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South African VAT registration amendments: will they streamline the process?
The Taxation Laws Amendment Act No 31 of 2013 introduced legislative changes aimed primarily at streamlining the VAT registration process. Taxand South Africa provides an insight into these amendments which came into force on 1 April 2014.
Prior to the amendments the VAT Act required any person who carried on an enterprise in South Africa to register as a VAT vendor, where the total value of taxable supplies made exceeded or was reasonably expected to exceed the R1 million threshold in a 12 month period. Those who did not meet the compulsory registration threshold were entitled to voluntarily register for VAT where the total value of taxable supplies made in a 12 month period had already exceeded R50,000. Where taxable supplies with a value in excess of R50,000 per annum are expected to be made in the future, there was also an entitlement to register for VAT.
Registering for VAT in South Africa was a notoriously frustrating process, stemmed in part from the inconsistent documentary requirements applied by the South African Revenue Service (SARS) consultants at the different branch offices, and applications were often submitted numerous times before they were accepted. The onerous SARS VAT registration process and procedures also resulted in significant time delays for VAT numbers issued. The VAT registration was generally made effective from a retrospective date, and the vendor was then assessed for VAT, penalties and interest on all supplies made from the effective date to the actual of date of registration.
The recent legislative changes have been introduced to overcome these flaws in the process. The predictive element associated with compulsory VAT registration has now been removed so that only those who have already made taxable supplies exceeding the R1 million threshold, or have a written contractual obligation to make taxable supplies exceeding the R1 million threshold in a period of 12 months, will be liable to register for VAT. Furthermore, voluntary registration can now occur where taxable supplies exceeding R50,000 in a 12 month period have already been made or are likely to be made within 12 months from the date of registration.
The South Africa VAT registration amendments sound simple enough to comply with, but only time will tell whether the SARS VAT registration procedures will be adopted in line with the legislation amendments to have the desired effect of streamlining the registration process, and alleviating some of the frustrations experienced in the past.