the outstanding amounts.
THOMSONS TAX
I am a Master Tax Practitioner (Private and Public Practice) and Former Tax Auditor at SARS Johannesburg - If I can't help you, you probably can't be helped.
This is an Advanced Level service to the Public, Tax Practitioners, Customers, Auditors, Accountants and Lawyers in private practice. Complete the Contact sheet or email me Directly on grant@taxpro.co.za - Hedley Grant Thomson - Master Tax Practitioner SAIT(SA) REMEMBER WE COME TO YOU
How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
Guidelines
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits - to check your compliance
* Desk audit - to verify accuracy of data
* Refund audit - that the refund is due
* Field audit - to closely monitor all tax processes.
* Integrated audit - to assess taxpayer compliance.
* Risk audit - to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Creditors
* Debtors
* Salaries & wages
* VAT
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* Purchases
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General - overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments - 5 yrs
* Invoices, sales & purchases - 5 yrs
* Bank statements - 5 yrs
* Year end working papers - 5 yrs
* VAT records - 5 yrs
* Other general documents - 5 yrs
* Salary & wage registers - 5 yrs
* Records of trust monies - indefinitely
* Staff records - 3 yrs
* Cheques & bills of exchange - 6 yrs
* Stock sheets - 6 yrs
* Record for CGT four years after date of tax return - 4 yrs
* Company statutory records - 15 yrs
* All close corporation statutory records - indefinitely
* All financial statements, fixed asset registers, accounting records, etc - 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
2009/02/25 SPC V2.000
VAT 404
Value-Added Tax
Guide for Vendors
www.sars.gov.za1
10 IMPORTANT PRINCIPLES
1.
All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies).
2.
Vendors collect VAT on behalf of the State – please make sure that you pay it over on time, otherwise penalties and interest will be charged.
3.
VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable.
4.
You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.
5.
Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic.
6.
You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.
7.
You are required to advise the South African Revenue Service (SARS) within 21 days of any changes in your registered particulars, including any change in your authorised representative, business address, banking details, trading name, or if you cease trading.
8.
If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect.
9.
You can pay your VAT by using various electronic methods, including eFiling, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks.
10.
Report fraudulent activities to SARS by calling the Fraud and Anti-Corruption Hotline on 0800 00 28 70. You may report an incident anonymously if you wish.
VAT 404 – Guide for Vendors Contents
2
FOREWORD
The VAT 404 is a basic guide where technical and legal terminology has been avoided wherever possible. Although fairly comprehensive, the guide does not deal with all the legal detail associated with VAT and is not intended for legal reference. All references to "the VAT Act" or "the Act" are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. The terms "Republic", "South Africa" or the abbreviation "RSA", are used interchangeably in this document as a reference to the sovereign territory of the Republic of South Africa, as set out in the definition of "Republic" in section 1 of the VAT Act. You will also find a number of specific terms used throughout the guide which are defined in the Value–Added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference.
The information in this guide is based on the VAT legislation (as amended) as at the time of publishing and includes the amendments contained in the
Taxation Laws Amendment Act 7 of 2010 and the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act 8 of 2010 both of which were promulgated on 2 November 2010 (as per GG 33726 and GG 33727 respectively). Below is a brief synopsis of some of the most important changes affecting the administration of VAT since the previous issue of this Guide:
1.
Remission of interest – With effect from 1 April 2010 the Commissioner’s discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor’s control. Interpretation Note No. 61: Remission of interest in terms of section 39(7)(a) was issued on 29 March 2011 to provide further guidance in this regard. The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010.
2.
Registration requirements – The documentary requirements with which a person must comply in order to obtain a VAT registration number were clarified. Any person that applies to register for VAT must ensure that the correct supporting documents as set out in the policy document AS-VAT-08 - Guide for Completion of VAT Registration Application Forms are submitted.
3.
Tax invoices – A supplier is not obliged to issue a tax invoice in cases where the consideration for a taxable supply is less than R50, but the recipient must nevertheless be in possession of a source document such as an invoice or till slip as proof that the expense has been incurred before an input tax deduction will be allowed.
4.
Second-hand goods – Vendors are required to maintain the prescribed records (form VAT 264) in respect of any second-hand goods acquired. Previously this was only required for purchases where the consideration was R1 000 or more. The proof of payment as well as the date on which payment was made is also required as part of the vendor’s records to validate any input tax deduction for second-hand goods acquired.
5.
Foreign-going ships and aircraft – The scope of the definitions "foreign-going aircraft" and "foreign-going ship" was widened so that the supply of consumables and repairs to certain military craft may qualify as zero rated exports as in the case of commercial foreign-going ships and aircrafts.
6.
Time of supply – The VAT law was amended to make it clear that the time of supply rule which is applicable to machines, meters or other devices that are operated by means of coins or tokens, is also applicable to machines that operate with paper currency. The time of supply for the supplier is when the coins, tokens or paper currency is removed from the machine or device. However, when payment is made via the machine or device by electronic means by credit or debit card, the normal time of supply rule applies (i.e. the earlier of the date of payment or the date that an invoice is issued).
VAT 404 – VAT Guide for Vendors Foreword
3
7.
VAT 201 return, modernisation and imported services – New fields were added to the VAT 201 return which came into operation on 28 June 2010. The changes were aimed mainly at addressing certain compliance aspects with regard to the import and export of goods – in particular fraudulent VAT refunds linked to exports. The new fields are 2A, 14A, 15A and the Customs Code. The effect of these changes is that vendors must distinguish between the value of zero-rated exports and other zero-rated supplies on their returns. Input tax in relation to the importation of goods must now also be indicated separately from other taxable supplies. Further, with effect from 1 February 2011, the VAT on any imported services must be declared on the VAT 201 in the case where the person is a vendor instead on form VAT 215. In April 2011, further modernisation changes came into effect in the form of a new look VAT 201 return which is in landscape format and contains additional demographic fields with certain pre-populated fields. Part of the changes are that VAT 201 returns are on no longer mailed in bulk to vendors, but instead must be requested by the vendor on eFiling or from a SARS office. It is expected that more modernisation changes will be implemented in phases in 2011. Vendors are therefore advised to check the SARS website for the latest information, as well as the new publication called VAT Connect which will be sent directly to vendors.
