Does a company have to levy output VAT on revenue earned before it was registered?
05 February 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: I have a query relating to company currently in
the process of filing its first VAT return. The company was registered using
the voluntary process during February 2014 and its first VAT reporting period
was July-August 2013. We were assured by the SARS consultants that all inputs
prior to VAT registration could be claimed as long as it was done within 5
years, even though the company was not a vendor at the time of supply.
My question relates to output VAT for the same
period. The company did not levy VAT on pre-VAT-registration revenue; does the
company have to declare output VAT on these transactions? If so, please confirm
the correct accounting and tax treatment of the revenue transactions.
A: In our view the
output VAT liability in section 7 of the VAT Act occurs as from the date of
registration per section 23 of the VAT Act. In our view, unless agreed
otherwise, the VAT amount remains recoverable from the recipient in terms of
section 67 of the VAT Act as the VAT was imposed (due to retrospective
registration) after the transaction was concluded. In our view the amended
section 67 per the Taxation Laws Amendment Act 2014 (effective from 1 April
2015) would still apply as this is for when the VAT Act applied for the first
In respect of the input
VAT, please note that though section 18(4) of the VAT Act allows for certain
deemed input VAT on supplies made prior to registration, we are of the view
that section 16(2)(a) of the VAT Act in respect of the section 20 of the same
act, tax invoice requirements may still be problematic. In this regard it is
our view that you may have to request a ruling in terms of section 20(7) of the
VAT Act from SARS to confirm that you may claim the inputs in respect of the
invoices which do not have your VAT number stated on it.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.