[Question] Tenders & Vat Registration

[gac]

Advice from those in the know would be sincerely appreciated.

Company A is currently not registered for VAT (still trading below the Vat Turnover Threshhold) and enters a Bid for a R4million value.

1) Given the value will Company A be legally obligated and required to immediately register for and and charge Vat IF they awarded the Tender?
2) If yes should Company A be including Vat in their Bid Offer Price (even though NOT Vat registered at time of submitting the Bid Offer)?
3) Is the Tender Issuing Party legally obligated to recognize the fact that because the Value exceeds the Vat Turnover they must consider all Bids inclusive of Vat and accept that Vat will have to be paid notwithstanding the fact that Company A is not a Vat Vendor at the time of Bid Submission/bid Closing Date?

I guess put another way...at what point in time is a party obligated to register and collect Vat in a situation where they quote for an amount that will push them over the Vat Turnover Threshhold.

Is the transaction that pushes them over the VTT exempt from Vat?
Do they only then, after crossing the VTT, register for and start collecting Vat on subsequent transactions?

Please keep the advice as simple as the questions (i.e. use the assumptions implied above).

Many thanks in advance.

[OOSAR]

Dear gac, with reference to your questions, I am assuming you are referring to tenders at government.

1. Yes, the company must register for VAT immediately once the tender has been awarded to the company. See sec 23(1)(b) of the VAT Act in this regard.

2. Yes, the company must factor VAT into its price because they would not be allowed to increase their price later as a consequence of their VAT registration.

3. Yes, in terms of procurement law the entity is to evaluate all received bids on the price as quoted irrespective their VAT status. Practically speaking their evaluation will presuming VAT is including, without adjusting the price of non-VAT vendors at the time.

Hope it helps.

[gac]

Tenders & Vat Registration

Thank you for your advice OOSAR. It is exactly as I suspected.

Yes, it is related to Government Tenders which I consult to a BBBEE Client for.

Frustratingly there are a number of Departments here in KZN that have been considering and preferring Bids from Non-Vat Registered Bidders (still below the Vat Turnover Threshold) even though the Tender Value exceeds R1million. Correctly registered Vat Vendor Bidders are losing out because they are "more expensive", which in my view has been completely legally irregular.

I so wish Government would either up-skill its employees or employ staff that know what they are doing. If their intention is sincere and not corrupt that is!