A taxpayer is experiencing long delays in payment from clients, especially government departments. As a result they are unable to meet their VAT obligations to SARS resulting in a non-compliant SARS status.
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
The VAT Act Section 15(1) of the VAT Act determines that, except as otherwise provided for in the VAT Act, every vendor must account for VAT on the invoice basis. Section 15(2) of the VAT Act provides the Commissioner with discretion to direct that a VAT vendor may account for VAT on the payments basis if the person falls into the specific categories of persons set out in section 15(2) of the VAT Act. Section 15(2) of the VAT Act provides or the following categories of persons that may apply to account for VAT on the payments basis: 1. A public authority 2. Water Boards and similar organisations 3. A municipal entity 4. A municipality 5. An association not for gain 6. Foreign suppliers of electronic services 7. The South African Broadcasting Corporation Limited 8. A natural person with annual turnover < R2.5 million Application of the principles Unless the client falls into one of the above categories, it would not be allowed to account for VAT on the payments basis. Any application to SARS in this regard would not be successful. If the client qualifies to account for VAT on the payments basis, and application must be made to the local SARS branch to change from the invoice to the payments basis (i.e. it is not an application for a Private Binding Ruling; it is an application for a directive which is dealt with by branch offices).