8.
Carbon Dioxide (CO) emission levy – An environmental levy (CO levy) was introduced with effect from 1 September 2010 on new passenger cars, including SUVs and other motor vehicles manufactured in, or imported into, the Republic which are principally designed to carry a maximum of nine passengers. As with all excise duties, the levy amount is built into the price that the manufacturer or importer charges the client. The value on which VAT is calculated must therefore include any environmental levy which is applicable.
9.
Tax Administration Bill (TAB) – The TAB is in the final stages of completion and was published for a second round of public comment in October 2010. The TAB seeks to provide a single body of law that outlines common procedures, rights and remedies. It is expected that the TAB will become an Act of Parliament in the latter part of 2011. Once in effect the TAB will have a major impact on the administration of all taxes in general. The effect from a VAT perspective is that a number of administrative type provisions which are currently in the VAT Act will be deleted or amended. The corresponding provisions in the TAB will then apply from the effective date. Schedule A – Schedule of Amendments reflects the proposed consequential amendments to the various tax acts which were necessary to align them with the TAB. The TAB is available on the SARS website under "Draft Bills" on the Legal and Policy page.
10.
Voluntary disclosure programme (VDP) – The VDP has been implemented to provide taxpayers with an opportunity to voluntarily apply to SARS to disclose their defaults and regularise their tax affairs. The period within which VDP applications can be made to SARS is prescribed by the Commissioner and runs from 5 November 2010 to 31 October 2011. The VDP applies for various taxes including VAT.
The following guides have also been issued and may be referred to for more information relating to the specific VAT topics:
•AS-VAT-08 - Guide for Registration of VAT Vendors
•Trade Classification Guide (VAT 403)
•Guide for Fixed Property and Construction (VAT 409)
•Guide for Accommodation, Catering and Entertainment (VAT 411)
•Share Block Schemes (VAT 412)
•Deceased Estates (VAT 413)
•Guide for Associations not for Gain and Welfare Organisations (VAT 414)
•Diesel Refund Guide (VAT 415)
•AS-VAT-10 - Quick Reference Guide (Small Vendors) (VAT 417)
•AS-VAT-02 - Quick Reference Guide (Diplomatic Refunds)
•Guide for Municipalities (VAT 419)
•Guide for Motor Dealers (VAT 420)
•VAT treatment of entities affiliated to FIFA Part 2 entities
•VAT treatment of entities affiliated to FIFA Part 3 entities
VAT 404 – VAT Guide for Vendors Foreword
4
The information in this guide is issued for guidance only and does not constitute a binding general ruling as contemplated in section 76P of the Income Tax Act, No. 58 of 1962 and sections 41A and 41B of the VAT Act unless otherwise indicated. All previous editions of the Guide for Vendors (VAT 404) are withdrawn with effect from 6 September 2011. Should there be any aspects relating to VAT which are not clear or not dealt with in this guide, or should you require further information or a specific ruling on a legal issue, you may:
•contact your local South African Revenue Service (SARS) branch;
•visit the SARS website at
www.sars.gov.za;
•contact your own tax advisors;
•if calling locally, contact the SARS National Call Centre on 0800 00 7277; or
•if calling from abroad, contact the SARS National Call Centre on +27 11 602 2093.
Comments and/or suggestions regarding this guide may be sent to the following e-mail address:
policycomments@sars.gov.za.
Prepared by
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
6 September 2011
VAT 404 – Guide for Vendors Contents 5
|
CONTENTS CHAPTER 1 : INTRODUCTION |
9 |
|
1.1 What is VAT? |
9 |
|
1.2 How does VAT work? |
9 |
|
CHAPTER 2 : REGISTERING YOUR BUSINESS |
12 |
|
2.1 When do I become liable to register for VAT? |
12 |
|
2.2 Where must I register? |
12 |
|
2.3 What documents must I submit with my application? |
13 |
|
2.4 How do I calculate the value of taxable supplies? |
14 |
|
2.5 Voluntary registration |
15 |
|
2.6 Refusal of a voluntary registration application |
16 |
|
2.7 Separate registration (branches, divisions and separate enterprises) |
16 |
|
2.8 Cancellation of registration |
17 |
|
CHAPTER 3 : TAX PERIODS |
20 |
|
3.1 Which tax periods are available? |
20 |
|
3.2 Allocation and change of tax periods |
21 |
|
3.3 The 10-day rule |
22 |
|
CHAPTER 4 : ACCOUNTING BASIS |
23 |
|
4.1 Introduction |
23 |
|
4.2 Invoice basis |
23 |
|
4.3 Payments basis |
24 |
|
4.4 Change of accounting basis |
25 |
|
4.5 Special cases |
26 |
|
CHAPTER 5 : TAXABLE SUPPLIES |
27 |
|
5.1 Introduction |
27 |
|
5.2 Standard rated supplies |
27 |
|
5.3 Zero-rated supplies |
28 |
|
5.4 Deemed supplies |
31 |
|
5.5 Time of supply |
32 |
|
5.6 Value of supply |
34 |
THOMSONS TAX
I am a Master Tax Practitioner (Private and Public Practice) and Former Tax Auditor at SARS Johannesburg - If I can't help you, you probably can't be helped.
This is an Advanced Level service to the Public, Tax Practitioners, Customers, Auditors, Accountants and Lawyers in private practice. Complete the Contact sheet or email me Directly on grant@taxpro.co.za - Hedley Grant Thomson - Master Tax Practitioner SAIT(SA) REMEMBER WE COME TO YOU
How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
Guidelines
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits - to check your compliance
* Desk audit - to verify accuracy of data
* Refund audit - that the refund is due
* Field audit - to closely monitor all tax processes.
* Integrated audit - to assess taxpayer compliance.
* Risk audit - to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Creditors
* Debtors
* Salaries & wages
* VAT
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* Purchases
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General - overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments - 5 yrs
* Invoices, sales & purchases - 5 yrs
* Bank statements - 5 yrs
* Year end working papers - 5 yrs
* VAT records - 5 yrs
* Other general documents - 5 yrs
* Salary & wage registers - 5 yrs
* Records of trust monies - indefinitely
* Staff records - 3 yrs
* Cheques & bills of exchange - 6 yrs
* Stock sheets - 6 yrs
* Record for CGT four years after date of tax return - 4 yrs
* Company statutory records - 15 yrs
* All close corporation statutory records - indefinitely
* All financial statements, fixed asset registers, accounting records, etc - 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
2009/02/25 SPC V2.000
VAT 404
Value-Added Tax
Guide for Vendors
www.sars.gov.za1
10 IMPORTANT PRINCIPLES
1.
