SARS – Page 5 – Rust Gold

10 Aug

When making a purchase for your business, you should always ensure you receive a valid VAT invoice. This enables you to claim input VAT from SARS. With the change in VAT rate from 14% to 15%, VAT has come under the spotlight. This brings more focus on VAT compliance and more specifically on when we can claim input VAT on an invoice, and what constitutes a valid VAT invoice. This is something small that is very much neglected when it comes to monthly bookkeeping. It is very important to pay attention to the invoices that are sent to your accountants as these invoices need to be “valid” before the input VAT can be claimed from the South African Revenue Service (SARS).

Please read through the following crucial information carefully with regard to valid VAT invoices.

South Africa operates on a VAT system whereby VAT registered businesses are allowed to claim the VAT (input VAT) incurred on business expenses from the VAT collected (output VAT) on the supplies made by the business. The most crucial document in such a system is the tax invoice. Without a valid tax invoice, a business cannot deduct input tax paid on business expenses.

The VAT Act prescribes that a tax invoice must contain certain details about the taxable supply made by the business as well as the parties to the transaction. The VAT Act also prescribes the timeframe within which a tax invoice must be issued (i.e. 21 days from the time the supply was made).

A business is required to issue a full tax invoice when the price is more than R5 000 and may issue an abridged tax invoice when the consideration for the supply is R 5 000 or less than R5 000. No tax invoice is needed for a supply of R50 or less. However, a document such as a till slip or sales docket indicating the VAT charged by the supplier will still be required to verify the tax deducted.

As from 8 January 2016, the following information must be present on a tax invoice for it to be considered valid by SARS:

Contains the words “Tax Invoice”, “VAT Invoice” or “Invoice”;
Name, address and VAT registration number of the supplier;
Name, address and where the recipient is a vendor, the recipient’s VAT registration number;
Serial number and date of issue of invoice;
Correct description of goods and /or services (indicating where the applicable goods are second hand);
Quantity or volume of goods or services supplied; and
Value of the supply, the amount of tax charged and the consideration of the supply.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

10 Aug

Customs for individuals travelling abroad and returning to South Africa

Kirsten Van Tonder

Finance News SARS, TC-01, Traveller Card

The South African Revenue Service (SARS) recently published a media release to clarify the confusion about the customs requirements for South African travellers returning from abroad regarding their personal effects (such as laptops and other electronic equipment). The confusion stems from various media reports on the inconsistent treatment of returning travellers by customs officials, some having to pay a fine when they could not produce a proof of purchase.

SARS confirms that in terms of current customs legislation, travellers are not required to declare their personal effects when leaving the country and they cannot be penalised for not doing so. The practical difficulty that travellers face, however, if they do not declare their personal effects on departure is that upon return, customs officials may require that they produce proof of local purchase to prove that the goods are not ‘new or used goods acquired whilst abroad’ and which could attract duty implications. Customs officials have discretionary powers of what would constitute sufficient proof. There is, however, an option available to travellers if they want to ensure that the proof they produce is sufficient for the customs official, and which exists in terms of the ‘registration for re-importation’ framework.

Travellers can complete a TC-01 Traveller Card indicating their intent to register goods for re-importation (the TC-01 form is available on the SARS website for download). The form is very user-friendly and only requires minimum information to be completed, including personal and travel details. A customs official captures the details from the TC-01 form on an online traveller declaration system at a port of departure. After digital authentication, the traveller is presented with a copy to retain the proof of registration. This registration can remain valid for a period of up to six months.

The TC-01 form is also a useful guideline on the goods that may be imported duty-free into South Africa, including 2 litres of wine, 1 litre of other alcoholic beverages, 200 cigarettes and up to 50ml of perfume. Importantly, this allowance is available once every 30 days, and only after 48 hours of absence from South Africa.

SARS has also confirmed that customs officials have been provided with the new guidelines, as well as reinforcing its internal procedures. Although it is likely that there could be some practical issues with the traveller card system initially, it is important that travellers are aware of their rights and start using the system. Travellers are encouraged to download and complete the TC-01 form well in advance of travel and confirm the operating times of the customs desk at the airport where they depart from and return to, to ensure a smoother transition through customs on return.

10 Apr

Welcoming tax news for franchise owners

Kirsten Van Tonder

Tax Income Tax Act, SARS, Section 24C

The Tax Court has upheld a decision that a tax deduction allowed by section 24C of the Income Tax Act may be applied to franchisee costs. Section 24C permits the deduction of certain expenses in the current tax year assessment, where those expenses are not yet incurred, on the basis that these expenses will contractually be incurred in future years. This tax allowance protects businesses from being taxed on earmarked funds that bloat their annual earnings.

Where did this decision come?

The appeal involved the taxpayer (restaurant chain) against additional assessments raised by SARS for its 2011 to 2014 years of assessment. They arose from SARS’ refusal of deductions claimed by the taxpayer as allowances in respect of future expenditure in terms of section 24C of the Income Tax Act.

