The Basics of VAT Registration

Compulsory registration

If a person carries on an enterprise in South Africa or partly in South Africa, it has to register as a vendor if the value of the taxable supplies both 14% and 0% exceed R1 million in any rolling 12 month period.

Note the definition of person does not specifically include or exclude foreign entities that are carrying on a business in South Africa. One needs to look at the nature of activities and if it could be regarded as an extension of its main business. One needs to also look at if the branch can be separately identifiable and if it maintains an independent accounting system.

Voluntary registration

An entity can apply for voluntary registration if its income in any 12 month period is R50 000 or R60 000 if the entity is commercial accommodation.

The following can be ignored when calculating the turnover limit:

– Proceeds received as a result of any cessation or any substantial and permanent reduction in the size or scale of the person’s enterprise.

– The replacement of any plant or other capital asset used in the enterprise.

– Abnormal circumstances of a temporary nature.

Separate enterprise of one person

If a person carries on two enterprises and is registered for one, he is automatically registered for the other.

If a person splits his enterprise between two or more entities in order to escape registration, SARS may deem the enterprises to be one. In order to do this, the Commissioner must be satisfied that the different entities are part of one larger activity and these have been split to avoid VAT registration.

Separate branches or divisions

Separate branches or divisions can be registered separately for VAT purposes. If one branch is registered, they must all be registered.

The requirements are as follows:

–  Vendor must apply to SARS in writing.

–  Each branch, enterprise must maintain an independent system of accounting.

–  Each branch, enterprise must be easily identified by reference to the nature of the activities it carries on or location.

VAT will now need to be accounted for on sales between branches.

PBO’s and Association not for gain

Certain PBO’s determined by the Minister may register as a vendor even if they do not carry on an enterprise to be able to claim input deductions.

An association not for gain can apply to have its enterprise treated as separate persons thus allowing a division with turnover below R1 million not having to register for VAT.

The requirements are as follows:

– The application must be in writing.

– The separate branch or division must maintain a separate accounting system.

– Each branch, enterprise must be easily identified by reference to the nature of the activities it carries on or location.

Category of a vendor

Category A – VAT periods of 2 months ending January, March, May etc.

Category B – VAT periods of 2 months ending February, April, June etc.

Category C – Monthly VAT returns when turnover exceeds R30 million for the year.

Category D – 6 monthly VAT returns ending on the last day of February and August – these are farming enterprises with turnover not exceeding R1.5 million.

Category E – Annual VAT returns ending last day of the year of their assessment unless otherwise registered. This is for a company or trust that receives only rental income or administrative/management fees from connected persons who are all vendors.

Category F – 3 tax periods in the year (4 months each) ending on the last day of June, October and February. A vendor falls into category F if his taxable supplies in a 12 month period do not exceed R1.5 million and he applies in writing to be placed in category F.

Refusal to register

SARS can refuse to register a person if any of the following apply:

– The person has no fixed abode or place of business.

– The person does not keep proper accounting records for his enterprise.

– The person does not have a bank account for his enterprise.

– The person’s VAT registration was previously cancelled due to him not performing his duties under the VAT Act.