All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies).
2.
Vendors collect VAT on behalf of the State – please make sure that you pay it over on time, otherwise penalties and interest will be charged.
3.
VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable.
4.
You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.
5.
Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic.
6.
You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.
7.
You are required to advise the South African Revenue Service (SARS) within 21 days of any changes in your registered particulars, including any change in your authorised representative, business address, banking details, trading name, or if you cease trading.
8.
If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect.
9.
You can pay your VAT by using various electronic methods, including eFiling, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks.
10.
Report fraudulent activities to SARS by calling the Fraud and Anti-Corruption Hotline on 0800 00 28 70. You may report an incident anonymously if you wish.
VAT 404 – Guide for Vendors Contents
2
FOREWORD
The VAT 404 is a basic guide where technical and legal terminology has been avoided wherever possible. Although fairly comprehensive, the guide does not deal with all the legal detail associated with VAT and is not intended for legal reference. All references to "the VAT Act" or "the Act" are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. The terms "Republic", "South Africa" or the abbreviation "RSA", are used interchangeably in this document as a reference to the sovereign territory of the Republic of South Africa, as set out in the definition of "Republic" in section 1 of the VAT Act. You will also find a number of specific terms used throughout the guide which are defined in the Value–Added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference.
The information in this guide is based on the VAT legislation (as amended) as at the time of publishing and includes the amendments contained in the
Taxation Laws Amendment Act 7 of 2010 and the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act 8 of 2010 both of which were promulgated on 2 November 2010 (as per GG 33726 and GG 33727 respectively). Below is a brief synopsis of some of the most important changes affecting the administration of VAT since the previous issue of this Guide:
1.
Remission of interest – With effect from 1 April 2010 the Commissioner’s discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor’s control. Interpretation Note No. 61: Remission of interest in terms of section 39(7)(a) was issued on 29 March 2011 to provide further guidance in this regard. The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010.
2.
Registration requirements – The documentary requirements with which a person must comply in order to obtain a VAT registration number were clarified. Any person that applies to register for VAT must ensure that the correct supporting documents as set out in the policy document AS-VAT-08 - Guide for Completion of VAT Registration Application Forms are submitted.
3.
Tax invoices – A supplier is not obliged to issue a tax invoice in cases where the consideration for a taxable supply is less than R50, but the recipient must nevertheless be in possession of a source document such as an invoice or till slip as proof that the expense has been incurred before an input tax deduction will be allowed.
4.
Second-hand goods – Vendors are required to maintain the prescribed records (form VAT 264) in respect of any second-hand goods acquired. Previously this was only required for purchases where the consideration was R1 000 or more. The proof of payment as well as the date on which payment was made is also required as part of the vendor’s records to validate any input tax deduction for second-hand goods acquired.
5.
Foreign-going ships and aircraft – The scope of the definitions "foreign-going aircraft" and "foreign-going ship" was widened so that the supply of consumables and repairs to certain military craft may qualify as zero rated exports as in the case of commercial foreign-going ships and aircrafts.
6.
Time of supply – The VAT law was amended to make it clear that the time of supply rule which is applicable to machines, meters or other devices that are operated by means of coins or tokens, is also applicable to machines that operate with paper currency. The time of supply for the supplier is when the coins, tokens or paper currency is removed from the machine or device. However, when payment is made via the machine or device by electronic means by credit or debit card, the normal time of supply rule applies (i.e. the earlier of the date of payment or the date that an invoice is issued).
VAT 404 – VAT Guide for Vendors Foreword
3
7.
VAT 201 return, modernisation and imported services – New fields were added to the VAT 201 return which came into operation on 28 June 2010. The changes were aimed mainly at addressing certain compliance aspects with regard to the import and export of goods – in particular fraudulent VAT refunds linked to exports. The new fields are 2A, 14A, 15A and the Customs Code. The effect of these changes is that vendors must distinguish between the value of zero-rated exports and other zero-rated supplies on their returns. Input tax in relation to the importation of goods must now also be indicated separately from other taxable supplies. Further, with effect from 1 February 2011, the VAT on any imported services must be declared on the VAT 201 in the case where the person is a vendor instead on form VAT 215. In April 2011, further modernisation changes came into effect in the form of a new look VAT 201 return which is in landscape format and contains additional demographic fields with certain pre-populated fields. Part of the changes are that VAT 201 returns are on no longer mailed in bulk to vendors, but instead must be requested by the vendor on eFiling or from a SARS office. It is expected that more modernisation changes will be implemented in phases in 2011. Vendors are therefore advised to check the SARS website for the latest information, as well as the new publication called VAT Connect which will be sent directly to vendors.
8.
Carbon Dioxide (CO) emission levy – An environmental levy (CO levy) was introduced with effect from 1 September 2010 on new passenger cars, including SUVs and other motor vehicles manufactured in, or imported into, the Republic which are principally designed to carry a maximum of nine passengers. As with all excise duties, the levy amount is built into the price that the manufacturer or importer charges the client. The value on which VAT is calculated must therefore include any environmental levy which is applicable.
9.
Tax Administration Bill (TAB) – The TAB is in the final stages of completion and was published for a second round of public comment in October 2010. The TAB seeks to provide a single body of law that outlines common procedures, rights and remedies. It is expected that the TAB will become an Act of Parliament in the latter part of 2011. Once in effect the TAB will have a major impact on the administration of all taxes in general. The effect from a VAT perspective is that a number of administrative type provisions which are currently in the VAT Act will be deleted or amended. The corresponding provisions in the TAB will then apply from the effective date. Schedule A – Schedule of Amendments reflects the proposed consequential amendments to the various tax acts which were necessary to align them with the TAB. The TAB is available on the SARS website under "Draft Bills" on the Legal and Policy page.
10.
