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FAQ 17 October 2013

17 October 2013   (1 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. SARS decline the request to transfer credit from income tax to SDL

Q: SARS activated the SDL of one of my clients a year after the business became liable and an assessment was raised. The company have a credit on income tax, I requested that the outstanding amount must be transferred from income tax to SDL. The company are still using the same bank account since registration.

Can this transfer be made?

A:  Allocation of payments

S 166 of the Tax Administration Act deals with allocation of payments and states the following:

"166. Allocation of payments.—(1) Despite anything to the contrary contained in a tax Act, SARS may allocate any payment made in terms of a tax Act against the oldest amount of tax outstanding at the time of the payment, other than amounts—

(a) for which payment has been suspended under this Act; or

(b) that are payable in terms of an instalment payment agreement under section 167.

(2) SARS may apply the first-in-first-out principle described in subsection (1) in respect of a specific tax type or a group of tax types in the manner that may be prescribed by the Commissioner by public notice".

It is important to note that this section deals with the allocation of payments, not necessarily the application or refund of excess payments (which appear to be the case in your query).

Refunds

Section 190 which deals with this states: "If a taxpayer has an outstanding tax debt, an amount that is refundable under section 190, including interest thereon under section 188 (3) (a), must be treated as a payment by the taxpayer that is recorded in the taxpayer’s account under section 165, to the extent of the amount outstanding, and any remaining amount must be set off against any outstanding debt under the Customs and Excise Act." (emphasis added)

SDL as tax and tax debt

S 1 of the Tax Administration Act – definition "tax”:

"tax”, for purposes of administration under this Act, includes a tax, duty, levy, royalty, fee, contribution, penalty, interest and any other moneys imposed under a tax Act;

The term 'tax Act' is defined as Acts administered by the Commissioner in terms of the SARS Act - this includes the Income Tax Act and the Skills Development Levy Act.

Conclusion

Section 166 allows (but does not require) SARS to allocate certain payments received. There is however no indication that an income tax credit can be equated to a payment. It is therefore submitted that this section would not provide authority for the view that SARS must apply your income tax credit against the SDL debt.

Section 190 however states that any amount refundable must be treated as a payment by the taxpayer if the taxpayer has outstanding tax debt. If your client therefore had outstanding SDL debt, this section provides authority to require SARS to utilise the income tax credit as payment of the SDL debt (which is a tax debt as discussed above). You must however ensure that the income tax amount is refundable (as opposed to being an assessed loss).

2. Unable to claim input VAT since instalment sale agreement does not contain client’s VAT number

Q: I have a problem with the finance houses not showing the client's VAT number on the instalment sale agreement.  When I approached them about it they said it was on the invoice of the dealer but the invoice is not made out to the client but to the finance house.  The finance house in turn issues the instalment sale agreement which must have the client’s VAT number on to enable us to claim the VAT input. If the VAT number is not on the instalment sale agreement SARS disallows the VAT input which results into penalties and interest for the client.  Is there any way that the finance houses can be made aware of this so we don't have endless trouble with them having to correct the instalment sale agreements all the time?

A: The vendor should ensure that their VAT number is stated on the agreement when the agreement is concluded. The onus that an amount of VAT is claimable is with the vendor and not SARS or the relevant financial institution.

You may refer the bank to the requirements of s 20(4)(b) and (c) of the Value Added Tax Act. The bank may also be at risk – the bank makes a supply but does not issue an invoice as required in terms of s 20(1).

3. How do I verify my practitioner details?

Q: I phoned SARS to verify my practitioner details and they referred me back to SAIT as the only avenue is through tax practitioner e-filing profiles. I do not have one; all my clients have their own profiles, including myself. How can I update my information with SARS?

A: 240. Registration of tax practitioners.—(1) Every natural person who—

(a) provides advice to another person with respect to the application of a tax Act; or

(b) completes or assists in completing a document to be submitted to SARS by another person in terms of a tax Act, must register with SARS as a tax practitioner, in such form as the Commissioner may determine, within 30 days after the date on which that person for the first time provides advice or completes or assists in completing any such document.

A person who must register as a tax practitioner must do so by means of following the processes and procedures:

You should now be registered as a practitioner, but if you are not as yet, you need to:

Log onto our eFiling website at www.sarsefiling.co.za and register as an eFiler. Once registered as an eFiler you can register as a tax practitioner online. (You do not need to send any returns on eFiling even if you have registered as an eFiler, and you can therefore register as an eFiler simply for purposes of registering as a tax practitioner)

You can also follow the link below: http://www.sars.gov.za/ClientSegments/Tax-Practitioners/Pages/Register-as-a-tax-practitioner.aspx

Conclusion

You have to register as a tax practitioner in such a form and manner as the Commissioner may determine.

4.SBC status of a CC of which an individual member is a beneficiary of a trust

Q: Three individual Family members own a Close Corporation business, but they have a trust of which the mother is a trustee and two sons are beneficiaries. The one son wants to start another business and remove himself from current business but he is not sure if the CC is going to be classified as a SBC if he is still a beneficiary of the trust.

Does a CC get disqualified as a Small Business Corporation if the individual member is a beneficiary of a trust? The trust is a shareholder in a company which owns a property (all other SBC conditions are met).

 A: S 12E(4)(a)(ii)

(ii) none of the shareholders or members at any time during the year of assessment of the company, close corporation or co-operative holds any shares or has any interest in the equity of any other company as defined in section 1, other than—

A share or interest held in another company or close corporation as trustee or as nominee will generally not be regarded as the holding of any shares or interest in the equity of any other company for purposes of this section as such shares are held in a fiduciary capacity. If the person is a beneficiary in a trust which holds shares a number of factors may have to be considered:

(1) The nature of the person's interest in the trust as beneficiary. If the person has a vested right to shares, it it submitted that this may well constitute an interest in equity shares. If the person however has a contingent right to shares held by a discretionary trust which may or may not vest in him, it is unlikely that this spes would constitute an interest in equity of a company.

(2) The specific assets to which a person has or does not have a vested right should be considered. In particular, a distinction must be made between a right to trust capital and income from the assets.

The purpose of the provision must also be considered in interpreting the specific requirement - this prohibition was included in the legislation to prevent a person from splitting income from a business between a number of entities which are owned by that person in order for each entity to fall below the gross income threshold. The fact that a person who has a spes rather than a vested right to a share held by a trust would be unlikely to move income to an entity which he may or may not own would support the above view.

Comments...

Marion Behr Sr says...
Posted 24 October 2013
with these kind of situtations, I just wrote to SARS to re-allocate the credits to the debits , if having info with pay period, than I specified these,stating my case why, simple, as all taxes are now under one roof in the tax system

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