CHAPTER 1 LAPD VAT G02 404 Guide For Vendors External
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- Prepared by
- Legal and Policy Division
- SOUTH AFRICAN REVENUE SERVICE
- 10.1 INTRODUCTION
- This chapter provides a brief overview of the main changes that have been made in respect of penalties under the provisions of Chapters 15 and 16 of the TA Act and a brief introduction to the interest provisions envisaged under Chapter 12 of the TA Act.
- 10.2 PENALTIES
- 10.2.1 Administrative non-compliance penalties
- Fixed-amount penalties
- A fixed amount penalty is imposed when a vendor does not comply with a legally required obligation. Such penalties may only be imposed in respect of the non-compliance listed in a public notice that will be issued by the Commissioner and not every act...
- Percentage-based penalties
- A percentage-based penalty is imposed if SARS is satisfied that an amount of tax was not paid as and when required under the tax Act. In the case of VAT, SARS may impose a penalty equal to the percentage, as prescribed in the VAT Act, of the amount of...
- The circumstances that trigger the imposition of the penalty remains in the VAT Act, for example, when a vendor fails to pay VAT within the period allowed for payment, a 10% penalty is imposed.79F
- 10.2.2 Understatement penalty (USP)
- The previously imposed “additional tax” of up to 200%, has been replaced by the USP. Any USP which is applicable will be included in an assessment issued by SARS and must be paid by the date specified in the notice of assessment.80F USP may only be i...
- defaulted in rendering a return;
- filed a return but omitted an item from that return; or
- filed a return in which an incorrect statement was made.
- For instance, if a vendor did not file a return but conducted an enterprise and should have filed VAT returns and paid VAT of R90 000, the shortfall is the difference between R90 000 and zero. The shortfall is, therefore, an expression of the prejudic...
- USP table
- The TA Act provides for different rates of USP, based on the type of behaviour or the degree of culpability involved, as shown in the table below82F :
- The amount of USP is determined by the amount resulting from applying the highest applicable understatement penalty percentage in accordance with the USP table to the shortfall in each tax period. In other words, if a vendor’s behaviour involves both ...
- The various behaviours will indicate the extent of the penalty that might be imposed. Once the behaviour has been determined, SARS must determine whether –
- the vendor made a voluntary disclosure before or after being notified of an audit,
- the vendor was obstructive when engaging with SARS officials;
- it is a repeat case; or
- the case is not defined by any of the above and is thus a standard case.
- If none of these behaviours can be identified, USP could still be imposed if the prejudice to SARS is the greater of 5% of the tax properly chargeable or R1 million. This is referred to as a “substantial understatement”.
- Refer to the Short Guide to the TA Act, 2011 or more details on the various behaviours.
- 10.3 INTEREST
- Chapter 12 of the TA Act provides that interest due or payable will be calculated on the daily balance owing and will be compounded monthly. This gives effect to the principle that interest is compensation for the loss of the use of money. The compoun...
- Refer to the Short Guide to the TA Act, 2011 and Interpretation Note 68 (Issue 2) dated 7 February 2013 “Provisions of the Tax Administration Act that did not Commence on 1 October 2012 under Proclamation No. 51 in Government Gazette 35687” for more d...
- The current rules provide that interest at the prevailing rate, under section 80 of the Public Finance Management Act (PFMA), will be charged per month or part thereof on late payments of VAT. This is calculated from the first day of the month after t...
- 10.4 REMISSION OF PENALTIES AND INTEREST
- 10.4.1 Remission of non-compliance penalty
- A vendor may apply to SARS to remit both the fixed-amount84F and a percentage-based penalty. The application must be made on the prescribed form and be delivered to SARS before the date the penalty must be paid.85F If a vendor has not filed the remi...
- SARS may remit a percentage-based administrative penalty if satisfied that the –
- amount involved is either less than R2 000, or the non-payment is a first incidence; and
- vendor has reasonable grounds explaining the non-compliance; and
- incidence of non-payment has been remedied.86F
- A “first incidence” means that no other penalty (fixed or percentage-based) must have been imposed in the period of 36 months preceding the one in respect of which the remission is concerned.87F
- A vendor may also qualify for the remission of a percentage-based penalty if exceptional circumstances exist for non-compliance. The exceptional circumstances must have made it impossible for the vendor to have complied with the obligation as prescrib...
- The circumstances are as follows:
- A natural or human-made disaster.