Voluntary disclosure programme (VDP) – The VDP has been implemented to provide taxpayers with an opportunity to voluntarily apply to SARS to disclose their defaults and regularise their tax affairs. The period within which VDP applications can be made to SARS is prescribed by the Commissioner and runs from 5 November 2010 to 31 October 2011. The VDP applies for various taxes including VAT.
The following guides have also been issued and may be referred to for more information relating to the specific VAT topics:
•AS-VAT-08 - Guide for Registration of VAT Vendors
•Trade Classification Guide (VAT 403)
•Guide for Fixed Property and Construction (VAT 409)
•Guide for Accommodation, Catering and Entertainment (VAT 411)
•Share Block Schemes (VAT 412)
•Deceased Estates (VAT 413)
•Guide for Associations not for Gain and Welfare Organisations (VAT 414)
•Diesel Refund Guide (VAT 415)
•AS-VAT-10 - Quick Reference Guide (Small Vendors) (VAT 417)
•AS-VAT-02 - Quick Reference Guide (Diplomatic Refunds)
•Guide for Municipalities (VAT 419)
•Guide for Motor Dealers (VAT 420)
•VAT treatment of entities affiliated to FIFA Part 2 entities
•VAT treatment of entities affiliated to FIFA Part 3 entities
VAT 404 – VAT Guide for Vendors Foreword
4
The information in this guide is issued for guidance only and does not constitute a binding general ruling as contemplated in section 76P of the Income Tax Act, No. 58 of 1962 and sections 41A and 41B of the VAT Act unless otherwise indicated. All previous editions of the Guide for Vendors (VAT 404) are withdrawn with effect from 6 September 2011. Should there be any aspects relating to VAT which are not clear or not dealt with in this guide, or should you require further information or a specific ruling on a legal issue, you may:
•contact your local South African Revenue Service (SARS) branch;
•visit the SARS website at
www.sars.gov.za;
•contact your own tax advisors;
•if calling locally, contact the SARS National Call Centre on 0800 00 7277; or
•if calling from abroad, contact the SARS National Call Centre on +27 11 602 2093.
Comments and/or suggestions regarding this guide may be sent to the following e-mail address:
policycomments@sars.gov.za.
Prepared by
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
6 September 2011
VAT 404 – Guide for Vendors Contents 5
|
CONTENTS CHAPTER 1 : INTRODUCTION |
9 |
|
1.1 What is VAT? |
9 |
|
1.2 How does VAT work? |
9 |
|
CHAPTER 2 : REGISTERING YOUR BUSINESS |
12 |
|
2.1 When do I become liable to register for VAT? |
12 |
|
2.2 Where must I register? |
12 |
|
2.3 What documents must I submit with my application? |
13 |
|
2.4 How do I calculate the value of taxable supplies? |
14 |
|
2.5 Voluntary registration |
15 |
|
2.6 Refusal of a voluntary registration application |
16 |
|
2.7 Separate registration (branches, divisions and separate enterprises) |
16 |
|
2.8 Cancellation of registration |
17 |
|
CHAPTER 3 : TAX PERIODS |
20 |
|
3.1 Which tax periods are available? |
20 |
|
3.2 Allocation and change of tax periods |
21 |
|
3.3 The 10-day rule |
22 |
|
CHAPTER 4 : ACCOUNTING BASIS |
23 |
|
4.1 Introduction |
23 |
|
4.2 Invoice basis |
23 |
|
4.3 Payments basis |
24 |
|
4.4 Change of accounting basis |
25 |
|
4.5 Special cases |
26 |
|
CHAPTER 5 : TAXABLE SUPPLIES |
27 |
|
5.1 Introduction |
27 |
|
5.2 Standard rated supplies |
27 |
|
5.3 Zero-rated supplies |
28 |
|
5.4 Deemed supplies |
31 |
|
5.5 Time of supply |
32 |
|
5.6 Value of supply |
34 |
THOMSONS TAX
Have an outstanding balance with SARS on your personal or business account for Tax, VAT, PAYE etc. and you have no idea where it comes from? Thomson Accountants can analyze and determine where this balance originated, if it is indeed correct and assist you with the objection if found that it is necessary. Complete the Contact sheet or email me Directly on grant@taxpro.co.za REMEMBER WE COME TO YOU
IT 88 - DO NOT ignore this document from SARS
The ITA88 system from SARS is here.
What is the ITA 88 system
With effect from the 1 September 2010 SARS will appoint employers as collection agents for Administrative penalties and unpaid taxes. You as the employer will be obliged to deduct the full amount from the employee’s salary and pay this over to the receiver with your next EMP 201 submission.
-
Penalties will be levied on the following offences:
-
Not registering as a tax payer
-
Not informing SARS of a change of address or other important details – employer as well
-
Not submitting a return or related documents
-
Not submitting a monthly return – employer
-
Not providing details of an employee – employer
-
Delivery of tax certificates before reconciling and returning to SARS – employer
-
Any other non-compliance with an obligation according to SARS
-
-
Basic information
-
Penalties are from R250 – R16000 depending on the assessment by SARS.
-
The employee would have received an ITP34 penalty assessment stating the offence, penalty, payment due date and payment procedure
-
This penalty can be disputed by remedying the problem and completing a Request for Remission form (RFR)
-
Penalties will be raised EVERY month until it’s sorted – consultation with employee is essential!
-
SARS rule – pay now, argue later
-
The following is the procedure that will have to be followed:
-
Employee fails to respond to ITP34 notice
-
SARS appoints the employer as agent (section 99 of the income tax act) and issues the ITA88 form to the employer to appoint him as agent (These notices will be issued electronically and via email – to be administered through Easyfile) – the employer is legally bound to obey and deduct the money
-
Employer administers the deduction from the payroll. This can be done over 3 months depending on employee’s affordability and the money will be paid over to SARS with your next EMP 201 submission
-
No interest applies if there is a payment plan(3 months) for the ITA88 penalty
-
Legal priority of deductions should there be limited funds then the employer must first deduct:
-
PAYE
-
UIF
-
Pension or provident Fund
-
Medical aid deductions
-
Special provisions for Garnishee/maintenance payments.
-
Existing garnishees must “stand back” for ITA88 deductions – The collecting agents/attorneys must be informed in writing.
Finally it is in the interest of the employer to help the employee resolve these outstanding issues. If the employer does not comply then SARS will hold the employer liable for the outstanding amounts.
