659 - Registration requirements

There is a compulsory threshold for registering for value-added tax (VAT), but there may be advantages to voluntary registration. VAT registration is a crucial obligation for businesses operating in South Africa. Knowing when to register for VAT is essential to comply with tax laws and avoid penalties. This article discusses the circumstances under which businesses must register for VAT, the registration process, and the benefits and responsibilities that come with VAT registration.

WHEN IS ONE REQUIRED TO REGISTER FOR VAT?

Businesses are required to register with SARS as VAT vendors if they conduct an “enterprise” and their taxable supplies, which include supplies of both goods and services, exceed (or will, in terms of a contractual obligation in writing, exceed) the prescribed threshold within a consecutive 12-month period. This prescribed threshold for compulsory registration is currently set at R1 million.

It is essential to monitor the value of taxable supplies regularly to ensure timely VAT registration ─ particularly if one’s taxable supplies are getting close to the prescribed threshold. If a business surpasses the threshold during a 12-month period, it is required to apply to register for VAT within 21 days from the end of that month.

However, if its taxable supplies will exceed the threshold in the next 12 months in terms of a written contractual obligation which has been entered into, it must apply to register for VAT within 21 days from the commencement of the month in which the obligation arises.

Non-resident suppliers of certain electronic services are also liable for compulsory VAT registration at the end of the month in which the total value of taxable supplies exceeds R1 million in any consecutive 12-month period. An intermediary is also allowed to register and account for VAT on behalf of supplies made by the non-resident supplier of electronic services.

VOLUNTARY VAT REGISTRATION

Even if a business’s taxable supplies do not exceed the threshold, it has the option to voluntarily register for VAT. This decision might be advantageous for businesses that want to claim VAT input credits on their purchases or to appear more credible to potential clients. SARS will entertain an application for voluntary registration if an enterprise is conducted and the value of taxable supplies made is less than R1 million but has exceeded R50 000 in the most recent consecutive 12-month period.

Furthermore, persons carrying out the following business activities are eligible to submit a voluntary registration application even if the total of their taxable supplies for the past consecutive 12 months has not exceeded R50 000:

- Municipalities;
- Welfare organisations (ie, charities);
- A purchaser who acquires an existing business as a going concern, where the seller has made taxable supplies from carrying on that enterprise which have exceeded R50 000 in the past 12 months;
- Activities listed in General Notice R446 (as published in the Government Gazette 38836 of 29 May 2015). This includes agriculture, farming, forestry, fisheries, mining, ship and aircraft building, the manufacturing or assembly of a plant, machinery, motor vehicles, or locomotives, property development, infrastructure development, or beneficiation.

For business activities not listed above, persons meeting the requirements and conditions listed in General Notice R447 (as published in the Government Gazette 38836 of 29 May 2015) may voluntarily register for VAT. These requirements and conditions include the following:

Taxable supplies made for one month: Where taxable supplies have been made for only one month preceding the date of application, the value for that month must have exceeded R4 200.

Taxable supplies made for two months or more: Where the taxable supplies have been made for two months or more preceding the date of application, the average value of taxable supplies made in the months preceding the date of application, must have exceeded R4 200 per month. The average is calculated using a minimum of two months and a maximum of 11 months before the date of application.

Written contracts: Where taxable supplies exceeding R50 000 in the 12 months following the date of registration will be made in terms of a contractual obligation in writing.

Expenditure: Where expenses are incurred or are to be incurred for commencing or continuing an enterprise in terms of an agreement; or capital goods are acquired in connection with the commencement of the enterprise; and where payment has been made or any extended payment agreement entered into where –

- as at the registration application date, payment has exceeded R50 000; or
- in any consecutive 12-month period commencing before and ending after the registration application date, payment will exceed R50 000; or
- in the 12 months following the registration application date, payment will exceed R50 000.

Finance agreement: This would include –

· a financial agreement with a registered bank;

· a credit agreement with a credit provider as per the National Credit Act, 2005;

· an agreement with a designated entity, public authority, or other person who continuously or regularly provides finance; or

· a financial agreement with a non-resident.

