Print Page   |   Report Abuse
News & Press: VAT

More stringent VAT verification procedures put in place

04 October 2011   (1 Comments)
Posted by: SAIT Technical
Share |

More stringent VAT verification procedures put in place

Clifford Watson, executive tax manager at Grant Thornton Johannesburg

Sars now requires the provision of three months bank statements. Sars has attempted to curb Value-Added Tax (VAT) fraud by implementing strict verification procedures for VAT registrations. Whether those procedures are in line with the VAT legislation is debatable.

The latest procedure put in place is the mandatory requirement of the provision of three months bank statements. Sars previously accepted an original letter from the bank confirming the bank details.

Third party accounts raise uncertainties

This has serious implications in cases where a third party’s bank account is used. Particularly in an instance where a non-resident company makes use of a representative vendor’s bank account or where an offshore holding company makes use of its local subsidiary’s bank account.

Requesting bank statements of the applicant would provide proof that the applicant does carry on a business in the Republic. However, requesting bank statements in this case will be futile since the third party’s bank account would generally not be used for commercial transactions, but only for payments to and from Sars. Therefore, requesting bank statements of the representative vendor or third party would have no bearing on the VAT application in such cases.

Beware of prying eyes

Third parties allowing the use of their bank account as representative vendor or as nominated bank account as per section 44(3)(d) of the VAT Act should be prepared to disclose financial information contained in its bank account to Sars. In many circumstances, attorneys act as representative vendors for non-resident vendors, meaning that confidential client information relating to litigation, property transfers and other legal matters may be open to Sars’ scrutiny.

There are also circumstances where a newly established business applies for VAT registration based on signed agreements but who has not yet commenced trading. Such a business would not be able to provide Sars with three months banks statements based on its newly opened bank account and a current bank statement will not yet contain any transactional detail.

Don’t get hindered by the process

VAT registration has become a significant obstacle for direct foreign investment in South Africa. Given South Africa’s need for such investments, one would have expected Sars to have uncomplicated the registration process for vendors that clearly carry on enterprises in the Republic and are faced with compulsory VAT registration. Prospective VAT vendors should approach their tax advisors and seek assistance with the registration process to alleviate any delays and mitigate risks.

Comments...

Brune Pretorius (Janse van Rensburg) says...
Posted 12 December 2011
We find that here in Namibia the process to get a vendor registered for VAT is also becoming more and more complicated, requirements change day by day and in many instances the new requirements does not even form part of the original or amended legislation, just some internal arrangement by Revenue Services. We are definately also creating an evironment filled with red tape, and its really not encouraging any investors to bring business to Namibia.

WHY REGISTER WITH SAIT?

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.

MINIMUM REQUIREMENTS TO REGISTER

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.

Membership Management Software Powered by YourMembership  ::  Legal