THOMSONS TAX
I am a Master Tax Practitioner (Private and Public Practice) and Former Tax Auditor at SARS Johannesburg - If I can't help you, you probably can't be helped.
This is an Advanced Level service to the Public, Tax Practitioners, Customers, Auditors, Accountants and Lawyers in private practice. Complete the Contact sheet or email me Directly on grant@taxpro.co.za - Hedley Grant Thomson - Master Tax Practitioner SAIT(SA) REMEMBER WE COME TO YOU
How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
Guidelines
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits - to check your compliance
* Desk audit - to verify accuracy of data
* Refund audit - that the refund is due
* Field audit - to closely monitor all tax processes.
* Integrated audit - to assess taxpayer compliance.
* Risk audit - to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Creditors
* Debtors
* Salaries & wages
* VAT
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* Purchases
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General - overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments - 5 yrs
* Invoices, sales & purchases - 5 yrs
* Bank statements - 5 yrs
* Year end working papers - 5 yrs
* VAT records - 5 yrs
* Other general documents - 5 yrs
* Salary & wage registers - 5 yrs
* Records of trust monies - indefinitely
* Staff records - 3 yrs
* Cheques & bills of exchange - 6 yrs
* Stock sheets - 6 yrs
* Record for CGT four years after date of tax return - 4 yrs
* Company statutory records - 15 yrs
* All close corporation statutory records - indefinitely
* All financial statements, fixed asset registers, accounting records, etc - 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
2009/02/25 SPC V2.000
VAT 404
Value-Added Tax
Guide for Vendors
www.sars.gov.za1
10 IMPORTANT PRINCIPLES
1.
All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies).
2.
Vendors collect VAT on behalf of the State – please make sure that you pay it over on time, otherwise penalties and interest will be charged.
3.
VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable.
4.
You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.
5.
Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic.
6.
You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.
7.
You are required to advise the South African Revenue Service (SARS) within 21 days of any changes in your registered particulars, including any change in your authorised representative, business address, banking details, trading name, or if you cease trading.
8.
If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect.
9.
You can pay your VAT by using various electronic methods, including eFiling, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks.
10.
Report fraudulent activities to SARS by calling the Fraud and Anti-Corruption Hotline on 0800 00 28 70. You may report an incident anonymously if you wish.
VAT 404 – Guide for Vendors Contents
2
FOREWORD
The VAT 404 is a basic guide where technical and legal terminology has been avoided wherever possible. Although fairly comprehensive, the guide does not deal with all the legal detail associated with VAT and is not intended for legal reference. All references to "the VAT Act" or "the Act" are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. The terms "Republic", "South Africa" or the abbreviation "RSA", are used interchangeably in this document as a reference to the sovereign territory of the Republic of South Africa, as set out in the definition of "Republic" in section 1 of the VAT Act. You will also find a number of specific terms used throughout the guide which are defined in the Value–Added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference.
The information in this guide is based on the VAT legislation (as amended) as at the time of publishing and includes the amendments contained in the
Taxation Laws Amendment Act 7 of 2010 and the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act 8 of 2010 both of which were promulgated on 2 November 2010 (as per GG 33726 and GG 33727 respectively). Below is a brief synopsis of some of the most important changes affecting the administration of VAT since the previous issue of this Guide:
1.
Remission of interest – With effect from 1 April 2010 the Commissioner’s discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor’s control. Interpretation Note No. 61: Remission of interest in terms of section 39(7)(a) was issued on 29 March 2011 to provide further guidance in this regard. The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010.
2.
Registration requirements – The documentary requirements with which a person must comply in order to obtain a VAT registration number were clarified. Any person that applies to register for VAT must ensure that the correct supporting documents as set out in the policy document AS-VAT-08 - Guide for Completion of VAT Registration Application Forms are submitted.
3.
Tax invoices – A supplier is not obliged to issue a tax invoice in cases where the consideration for a taxable supply is less than R50, but the recipient must nevertheless be in possession of a source document such as an invoice or till slip as proof that the expense has been incurred before an input tax deduction will be allowed.
4.
Second-hand goods – Vendors are required to maintain the prescribed records (form VAT 264) in respect of any second-hand goods acquired. Previously this was only required for purchases where the consideration was R1 000 or more. The proof of payment as well as the date on which payment was made is also required as part of the vendor’s records to validate any input tax deduction for second-hand goods acquired.
5.
Foreign-going ships and aircraft – The scope of the definitions "foreign-going aircraft" and "foreign-going ship" was widened so that the supply of consumables and repairs to certain military craft may qualify as zero rated exports as in the case of commercial foreign-going ships and aircrafts.
6.
Time of supply – The VAT law was amended to make it clear that the time of supply rule which is applicable to machines, meters or other devices that are operated by means of coins or tokens, is also applicable to machines that operate with paper currency. The time of supply for the supplier is when the coins, tokens or paper currency is removed from the machine or device. However, when payment is made via the machine or device by electronic means by credit or debit card, the normal time of supply rule applies (i.e. the earlier of the date of payment or the date that an invoice is issued).
VAT 404 – VAT Guide for Vendors Foreword
3
7.
VAT 201 return, modernisation and imported services – New fields were added to the VAT 201 return which came into operation on 28 June 2010. The changes were aimed mainly at addressing certain compliance aspects with regard to the import and export of goods – in particular fraudulent VAT refunds linked to exports. The new fields are 2A, 14A, 15A and the Customs Code. The effect of these changes is that vendors must distinguish between the value of zero-rated exports and other zero-rated supplies on their returns. Input tax in relation to the importation of goods must now also be indicated separately from other taxable supplies. Further, with effect from 1 February 2011, the VAT on any imported services must be declared on the VAT 201 in the case where the person is a vendor instead on form VAT 215. In April 2011, further modernisation changes came into effect in the form of a new look VAT 201 return which is in landscape format and contains additional demographic fields with certain pre-populated fields. Part of the changes are that VAT 201 returns are on no longer mailed in bulk to vendors, but instead must be requested by the vendor on eFiling or from a SARS office. It is expected that more modernisation changes will be implemented in phases in 2011. Vendors are therefore advised to check the SARS website for the latest information, as well as the new publication called VAT Connect which will be sent directly to vendors.