The total repayment in the 12 months following the registration application date must exceed R50 000.

Voluntarily registered businesses must adhere to the same VAT rules and obligations as businesses that are mandated to register.

BENEFITS OF VAT REGISTRATION

One of the primary advantages of being VAT-registered is the ability to claim VAT input credits. Registered businesses can offset the VAT paid on their purchases against the VAT collected on their sales, thereby reducing their overall VAT liability. This can result in significant cost savings for businesses, especially those that have substantial input VAT costs. Additionally, VAT registration can enhance a business’s image and credibility, as it signals that the business is established and operating above a certain turnover level. This can be particularly valuable when dealing with other businesses or tendering for contracts.

HOW TO REGISTER FOR VAT

VAT registration is done via the SARS eFiling platform (www.sarsefiling.co.za), where the following steps are set out:

- Create or log on to one’s eFiling profile.
- Navigate to the “SARS Registered Details” screen.
- On the “Individual” portfolio, select “Home” to find “SARS Registered Details” on the left menu. On the “Tax Practitioner” and “Organisations” portfolio, the “SARS Registered Details” functionality is under the “Organisations” menu tab.
- Select “Maintain SARS Registered Details” on the left menu. Once the screen has loaded, select “I Agree” to confirm that one is authorised to perform maintenance functions of the registered details of the vendor.
- Select VAT under “My tax products > Revenue” on the left menu.
- Select “Add new product registration” to register a new or additional VAT branch registration.
- Complete the following in the VAT container: Registered particulars (if not pre-populated), “Trading As” name (where applicable), and “Liability Date”.
- Select the “Business Activity” code. The codes may be obtained in the VAT 403 Vendors and Employers Trade Classification Guide.
- Select Farming Activity Code, if applicable. (Note: If one selects a different business activity code after one has received the containers for Diesel concession, the following error message will appear: “Mark here if you derive farming income in addition to your main business activity income”. If one selects this indicator, the “Farming Activity Code” field will be mandatory).
- Select the relevant registration option.
- Enter the following information: Value of taxable supplies, accounting basis (“invoice” or “payments” basis), and tax period.
- Complete the following fields if not pre-populated: Contact details, physical address, postal address, and banking details.

EFFECTIVE DATE OF REGISTRATION

Voluntary VAT registrations

The VAT liability date will be set according to the date of application. The backdating of a voluntary registration is not allowed. If one wants to backdate one’s voluntary registration application, one must provide SARS with the necessary supporting documents to justify the backdating request.

Compulsory VAT registrations

The SARS eFiling (RAV01) system only allows backdating up to six months from the date on which the compulsory registration threshold of R1 million was exceeded. If the backdating is more than six months from the date on which the compulsory registration threshold was exceeded, one will need to make an appointment to visit a SARS branch with the necessary supporting documents such as financial statements, signed contracts, invoices issued, etc.

RESPONSIBILITIES OF VAT-REGISTERED BUSINESSES

Once registered for VAT, businesses assume several responsibilities. They must charge the appropriate VAT rate on their taxable supplies, issue VAT invoices to their customers, and file regular VAT returns with SARS.

VAT returns must be submitted on time, and any VAT owed to SARS must be paid promptly. The due date for the submission of the return and payment of any VAT due is the 25th of the month following the end of each tax period. If the 25th falls on a weekend or public holiday, the due date is the previous business day. If the vendor is registered for eFiling and payment is made via either SARS eFiling or Electronic Funds Transfers (internet banking), the return and payment may be submitted by the last business day of the month.

Businesses also have an obligation to keep accurate VAT records, including invoices, receipts, and relevant financial documents. These records are subject to review by SARS during tax audits.

Failure to fulfil these responsibilities or comply with VAT regulations can lead to penalties and interest charges. It is therefore essential for VAT-registered businesses to stay updated on VAT rules and regulations, to avoid potential pitfalls and ensure compliance.

Steven Jones

Bellan Media

Acts and Bills

· National Credit Act 34 of 2005.