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Thread: VAT Registration with big CAPEX and minimal turnover

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    VAT Registration with big CAPEX and minimal turnover

    SARS allows VAT registration only once turnover exceeds R500k p.a. If there is reasonably good indication that a new business is going to exceed that registration thresh-hold in year 2 it seems prejudicial that they would not be allowed the opportunity of off-setting VAT (inputs vs outputs) in a scenario where substantial CAPEX is being made in the first 12 months.

    For example - R1.75million Capex and R750k working capital investment in year 1 and turnover of R350k (projected R1.2m turnover projected for year 2).
    Input Vat exceeds Output Vat by R301k obviously prejudicing cash flow.

    Is their no way SARS would make a registration exception?

    Does SARS allow Yr1 Vat to be claimed back in Yr2 post VAT registration?

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    I think the minimum threshold is R50k in 12 months, not R500k. That may help.

    However I'd still be interested how the situation is dealt with when significant capex is done before any sales are made.

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    Quote Originally Posted by BusFact View Post
    I think the minimum threshold is R50k in 12 months, not R500k. That may help.

    However I'd still be interested how the situation is dealt with when significant capex is done before any sales are made.
    Yes, you can register for voluntary VAT as soon as you have R50 turnover.

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    You need something concrete, like bank statements, orders or tenders that have been awarded etc to confirm that your taxable receipts will exceed R50 000 in 12 months.

    They are not interested in business plans or cash flow projections.

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    Quote Originally Posted by dellatjie View Post
    You need something concrete, like bank statements, orders or tenders that have been awarded etc to confirm that your taxable receipts will exceed R50 000 in 12 months.

    They are not interested in business plans or cash flow projections.
    I setup VAT for a new business recently. The business is 4 months old and had a turnover of more than R50k in the 2nd month. The bank statements and invoices was enough for SARS to approve VAT.

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    That all makes sense, but what happens when you start a new business with plenty of funds. Lets say in September you buy R1mil worth of stock, and you buy R2mil worth of assets (machines, tools, signage, etc). Now you are ready for your first sale in October.

    Does that mean you just spent R3mil on stuff which you can't use as input VAT?

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    Quote Originally Posted by BusFact View Post
    That all makes sense, but what happens when you start a new business with plenty of funds. Lets say in September you buy R1mil worth of stock, and you buy R2mil worth of assets (machines, tools, signage, etc). Now you are ready for your first sale in October.

    Does that mean you just spent R3mil on stuff which you can't use as input VAT?
    I think you can "backdate" the VAT claims. Perhaps a CA could confirm this?

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