8.
Carbon Dioxide (CO) emission levy – An environmental levy (CO levy) was introduced with effect from 1 September 2010 on new passenger cars, including SUVs and other motor vehicles manufactured in, or imported into, the Republic which are principally designed to carry a maximum of nine passengers. As with all excise duties, the levy amount is built into the price that the manufacturer or importer charges the client. The value on which VAT is calculated must therefore include any environmental levy which is applicable.
9.
Tax Administration Bill (TAB) – The TAB is in the final stages of completion and was published for a second round of public comment in October 2010. The TAB seeks to provide a single body of law that outlines common procedures, rights and remedies. It is expected that the TAB will become an Act of Parliament in the latter part of 2011. Once in effect the TAB will have a major impact on the administration of all taxes in general. The effect from a VAT perspective is that a number of administrative type provisions which are currently in the VAT Act will be deleted or amended. The corresponding provisions in the TAB will then apply from the effective date. Schedule A – Schedule of Amendments reflects the proposed consequential amendments to the various tax acts which were necessary to align them with the TAB. The TAB is available on the SARS website under "Draft Bills" on the Legal and Policy page.
10.
Voluntary disclosure programme (VDP) – The VDP has been implemented to provide taxpayers with an opportunity to voluntarily apply to SARS to disclose their defaults and regularise their tax affairs. The period within which VDP applications can be made to SARS is prescribed by the Commissioner and runs from 5 November 2010 to 31 October 2011. The VDP applies for various taxes including VAT.
The following guides have also been issued and may be referred to for more information relating to the specific VAT topics:
•AS-VAT-08 - Guide for Registration of VAT Vendors
•Trade Classification Guide (VAT 403)
•Guide for Fixed Property and Construction (VAT 409)
•Guide for Accommodation, Catering and Entertainment (VAT 411)
•Share Block Schemes (VAT 412)
•Deceased Estates (VAT 413)
•Guide for Associations not for Gain and Welfare Organisations (VAT 414)
•Diesel Refund Guide (VAT 415)
•AS-VAT-10 - Quick Reference Guide (Small Vendors) (VAT 417)
•AS-VAT-02 - Quick Reference Guide (Diplomatic Refunds)
•Guide for Municipalities (VAT 419)
•Guide for Motor Dealers (VAT 420)
•VAT treatment of entities affiliated to FIFA Part 2 entities
•VAT treatment of entities affiliated to FIFA Part 3 entities
VAT 404 – VAT Guide for Vendors Foreword
4
The information in this guide is issued for guidance only and does not constitute a binding general ruling as contemplated in section 76P of the Income Tax Act, No. 58 of 1962 and sections 41A and 41B of the VAT Act unless otherwise indicated. All previous editions of the Guide for Vendors (VAT 404) are withdrawn with effect from 6 September 2011. Should there be any aspects relating to VAT which are not clear or not dealt with in this guide, or should you require further information or a specific ruling on a legal issue, you may:
•contact your local South African Revenue Service (SARS) branch;
•visit the SARS website at
www.sars.gov.za;
•contact your own tax advisors;
•if calling locally, contact the SARS National Call Centre on 0800 00 7277; or
•if calling from abroad, contact the SARS National Call Centre on +27 11 602 2093.
Comments and/or suggestions regarding this guide may be sent to the following e-mail address:
policycomments@sars.gov.za.
Prepared by
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
6 September 2011
VAT 404 – Guide for Vendors Contents 5
|
CONTENTS CHAPTER 1 : INTRODUCTION |
9 |
|
1.1 What is VAT? |
9 |
|
1.2 How does VAT work? |
9 |
|
CHAPTER 2 : REGISTERING YOUR BUSINESS |
12 |
|
2.1 When do I become liable to register for VAT? |
12 |
|
2.2 Where must I register? |
12 |
|
2.3 What documents must I submit with my application? |
13 |
|
2.4 How do I calculate the value of taxable supplies? |
14 |
|
2.5 Voluntary registration |
15 |
|
2.6 Refusal of a voluntary registration application |
16 |
|
2.7 Separate registration (branches, divisions and separate enterprises) |
16 |
|
2.8 Cancellation of registration |
17 |
|
CHAPTER 3 : TAX PERIODS |
20 |
|
3.1 Which tax periods are available? |
20 |
|
3.2 Allocation and change of tax periods |
21 |
|
3.3 The 10-day rule |
22 |
|
CHAPTER 4 : ACCOUNTING BASIS |
23 |
|
4.1 Introduction |
23 |
|
4.2 Invoice basis |
23 |
|
4.3 Payments basis |
24 |
|
4.4 Change of accounting basis |
25 |
|
4.5 Special cases |
26 |
|
CHAPTER 5 : TAXABLE SUPPLIES |
27 |
|
5.1 Introduction |
27 |
|
5.2 Standard rated supplies |
27 |
|
5.3 Zero-rated supplies |
28 |
|
5.4 Deemed supplies |
31 |
|
5.5 Time of supply |
32 |
|
5.6 Value of supply |
34 |
THOMSONS TAX
I am a Master Tax Practitioner (Private and Public Practice) and Former Tax Auditor at SARS Johannesburg - If I can't help you, you probably can't be helped.
This is an Advanced Level service to the Public, Tax Practitioners, Customers, Auditors, Accountants and Lawyers in private practice. Complete the Contact sheet or email me Directly on grant@taxpro.co.za - Hedley Grant Thomson - Master Tax Practitioner SAIT(SA) REMEMBER WE COME TO YOU
How confident are you about your business’s tax compliance? The SARS audit is serious stuff. Don’t take it lightly. It could cost you more at the end than if you actually spent the time and money to get your business in order. A SARS audit is very much a daunting experience for any business. You will worry about: What will SARS be looking for ?
Are there any grey areas in your business ?
Will SARS agree with your records ?
Will SARS agree with your interpretation of the different laws and applications ?
These are just a few of the questions that will be playing in your mind until the entire audit is finally over.
The guide below is a tool which will enable you to view your business from the eyes of the SARS auditor. It is not conclusive, but is sufficient enough to get you on the right path.