The crux of the dispute lies in whether or not the income received by the taxpayer from sales of meals to its customers can properly be regarded as arising directly from – or put differently, accruing in terms of – the franchise agreement itself. The taxpayer maintains that it can whereas SARS maintains it cannot.

However, as far as franchisees are concerned, it is clear that where a franchise agreement sets out an obligation to incur future expenditure, such expenditure may very well fall within the beneficial parameters of section 24C of the Act.

The Court’s decision

The Tax Court held that there need not be one physical contract document to give rise to section 24C’s benefit. Furthermore, while different parties were involved (the franchisor and the restaurant’s customers), the franchisee’s agreements with each were “inextricably linked” and “not legally independent and separate”.

The income deducted was, therefore, regarded as earned under the same contract as the taxpayer’s future expenditure, fulfilling the requirements of section 24C.

Reference:

B v Commissioner for the South African Revenue Services (IT14240) [2017] ZATC 3 (3 November 2017)

9 Apr

Company tax in South Africa

Kirsten Van Tonder

Tax Income Tax Act, SARS, Taxpayer

If you are self-employed or a business owner, you have to pay company tax in South Africa. How much business tax you pay and what deductions you can claim will depend on the size and type of your business.

What is company tax?

Company tax (also called, “corporate income tax”) is what keeps our economy functional. There exists different business categories, who all have to go through registration procedures and have to pay tax. Tax is a rather complicated matter, which is why a lot of people choose to rather pass it on to professional business accountants.

Who needs to pay company tax?

All registered businesses in South Africa have to pay company tax on their worldwide income to SARS. Companies based outside of South Africa, but operating in South Africa, must pay tax on income derived from within South Africa only. The type of companies that have to pay company tax in South Africa include:

listed and unlisted public companies
private companies
close corporations
co-operatives
collective investment schemes
small business corporations
share block companies
body corporates
public benefit companies
dormant companies

What steps must be taken?

Register as a taxpayer. Every business liable to tax under the Income Tax Act, 1962, must register with SARS as a taxpayer. You can register once for all different tax types, using the client information system.

Submit annual tax return. Every registered taxpayer must submit a return of income twelve months after the end of the financial year. Returns can be submitted electronically or manually via SARS.

Submit provisional tax returns. Every company must submit provisional tax returns. Your first provisional tax return must be submitted six months from the start of the year, and the second at year-end, and must contain an estimate of the total taxable income earned or to be earned for that period. Payment of the tax must accompany the return. A third “top-up” payment may be made six months after year-end.

9 Apr

Claiming VAT input on “pre-enterprise” expenditure

Kirsten Van Tonder

Tax SARS, Tax, VAT

In terms of section 17 of the Value-Added Tax Act, 89 of 1991, a registered VAT vendor is entitled to claim back any amounts of VAT paid on goods and services acquired or imported that will be used in the furtherance of that particular VAT enterprise. The ability to claim input VAT in this manner is however limited to VAT vendors only and the wording of section 17(1) makes it clear that input tax may only be claimed in respect of goods and services supplied to a vendor – in other words, a person that is already a registered vendor at the time that the goods or services are supplied to him/her.

Section 18(4) of the VAT Act provides relief for persons incurring expenses in the form of goods or services being supplied to them in anticipation of a VAT enterprise being set up. In terms of that provision, and notwithstanding section 17, where VAT is paid on goods or services acquired by a person and those goods or services will subsequently be supplied as part of a VAT enterprise, those goods or services on which VAT was paid historically will be deemed to have been supplied to that VAT vendor only at the stage that those goods or services are used by it to supply its own VAT supplies. In other words, the provision enables the person, who earlier would not have been able to enter a claim for input tax, to claim input tax on those goods and services supplied to him/her previously, before becoming a VAT vendor.

The relief is not only limited to goods or services supplied to the now-VAT vendor and on which VAT was paid, but also extends to second-hand goods which were previously acquired by it and is now also used in the furtherance of its VAT enterprise.

From a practical perspective, we often find in practice that SARS disallows such claims for input tax on the basis that the claiming vendor’s VAT number does not appear on the invoice which it would submit in support of its input VAT claim subsequently. This is obviously incongruous, since the VAT-claiming vendor under these circumstances could not have had its VAT number appear on the invoice of another vendor which supplied goods or services to it, simply since the vendor would not have had a VAT number at that stage, yet is perfectly eligible to submit a VAT input claim in terms of the provisions of section 18(4). We would argue that SARS’ approach is contradictory to the wording of section 20(4)(c) of the VAT Act which requires the following to appear on invoices submitted by vendors in support of an input tax claim:

“… the name, address and, where the recipient is a registered vendor, the VAT registration number of the recipient”.

Clearly, where a vendor submits an invoice to claim input VAT on “pre-enterprise” expenditure incurred, that vendor will not have been a registered vendor at that time, therefore in our view highly arguably not required to have its own VAT number on an invoice in order to support a claim for input VAT on “pre-enterprise” expenditure.

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