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FAQ - 6 September 2017

Wednesday, 06 September 2017   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. Does a branch of a business need a separate VAT number?

Q: My client has opened a branch in Gauteng with the Head Office in PMB. They don't maintain a separate accounting system and have the same management. Does this branch need to a separate VAT number?

A: The VAT Act

  1. “Enterprise” is defined in section 1(1) of the VAT Act as any enterprise or activity which is carried on continuously or regularly in or partly in South Africa and in the course or furtherance of which goods or services are supplied to any other person for a consideration.
  2.  Section 23(1)(a) of the VAT Act determines that a person who carries on any enterprise … becomes liable to register … in the course of all enterprises carried on by …
  3. Section 50(1) of the VAT Act determines that where separate enterprises are carried on by any vendor or an enterprise is carried on by any vendor in branches or divisions, the vendor may apply in writing to the Commissioner for SARS for each such separate enterprise, branch or division to be registered separately for VAT purposes.

Application of the principles

  1. A person registers as a VAT vendor. A person may be carrying on various enterprises for VAT purposes. The single registration of the person as a VAT vendor automatically includes all enterprise carried on by the person. 
  2.  Where the person carries on its business in separate branches or divisions (subject to certain requirements), the person may apply to SARS to register the branches separately. There is no obligation on the person to make such application.
  3.  In conclusion, your client is under no obligation to register its Pietermaritzburg branch separately for VAT purposes. The activities of the Pietermaritzburg branch may be declared in the current VAT registration.
  4.  Your client must however advise SARS that it has opened a branch in Gauteng as this represents a significant change in the operations of the person (the VAT vendor).

2. What is the VAT treatment when a non-executive director holds this position in multiple entities?

Q: If a non-executive Director has 3 entities that he is a non-executive director of, what is the position with regards to VAT? Does he have to register all 3 entities separately with 3 separate VAT numbers under his name on his eFiling profile? Or can one VAT return be done declaring all the info?

A: The consequence of the binding general ruling is that the non-executive director is deemed to carry on an enterprise (with effect 1 June 2017).  The individual (the non-executive director) must determine the value of all taxable supplies of goods or services made by him or to determine his or her liability to register as a vendor.  Included in the value of taxable supplies must be all fees received as a non-executive director (and other professional fees). 

The ruling doesn’t deal with the entities that the non-executive director renders the services to (or supplies the services in a VAT context).  It is a supply by the individual (the non-executive director) and therefore has no impact on the companies itself – as far as registering as a vendor is concerned.  If registered, they will be able to make a deduction of input tax relevant to the fees if they are making taxable supplies.   

3. Does software development constitute "professional service" as defined in the Fourth Schedule?

Q: My client is an individual who wants to register for the turnover tax regime. He develops software and then sells it to customers. He will not be a personal service provider but may not fulfil the requirement for the turnover tax regime due to the 20% professional services requirement. He sells the software electronically. May the service be seen as goods if he puts the software on a CD and then sell it?

A: Please note that SAIT's technical query system policy prescribes that only guidance should be provided in relation to requests submitted.  Opinions or interpretations carry risks against which SAIT is not indemnified and would effectively cause SAIT to compete with its own members.  Guidance implies that sources or references relevant to your request are provided, but that ultimately your professional judgment is required to be applied to the specific circumstances. 

The Tax court considered the section 12E definition and Judge Mbha made the following comments in this regard:

“It is accepted generally that the meaning of words in a statute is derived from the common law.  The basic rule of interpretation is that the meaning must, unless a statute provides otherwise, or unless it would result in an absurdity, be taken to be the ordinary meaning of the word which can be found in a dictionary of established authority.”  Note: SARS changed its Interpretation Note after this case. 

SARS, in their micro business guide, states that “professional services are generally rendered by more sophisticated, high-income earning taxpayers, with profit margins that are significantly higher than those assumed in the design of turnover tax.” 

The ordinary meaning of “information technology” is “the study or use of systems (especially computers and telecommunications) for storing, retrieving, and sending information.” – Oxford dictionary.  The Judge, in the tax case referred to above, didn’t deal with the words “in the field of”.  The issue is whether it may well extend the meaning of the words. 

The current practice generally prevailing, in respect of small business corporations, is the ‘the words “any service in the field of” preceding the categories of services listed in the definition suggest that a wide interpretation must be applied to these categories. Therefore, the list must be interpreted to include every service in the specified field irrespective of whether it is of a professional nature.’ 

There is therefore no precedent to rely on in your opinion of whether selling of CD’s would be incidental to information technology. 

You may well want to obtain a ruling or non-binding opinion from SARS.  

Disclaimer: Nothing in this query and answer 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 answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. 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.

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