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FAQ - 20 July 2016

20 July 2016   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. Can VAT be charged for services provided to a foreign company?

Q: I would like to check if a Law Firm advising a foreign company (based outside SA) is obliged to charge VAT in the invoice. Will it be zero rated?

A: There are two instances where the rate of zero per cent can be applied, assuming that that documentary requirements (section 11(3) of the Value-Added Tax Act and Interpretation Note 31) are observed.  

The first instance is where the services are physically rendered elsewhere than in the RSA etc. Section 11(2) (k) will then apply, but we think the services are rendered in the RSA in this instance.

The second is where section 11(2) (l) applies. If we accept that services are not supplied directly in connection with land or any improvement thereto situated inside the RSA, there are two issues which must then be considered. We also accept that the services are not supplied in connection with movable goods in the RSA at the time the services are rendered.  

The recipient of the services must be "a person who is not a resident of the Republic” (RSA). This is a defined concept and basically requires that the company must not carry on in the RSA any enterprise or other activity and from a fixed or permanent place in the RSA relating to such enterprise or other activity. Our guidance assumes that either the company ‘based outside SA’ is not a resident of and does not carry on an activity in the RSA. If this assumption is not correct the guidance may not be appropriate.  

The second issue then is that the said person (the non-resident) or any other person must not be in the RSA at the time the services are rendered. If we accept for the moment that the non-resident is NOT be present in the RSA at the time the service is rendered (section 11(2) (l) (iii)) the rate of zero per cent can potentially apply. (If the non-resident is present in the RSA at the time, the service will be standard rated (section 7(1) (a))).  

2. Does the provisional tax due date of a company change when the year-end changes?

Q: The client changed their year-end from December to February. How will the provisional tax deadlines change? The provisional tax return for the 2016/01 was submitted at the end of June with the Dec year-end, but now that the year-end has changed to Feb, the 2016/02 should normally have been submitted 29/02/2016. When will the 2016/02 provisional return be due?

A: A company’s year of assessment is its financial year (refer to the relevant definitions in section 1(1) of the Income Tax Act). The first year of assessment can be for a period that is more or less than 12 months. In terms of the Companies Act (in section 27) the first financial year of a company begins on the date that the incorporation of the company is registered, as stated in its registration certificate and ends on the date set out in the Notice of Incorporation, which may not be more than 15 months after the date as stated in its registration certificate.  

In terms of the Income Tax Act, the definition of financial year in section 1(1), the company needed approval from SARS to end its financial year on 31 December. We accept that this was done. The change to now end on another day, now also must be approved (to close on the last day of February) by SARS.  In addition to this approval the company must also specifically request SARS to change the provisional tax dates / returns to 31 August (and the last day of February). If this was not done SARS will not be able to process the IRP6’s for August as it will not have issued one.  

3. Can a company registering for VAT back date the liability date on order to claim the back VAT on expenditure?

Q: A client opened up a restaurant and the POS system automatically charged VAT from March 2016. I have done a VAT registration in July 2016 and have backdated the date of liability to March 2016. Can we claim the expenditure from then without having a VAT number on the expenses invoices?

A: If the application was made and the registration by SARS was done under section 23(3) (b) SARS can then, in terms of section 23(4) (a), determine the effective date. It is unlikely that they will back-date that.  

If it was that the application was or should have been brought under section 23(1) (a) then section 23(4) (b) applies. SARS must then register the person with effect from the date on which that person first became liable to be registered.  

In this instance we accepted that the application was not brought by way of a voluntary disclosure or that the person asked for a later effective date. The person will then have to submit returns of output tax (the Act deems the amounts received to be inclusive of output tax) and input tax for each period.  A late payment penalty will be levied where amounts are due. The monthly VAT201 returns should be available on eFiling from the effective date.   

 Is your concern that the invoices, where the consideration exceeded R5 000, doesn’t have the VAT registration number of the recipient on? If so, the argument would be that the person was not registered then and the registration number was therefore not available.

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. 


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

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