FAQ - 12 March 2015
10 March 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. How can I request SARS to reduce or write-off my tax debt?
Q: A client of mine operated a business until very recently but had to give it up because the business no longer proved to be financially viable. Currently she has no income of her own and she owes SARS some VAT.
Taking into account her current financial position, I was wondering whether there exists any channel through which negotiations could be initiated to reduce the overall tax debt in this regard. Under what conditions would the tax legislation allow for the reduction or write-off of a tax debt?
A: Section 200 of the Tax Administration Act (TAA) allows a taxpayer to approach SARS and request that the full or portion of an outstanding tax debt be "compromised”. Section 201 TAA sets out that the request must be in writing and must contain all the details stated in that section.
SARS will then consider the request per the guidelines in section 202 and the prohibitions in section 203 TAA. Should SARS agree to partially or in full compromise the tax debt a written agreement will be entered into and the taxpayer should ensure that she can meet the terms thereof, including any payment terms, otherwise SARS may not be bound to the terms and proceed to elect to recover the original debt per s205 TAA.
The request should be submitted to the local branch for consideration. Should SARS not respond or provide any correspondence as to them having received and considering the request, please follow-up with the call centre within 21 days or contact us to escalate the matter to SARS debt management in the region where the taxpayer is situated.
2. Is PAYE deductible on commission paid by one company to another?
Q: Is 25% PAYE deductible on commission paid to a company?
Company A is appointed by company B (no formal agency agreement). The business arrangement is that company B will facilitate the sale of software supplied by company A. Company B will invoice company A for commission earned on the sale.
Is company A obliged to deduct PAYE of 25% from the amount of commission invoiced by company B?
The only references I can find refer to an individual earning commission. I would think that as this is revenue earned by a company, no PAYE would be deducted and income tax would be payable on the profit declared at the end of the profit posted.
A: Consider whether the company is a "personal service provider” as defined in the 4th Schedule to the Income Tax Act. If not, then the revenue will form part of the normal revenue stream of the company and employees’ taxes need not be deducted at source.
3. What are the SARS Interpretation Notes dealing with VAT on exported goods?
Q: Please provide me with an interpretation note dealing exporting goods so I can insist a supplier charges VAT.
A client of mine (A) is exporting goods to an overseas (B). My client’s supplier (C) is shipping directly to their client (B) on my clients behalf (A), but billing my client (A).
I need to prove to the local supplier (C) that they have to charge VAT, yet the VAT handbook is unclear. I maintain that the supplier(C) has to charge my client (A) VAT. They refuse to do so as they say the goods are exported. I believe it is correct that my client (A) does not charge the foreign company vat (B), yet the local company (C) shipping on my client’s behalf should charge VAT.
A: Please refer to Interpretation Notes 30 and 31.
4. Is the provision of retirement accommodation to the elderly an exempt supply?
Q: I have a client that provide retirement cottages to the elderly. They receive payment for these cottages and the cottages remain the property of the client. They are registered as a VAT Vendor. I've recently taken over the client and noticed that they have been completing their VAT201 returns with this income as 60% taxable as it is accommodation that exceeds 45 days. However as this is long term residential accommodation, shouldn't this qualify as exempt in terms of the VAT act?
A: "Commercial accommodation", is defined as follows (section 1 of the VAT Act):
• Accommodation including the supply of domestic goods and services, in any house, flat, apartment, room, hotel, motel, inn, guesthouse, boarding house, residential establishment, holiday accommodation unit, chalet, tent, caravan, camping site, houseboat or similar establishment, which is regularly or systematically let out and where the total annual receipts from the letting thereof is reasonably expected to exceed R60 000 per annum:
• Accommodation in a home for the aged, children, physically or mentally handicapped persons; and
• A hospice.
Once it has been established that the enterprise is supplying commercial accommodation, the next issue is to establish the value of such supply. In this regard there is now a single test, will the person stay in the accommodation for more than 28 days? If not, the supply will be taxed in full. If however, the person will stay for more than 28 days, then only 60% of the value of the supply of domestic goods and services will be subject to VAT (s 10 of the VAT Act).
The term "domestic goods and services" has been expanded to include the provision of meals and the right to use furniture and fittings where they are supplied as part of the right of occupation in an all-inclusive charge.
Thus, in summary, where accommodation is being supplied, the first issue is to determine whether or not such accommodation constitutes "commercial accommodation". If it does, then the vendor must determine whether the resident will be staying for an unbroken period exceeding 28 days. If not, the all-inclusive charge will be subject to VAT whereas if the stay exceeds 28 days only 60% of the all-inclusive charge will be subject to VAT.
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.