A taxpayer registered for VAT on the 7 May 2019. The taxpayer has already commenced trading and issuing tax invoices from 1 February. The taxpayer is registered as a VAT vendor on a bi-monthly odd periods basis. SARS effectively registered the taxpayer
mportant:
This answer is based on tax law year ending 28 February 2021.
Answer:
The VAT Act Sections dealing with registration Section 23(1)(a) of the VAT Act determines that every person who carries on a VAT enterprise and is not registered as a VAT vendor becomes liable to be registered at the end of any month where the total value of taxable supplies made by that person in the period of 12 months ending at the end of that month in the course of carrying on all enterprises has exceeded R1 million. Section 23(3) of the VAT Act deals with the various circumstances under which SARS may register a person as a VAT vendor on a voluntary basis. Section 23(4)(a) of the VAT Act determines that where a person has applied for registration as a VAT vendor and the Commissioner for SARS is satisfied that the person is eligible to be registered in terms of the VAT Act, the person will be regarded as a VAT vendor with effect from the date determined by the Commissioner for SARS. The SARS website SARS provides the following guidelines with regards to the back-dating of registrations. “In terms of voluntary VAT registrations submitted via eFiling, please note that the VAT liability date will be set in accordance with your date of registration. If you have charged VAT or are under a contractual obligation to charge VAT prior to applying for registration, you must visit a SARS Branch with the necessary supporting documents such as signed contracts or invoices issued to prove the backdated liability request.” “VAT liability date backdating requests submitted at the SARS branch will only be considered for new and existing registration if the vendor can provide sufficient supporting documents proving the backdated liability. Kindly note that all other associated registration related supporting documents are still applicable. For VAT liability date backdating requests specifically, you will be expected to provide invoices, signed contracts or financial statements to motivate the backdating.” “For VAT registrations with taxable supplies exceeding R1 million (also referred to as compulsory registrations), the eFiling RAV01 VAT registration process will not allow backdating for more than six months from the date of registration. If the date entered exceeds six months, SARS will reset the date to the date of the application. Please visit a SARS branch if the backdating exceeds six months.” Sections dealing with pre-registration adjustments Section 16(3)(f) of the VAT Act allows a vendor a deduction of amounts calculated in accordance with, amongst others, section 8(4) of the VAT Act. Section 18(4)(b)(i) of the VAT Act determines that where VAT-able goods or services have been supplied to a person and the person has not claimed any input tax on the acquisition of such goods or services, the person may claim a deduction if the goods or services are subsequently used in a taxable activity. The deduction must be computed by applying the following formula: A ´ B ´ C ´ D, where; A = The tax fraction (15/115) B = The lower of the adjusted cost (the cost on which VAT has been paid) or the open market value of the goods C = The % taxable use D = If second-hand goods, the extent to which to purchase price has been paid Section 16(2)(f) of the VAT Act determines that a VAT vendor may not make a deduction in terms of, amongst others, section 16(3)(f) of the VAT Act unless the vendor is in possession of documentary proof as prescribed by the Commissioner substantiating the vendor’s entitlement to the deduction at the time the return in respect of the deduction is furnished. The documentary proof required by the commissioner is contained in VAT Interpretation Note No. 92. VAT Interpretation Note 92 Item E of the Interpretation Note determines that in respect of a deduction in terms of section 16(3)(f) of the VAT Act, the VAT vendor must hold the original tax invoice and proof of the market value of the goods on the date of registration as a VAT vendor. The original tax invoices need not reflect the VAT registration number of the vendor, as the vendor would not have been registered at the time that the invoices were issued. Application of the principles SARS will consider backdating the registration if the client is illegible for backdating. A SARS office will have to be visited and copies of the tax invoices issued presented to SARS to support the request for the back-dating (we assume that VAT levied on the tax invoices have been paid to SARS). Whether or not the registration is backdated, the client will be entitled to a deduction in terms of section 16(3)(f) of the VAT Act in respect of the capital goods brought into the VAT enterprise on the date of registration (i.e. capital goods acquired before the effective date of registration and held by the applicant on the effective date of registration). This deduction is made on the normal VAT return and must be made within 5 years from the effective date of registration as a VAT vendor. The deduction will be based on the lower of the original cost of the goods or the open market value thereof on the date of registration as a VAT vendor (see above formula).