FAQ - 19 February 2015
17 February 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. Is it possible to transfer VAT number from a sole proprietor to a personal liability company?
Q: We need assistance with a client who was a sole proprietor and VAT vendor. He then registered a personal liability company in which he trades now. Can we transfer the VAT number from the sole proprietor to the company? Can you please shed some light on this for us and the steps needed to be taken.
A: The company is a new "person” for VAT purposes and it is our opinion that the VAT Act does not provide for the transfer of a VAT number from one person to another. The company would have to do a new registration and as the sole proprietor will be conducting the enterprise in the company, he may have to deregister for VAT once the business has been transferred to the company, which subject to meeting all the requirements could be done as a going concern.
2. Can SARS compel a taxpayer to submit a tax return in respect of a tax period more than 5 years ago?
Q: A client was requested in 2014 to file 2007 and 2008 tax returns, this is longer than 5 years and no IRP5s or any other supporting documents are available. I have filed a notice of objection and SARS disallowed it, stating that the taxpayer has to submit the return.
A:Time period for keeping records
With regards to the number of years one may keep documentation for tax purposes, please note section 29 of the Tax Administration Act (TAA):
It’s best you begin by looking at section 29(3):
"Records, books of account or documents need not be retained by the person described in—
(a) subsection (2) (a), after a period of five years from the date of the submission of the return; and
(b) subsection (2) (c), after a period of five years from the end of the relevant tax period."
You’ll notice that section 29(3) makes no mention of a person described in section 29(2)(b):
Section 29(2)(b) speaks of a person who "is required to submit a return for the tax period and has not submitted a return for the tax period.”
The 5 year period therefore doesn’t apply to someone who is required to submit a return but hasn’t, which is exactly the position your client is in.
Yet section 29(1)(a) does still require such a person to keep records to "enable the person to observe the requirements of a tax Act…”; one such requirement is to submit a tax return [see section 66 of the Income Tax Act].
From this, one can infer that if one is required to submit a tax return, but doesn’t; then he or she must retain records indefinitely.
Lastly, in terms of section 171 of the TAA, proceedings for recovery of a tax debt may not be initiated after the expiration of 15 years from the date the assessment of tax, or a decision referred to in section 104 (2) giving rise to a tax liability, becomes final. SARS is therefore entitled to claim payment of an amount that is outstanding for a period of less than 15 years.
No IRP5s available
To address this issue, please see section 95(3) of the TAA, which states:
"If the taxpayer is unable to submit an accurate return, a senior SARS official may agree in writing with the taxpayer as to the amount of tax chargeable and issue an assessment accordingly, which assessment is not subject to objection or appeal.”
3. What are the advantages if a VAT vendor changes from the payments basis to the invoice basis?
Q: A municipality intends to change its basis for submission of VAT returns from the payments basis to the invoice basis.They want to know how it is going to affect them going forward, as well as the advantages that will inform such a change.
A: The advantages or disadvantages of the invoice or payments basis will be fact specific and should be dealt with on that basis.
Where a vendor changes from the cash basis to the invoices basis section 15(4) of the VAT Act requires that the vendor submit to the SARS such information in the prescribed form calculating the tax payable or refundable.
Such amount is calculated in terms of section 15(7) of the VAT Act for the change from payment to invoice basis. Where an amount is refundable, it will constitute a refund in terms of the TAA which means SARS are entitled to withhold the refund until it has audited or verified the relevant information.
Also not that if a vendor makes a changeover it will in terms of section 15(9) of the VAT Act it must prepare a list of debtors and creditors showing the amounts owing as at the end of the tax period before the approved changeover.
Disclaimer: Nothing in these queries and answers 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 answers, SAIT do not accept any responsibility for consequences of decisions taken based on these queries and answers. It remains your own responsibility to consult the relevant primary resources when taking a decision.