Guidelines
1. How does SARS select its cases?
* Random selection
* Specific referral
* Referral by the public
* Discretionary selection
* Computer-generated selection
* Refund audits
2. What to expect from the audit ?
* The type of audit determines this
* Tax audits - to check your compliance
* Desk audit - to verify accuracy of data
* Refund audit - that the refund is due
* Field audit - to closely monitor all tax processes.
* Integrated audit - to assess taxpayer compliance.
* Risk audit - to analyse the extent of your non-compliance and material mis- representations.
3. What are your rights in an audit ?
* Did SARS notify you in writing?
* A phone call is not sufficient
* Did SARS inform you of the date and time of the audit ?
* if you were informed telephonically, did you later receive written notice ?
* Did SARS give you reasonable notice of the audit ?
* While at the audit on-site, did SARS personnel respect you, your premises and your business operations ?
Audit risk indicators
* General—TB’s, sales, processing, etc
* Fixed Assets
* Creditors
* Debtors
* Salaries & wages
* VAT
* PAYE and payroll
* Your tax record with SARS
5. SARS assessing your compliance
* Your tax returns are first in line
* Income statement
* Balance sheet discrepancies
* Assets and liabilities tests
* Calculation of your taxable income
6. Type of expenses targeted
* Purchases
* General expenses
* Repairs & maintenance
* Salaries & wages
7. Minimise payroll risk
* General - overview of the cycle
* PAYE/SITE deductions
* Fringe benefits
* Other allowances
* Treatment of allowances and benefits
* Directors remuneration
8 What do they check in a VAT audit ?
* VAT201 totals checked against the general ledger and summary
* VAT control account is reviewed to test the accounting system
* Were VAT interest and penalties added back
* Tax invoices selected and tested
* Debtors checked
* Classification of trade
* Record of any previous audits
* Type of taxable supplies
* History of VAT refunds
* Value of assets and liabilities when registering for VAT
* Capital assets acquired
9. Record Keeping
* Tax returns and assessments - 5 yrs
* Invoices, sales & purchases - 5 yrs
* Bank statements - 5 yrs
* Year end working papers - 5 yrs
* VAT records - 5 yrs
* Other general documents - 5 yrs
* Salary & wage registers - 5 yrs
* Records of trust monies - indefinitely
* Staff records - 3 yrs
* Cheques & bills of exchange - 6 yrs
* Stock sheets - 6 yrs
* Record for CGT four years after date of tax return - 4 yrs
* Company statutory records - 15 yrs
* All close corporation statutory records - indefinitely
* All financial statements, fixed asset registers, accounting records, etc - 15 yrs
10. Analysis techniques that SARS use:
* SARS will use ratio analysis
* Check stock turnover ratios
* What does debtor turnover ratio say
* Assets ratios to determine asset use
* Analyse financial structure with capital ratios
* Profitability analysis
* Consider cost of sales
* Analyse profit & loss sections
2009/02/25 SPC V2.000
VAT 404
Value-Added Tax
Guide for Vendors
www.sars.gov.za1
10 IMPORTANT PRINCIPLES
1.
All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies).
2.
Vendors collect VAT on behalf of the State – please make sure that you pay it over on time, otherwise penalties and interest will be charged.
3.
VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable.
4.
You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.
5.
Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic.
6.
You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.
7.
You are required to advise the South African Revenue Service (SARS) within 21 days of any changes in your registered particulars, including any change in your authorised representative, business address, banking details, trading name, or if you cease trading.
8.
If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect.
9.
You can pay your VAT by using various electronic methods, including eFiling, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks.
10.
Report fraudulent activities to SARS by calling the Fraud and Anti-Corruption Hotline on 0800 00 28 70. You may report an incident anonymously if you wish.
VAT 404 – Guide for Vendors Contents
2
FOREWORD
The VAT 404 is a basic guide where technical and legal terminology has been avoided wherever possible. Although fairly comprehensive, the guide does not deal with all the legal detail associated with VAT and is not intended for legal reference. All references to "the VAT Act" or "the Act" are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. The terms "Republic", "South Africa" or the abbreviation "RSA", are used interchangeably in this document as a reference to the sovereign territory of the Republic of South Africa, as set out in the definition of "Republic" in section 1 of the VAT Act. You will also find a number of specific terms used throughout the guide which are defined in the Value–Added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference.
The information in this guide is based on the VAT legislation (as amended) as at the time of publishing and includes the amendments contained in the
Taxation Laws Amendment Act 7 of 2010 and the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act 8 of 2010 both of which were promulgated on 2 November 2010 (as per GG 33726 and GG 33727 respectively). Below is a brief synopsis of some of the most important changes affecting the administration of VAT since the previous issue of this Guide:
1.
Remission of interest – With effect from 1 April 2010 the Commissioner’s discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor’s control. Interpretation Note No. 61: Remission of interest in terms of section 39(7)(a) was issued on 29 March 2011 to provide further guidance in this regard. The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010.
2.
Registration requirements – The documentary requirements with which a person must comply in order to obtain a VAT registration number were clarified. Any person that applies to register for VAT must ensure that the correct supporting documents as set out in the policy document AS-VAT-08 - Guide for Completion of VAT Registration Application Forms are submitted.
3.
Tax invoices – A supplier is not obliged to issue a tax invoice in cases where the consideration for a taxable supply is less than R50, but the recipient must nevertheless be in possession of a source document such as an invoice or till slip as proof that the expense has been incurred before an input tax deduction will be allowed.
4.
Second-hand goods – Vendors are required to maintain the prescribed records (form VAT 264) in respect of any second-hand goods acquired. Previously this was only required for purchases where the consideration was R1 000 or more. The proof of payment as well as the date on which payment was made is also required as part of the vendor’s records to validate any input tax deduction for second-hand goods acquired.
5.
Foreign-going ships and aircraft – The scope of the definitions "foreign-going aircraft" and "foreign-going ship" was widened so that the supply of consumables and repairs to certain military craft may qualify as zero rated exports as in the case of commercial foreign-going ships and aircrafts.
6.
Time of supply – The VAT law was amended to make it clear that the time of supply rule which is applicable to machines, meters or other devices that are operated by means of coins or tokens, is also applicable to machines that operate with paper currency. The time of supply for the supplier is when the coins, tokens or paper currency is removed from the machine or device. However, when payment is made via the machine or device by electronic means by credit or debit card, the normal time of supply rule applies (i.e. the earlier of the date of payment or the date that an invoice is issued).
