[FAQ] Basis of registration as a VAT vendor

[FAQ] Basis of registration as a VAT vendor

• 28 October 2020
• VAT
• Christo Theron

Background

A taxpayer is experiencing long delays in receiving 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.

1. Can the taxpayer change their basis of accounting for VAT from the invoice basis to payments basis? 

2. Where does the taxpayer address the application to change this?

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 for 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, an 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).

Webinar Commentary

Further webinar commentary on Basis of registration as a VAT vendor can be accessed here.

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