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The SABC, TV licenses and VAT

Thursday, 26 February 2015   (0 Comments)
Posted by: Author: Lesedi Seforo
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Author: Lesedi Seforo (SAIT)

"Pay your TV license, it’s the right thing to do.”

Most South Africans are very familiar with this tagline, which stems from an initiative launched by the South African Broadcasting Corporation (SABC) many years ago in a desperate bid to encourage TV owners to pay their licenses. Besides the numerous other challenges that have plagued the organisation of late, the non-payment of TV licenses by South Africans remains the most persistent. 

This has created obvious cash flow problems for the public entity and by extension, VAT problems. 

A VAT vendor can either account for VAT on an invoice basis or payments basis. In terms of the latter, a VAT vendor pays VAT to SARS during a tax period in which it receives payment for the goods or services supplied to its customers. In terms of the former, VAT is payable during the tax period in which customers were invoiced for the goods or services supplied to them. The invoice basis is clearly the worse of the two options since a vendor could conceivably end up having to pay VAT over to SARS in respect of sales for which it has not yet been paid by its customers. 

Unfortunately most vendors operate on the invoice basis because SARS has limited the payments basis to a very small class of taxpayers. 

For vendors operating on the invoice basis, a supply of goods or services is deemed to be made on the earlier of an invoice being issued by that vendor, or payment being received for goods or services supplied by the vendor. 

What does this have to do with the SABC? 

Let’s assume the SABC invoices millions of TV owners in December for the payment of TV licenses. A lot of the ‘customers’ invoiced will only pay months later, if at all. In the meantime, the SABC will have to pay millions of Rands in VAT to SARS during the December/January months when it has not even received the cash resources to enable it to make those payments.

To address this very serious issue, one of the tax proposals made by government for the 2015/2016 legislative cycle is that the SABC and its subsidiaries be allowed to account for VAT on the payments basis. 

This would definitely bring some much-needed relief to the public entity.



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