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VAT: Turnover threshold from which a vendor may be on the monthly tax period

03 April 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

The answer to this query is based on legislation as at 2014/04/03.

Q: Currently the company is paying VAT every second month. From which turnover should they be paying monthly?


A: Sec 27 of the Value-Added Tax Act (No. 89 of 1991) (hereinafter referred to as ‘the VAT Act’) determines the tax periods in which to account for VAT. Currently, the company is either a ‘Category A’ or ‘Category B’ vendor depending on when its tax periods end. In terms of sec 27(1) of the VAT Act, a vendor with a monthly tax period would be classified as a ‘Category C’ vendor. ‘Category C’ is defined as follows in sec 27(1) of the VAT Act:‘... means the category of vendors whose tax periods are periods of one month ending on the last day of each of the 12 months of the calendar year...’ (own emphasis added).

Sec 27(3) determines that a vendor shall fall into Category C in either one of the following circumstances:‘(a) the total value of the taxable supplies of the vendor (including the taxable supplies of any branches, divisions or separate enterprises of the vendor registered as separate vendors under section 50 (2))—(i) has in the period of 12 months ending on the last day of any month of the calendar year exceeded R30 million; or(ii) is likely to exceed that amount in the period of 12 months beginning on the first day of any such month; or(b) the vendor has applied in writing for the tax periods in his case to be on a monthly basis; or(c) the vendor has repeatedly made default in performing any of his obligations in terms of this Act,and the Commissioner has directed that, with effect from the commencement date or such later date as may be appropriate, the vendor shall fall within Category C...’.

Therefore sec 27(3) determines that the total value of the company’s taxable supplies must have exceeded R30 million during the previous 12 months ending on the last day of any month or that it is likely to exceed R30 million for the following 12 months on the first day of any month.It should be noted that in terms of sec 27(5)(a) of the VAT Act, in determining whether the total value of the taxable supplies exceeded or is likely to exceed R 30 million, the normal sec 10 value of supply rules should be used and no regard must be given to the VAT included in the supplies.

Please also have a look at sec 27(5)(b) when making this determination.

Conclusion

The company will fall within ‘Category C’ when, on the last day of any month, the total value of its taxable supplies exceeded R 30 million for the previous 12 months or on the first day of the month, when it is likely to exceed R30 million in the following 12 months. It should be noted that although the above requirements may not be met, the company may still apply to the Commissioner to be registered within Category C.


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