- A civil disturbance or disruption in services.
- The vendor suffers a serious illness or was involved in a serious accident.
- The vendor suffers a serious emotional or mental distress.
- Certain acts by SARS.
- The vendor suffers serious financial hardship.
- Any other circumstances of analogous seriousness.
- Should SARS decide not to remit or reduce the administrative non-compliance penalty, the vendor may object to this decision under the Dispute Resolution provisions of the TA Act (refer to Chapter 16). This is a qualification of the right to object and...
- SARS may remit administrative non-compliance penalties in respect of tax defaults voluntarily disclosed for which relief has been sought and granted under the voluntary disclosure programme (VDP). For the relief to be granted, the vendor must voluntar...
- For more details on the voluntary disclosure programme refer to the following documents which can be accessed on the SARS website:
- 10.4.2 Remission of understatement penalty
- Generally, SARS may not remit USP imposed for an understatement, except when the USP is imposed for a substantial understatement resulting from an “arrangement” referred to in Chapter 34 of the TA Act and SARS is satisfied that the vendor –
- made full disclosure of the “arrangement” that gave rise to the prejudice to SARS or the fiscus by no later than the date that the relevant return was due; and
- was in possession of an opinion by an independent registered tax practitioner which was issued on or before the date that the relevant return was due88F , confirming that the vendor’s position is more likely than not to be upheld if the matter proceed...
- In all other cases, a vendor may object to the USP being imposed and to request a re-classification of the behaviour or for circumstances not previously considered to be taken into account by SARS. If the objection is allowed, this may result in a red...
- 10.4.3 Remission of interest
- Once the interest provisions under the TA Act become operational, a senior SARS official must be satisfied that the interest payable by a vendor was caused by circumstances beyond the vendor’s control in considering an application to remit any interes...
- A natural or human made disaster.
- A civil disturbance or disruption in services.
- A serious illness or accident.
- EXPORTS AND IMPORTS
- Example 26 – Second-hand goods – direct export
- Example 27 – Second-hand goods – indirect export
- Assume the same facts in Example 26, except that Mr M collects the painting in the RSA and exports it himself. (Price advertised: R16 400 including R2 014 VAT). To assist Mr M to obtain his refund from the VRA, at the time of export, the tax invoice s...
- R
- Selling Price excluding VAT 14 386
- VAT @ 14% 2 014
- Selling price including VAT 16 400
- VAT Refund
- Total VAT 2 014
- Less notional input tax deducted (1 400)
- VAT refundable 614
- The tax invoice must contain a full and proper description of the goods supplied (indicating, when applicable, that the goods are second-hand goods). A refund will not be authorised if these details are not clearly indicated on the face of the tax inv...
- 12.2.2 Imports from countries other than Botswana, Lesotho, Namibia or Swaziland (the BLNS countries)
- ATV × 14% = VAT payable
- Example 28 – Importation of goods
- Example 29 – Imported services definition
- Mr A (a VAT vendor), manufactures ball valves and pays a technical license fee to a UK-based company. The service is accordingly supplied by a supplier who is not a resident of the RSA to a resident (Mr A). However, as the services are wholly consumed...
- Example 30 – Imported services (digital products / electronic services)
- Mrs B orders an electronic version of the latest “Harry Potter” novel from XYZ (an internet based business located in Belgium) and downloads the document on her personal computer. She pays €60 for the book by way of a credit card transaction. Therefor...
- VAT payable = R600 × 14% = R84
- From 1 June 2014, a non-resident supplier that provides certain electronic services to a South African resident is required to register for VAT if certain conditions104F are met and the total value of taxable supplies exceeds R50 000. In the event th...
- 12.3.2 When must VAT on imported services be paid?
- Example 31 – Value of imported service
- Notes:
- 1. If A was paid an additional amount to construct a building where the spaza shop enterprise is carried on, no VAT would be payable in this regard as Mrs S would have acquired those services for making taxable supplies.
- Example 32 – Exempt imported services
- VAT is therefore not payable by the recipient (Mrs S or D) on the fees of R120 000 in this case.
- Examples of zero-rated goods:
- Examples of zero-rated services:
- Northern South Africa
- Eastern South Africa
- Vendors residing in KZN and northern parts of the Eastern Cape (up to and including East London).
- Southern South Africa
- Vendors residing in the Eastern Cape, south of East London and the Western Cape.