FAQ - 20 July 2016
20 July 2016
Posted by: Author: SAIT Technical
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
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
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.
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
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.