VAT 404 – VAT Guide for Vendors Foreword
3
7.
VAT 201 return, modernisation and imported services – New fields were added to the VAT 201 return which came into operation on 28 June 2010. The changes were aimed mainly at addressing certain compliance aspects with regard to the import and export of goods – in particular fraudulent VAT refunds linked to exports. The new fields are 2A, 14A, 15A and the Customs Code. The effect of these changes is that vendors must distinguish between the value of zero-rated exports and other zero-rated supplies on their returns. Input tax in relation to the importation of goods must now also be indicated separately from other taxable supplies. Further, with effect from 1 February 2011, the VAT on any imported services must be declared on the VAT 201 in the case where the person is a vendor instead on form VAT 215. In April 2011, further modernisation changes came into effect in the form of a new look VAT 201 return which is in landscape format and contains additional demographic fields with certain pre-populated fields. Part of the changes are that VAT 201 returns are on no longer mailed in bulk to vendors, but instead must be requested by the vendor on eFiling or from a SARS office. It is expected that more modernisation changes will be implemented in phases in 2011. Vendors are therefore advised to check the SARS website for the latest information, as well as the new publication called VAT Connect which will be sent directly to vendors.
8.
Carbon Dioxide (CO) emission levy – An environmental levy (CO levy) was introduced with effect from 1 September 2010 on new passenger cars, including SUVs and other motor vehicles manufactured in, or imported into, the Republic which are principally designed to carry a maximum of nine passengers. As with all excise duties, the levy amount is built into the price that the manufacturer or importer charges the client. The value on which VAT is calculated must therefore include any environmental levy which is applicable.
9.
Tax Administration Bill (TAB) – The TAB is in the final stages of completion and was published for a second round of public comment in October 2010. The TAB seeks to provide a single body of law that outlines common procedures, rights and remedies. It is expected that the TAB will become an Act of Parliament in the latter part of 2011. Once in effect the TAB will have a major impact on the administration of all taxes in general. The effect from a VAT perspective is that a number of administrative type provisions which are currently in the VAT Act will be deleted or amended. The corresponding provisions in the TAB will then apply from the effective date. Schedule A – Schedule of Amendments reflects the proposed consequential amendments to the various tax acts which were necessary to align them with the TAB. The TAB is available on the SARS website under "Draft Bills" on the Legal and Policy page.
10.
Voluntary disclosure programme (VDP) – The VDP has been implemented to provide taxpayers with an opportunity to voluntarily apply to SARS to disclose their defaults and regularise their tax affairs. The period within which VDP applications can be made to SARS is prescribed by the Commissioner and runs from 5 November 2010 to 31 October 2011. The VDP applies for various taxes including VAT.
The following guides have also been issued and may be referred to for more information relating to the specific VAT topics:
•AS-VAT-08 - Guide for Registration of VAT Vendors
•Trade Classification Guide (VAT 403)
•Guide for Fixed Property and Construction (VAT 409)
•Guide for Accommodation, Catering and Entertainment (VAT 411)
•Share Block Schemes (VAT 412)
•Deceased Estates (VAT 413)
•Guide for Associations not for Gain and Welfare Organisations (VAT 414)
•Diesel Refund Guide (VAT 415)
•AS-VAT-10 - Quick Reference Guide (Small Vendors) (VAT 417)
•AS-VAT-02 - Quick Reference Guide (Diplomatic Refunds)
•Guide for Municipalities (VAT 419)
•Guide for Motor Dealers (VAT 420)
•VAT treatment of entities affiliated to FIFA Part 2 entities
•VAT treatment of entities affiliated to FIFA Part 3 entities
VAT 404 – VAT Guide for Vendors Foreword
4
The information in this guide is issued for guidance only and does not constitute a binding general ruling as contemplated in section 76P of the Income Tax Act, No. 58 of 1962 and sections 41A and 41B of the VAT Act unless otherwise indicated. All previous editions of the Guide for Vendors (VAT 404) are withdrawn with effect from 6 September 2011. Should there be any aspects relating to VAT which are not clear or not dealt with in this guide, or should you require further information or a specific ruling on a legal issue, you may:
•contact your local South African Revenue Service (SARS) branch;
•visit the SARS website at
www.sars.gov.za;
•contact your own tax advisors;
•if calling locally, contact the SARS National Call Centre on 0800 00 7277; or
•if calling from abroad, contact the SARS National Call Centre on +27 11 602 2093.
Comments and/or suggestions regarding this guide may be sent to the following e-mail address:
policycomments@sars.gov.za.
Prepared by
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
6 September 2011
VAT 404 – Guide for Vendors Contents 5
|
CONTENTS CHAPTER 1 : INTRODUCTION |
9 |
|
1.1 What is VAT? |
9 |
|
1.2 How does VAT work? |
9 |
|
CHAPTER 2 : REGISTERING YOUR BUSINESS |
12 |
|
2.1 When do I become liable to register for VAT? |
12 |
|
2.2 Where must I register? |
12 |
|
2.3 What documents must I submit with my application? |
13 |
|
2.4 How do I calculate the value of taxable supplies? |
14 |
|
2.5 Voluntary registration |
15 |
|
2.6 Refusal of a voluntary registration application |
16 |
|
2.7 Separate registration (branches, divisions and separate enterprises) |
16 |
|
2.8 Cancellation of registration |
17 |
|
CHAPTER 3 : TAX PERIODS |
20 |
|
3.1 Which tax periods are available? |
20 |
|
3.2 Allocation and change of tax periods |
21 |
|
3.3 The 10-day rule |
22 |
|
CHAPTER 4 : ACCOUNTING BASIS |
23 |
|
4.1 Introduction |
23 |
|
4.2 Invoice basis |
23 |
|
4.3 Payments basis |
24 |
|
4.4 Change of accounting basis |
25 |
|
4.5 Special cases |
26 |
|
CHAPTER 5 : TAXABLE SUPPLIES |
27 |
|
5.1 Introduction |
27 |
|
5.2 Standard rated supplies |
27 |
|
5.3 Zero-rated supplies |
28 |
|
5.4 Deemed supplies |
31 |
|
5.5 Time of supply |
32 |
|
5.6 Value of supply |
34 |