Vat deregistration

[Darko]

OK, I know i'm new here and that I have not provided helpful answers to anyone yet. At the moment, I just have questions. I hope to reciprocate soon however.

Am i correct in saying that the VAT registration threshold was R300K and now it is R1m? If so, can a vendor now deregister for VAT? I have a friend who owns an estate agency and i was wondering if this is the best way to go?

[garthu]

Hiya Darko, not sure about the process but there would one catch which i'm not sure how to resolve just yet. The EAAB code of conduct and rules specify that the agency must be VAT registered. Also Sars asks for VAT reg numbers on registration, with no number it could tie up the process - don't know yet, there hasnt really been a case that i know of yet..

So according to the new tax system, yes i think possible (accountants help please...) , according to the code of conduct, they could be in breach. Maybe get feedback from EAAB first...

[sgafc]

Think its compulsory for estate agents to have a Vat no.. Vat deregistration is not a simple matter. A letter of the vendors intention to deregister must be send to SARS.

SARS will request a list of assets and liabilities. Before any deregistration can be finalised, the vendor will have to pay "Notional Vat". That is vat on the net asset value of the business. So if you have a net asset value of R100 000, notional value equals R14000, etc.

[Darko]

Thanks guys.

[wynn]

The other thing to consider is, do your clients require a VAT invoice, it makes their bookkeeping so much simpler!

Every two months you can do a VAT return and if your out-go is more than your in-get you get a credit from the SARS you wouldn't have if you were deregistered.

Methinks the SARS is going to pay a heavy penalty for the short weeks in April.

[Darko]

To the best of my knowledge, estate agencies would almost always have more output vat and therefore almost always be liable to only ever pay over vat.

MMM...perhaps they should increase their commissions collectively (a la cartel style) to account for VAT.

[sandras]

Deregistering for VAT is something you have to consider very carefully. Obviously, it will cut back on your bookkeeping costs of you don't have to pay your accountant to calculate and submit your VAT every two months, but some of the larger suplliers in various industries expect you to be registered for VAT.

The best advice would be to make an appointment with your accountant and discuss this in detail, the best person to give advice would be the one that handles your financials.

Something else: if you are not registered for VAT, you can't claim back the VAT you have paid on your purchases, however, if you run your business at a profit, you will always pay over VAT and thus merely staying registered so that you can claim your input VAT is not a good choice.

Eg. Your input VAT on your stock is R100 that you can claim from SARS. This is the amount you will lose should you deregister. However, if you sell that stock with a markup, you output VAT is R200. So you still have to pay over R100 to SARS, after already having paid the original R100 when you purchased the stock. So, if you stay registered for VAT this transaction will cost you R200 in VAT, while if you deregister, the transaction will only cost you R100 in VAT.

Obviously, there are exceptions to this rule, so rather meet with your accountant.

[Dave A]

With the change in threshold, there have got to be a heck of a lot of businesses facing this decision at the moment.

[sgafc]

Vat Threshold

This "Threshold Thing", is gonna lock many SME, into the Micro Enterprise Mindset. In other words, "SME's will not intend to grow big".

A million in turnover is not much. It Translates into a monthly turnover(not profit) of about R83 000, R83 333 to be exact. Of course many sme, or should i say ME's are happy with their comfort/survivalist zone of between
R20 000 to R50 000 turnover a month. But for the enthusiastic entrepreneur constant new growth targets are set, way above the Vat threshold on a monthly basis.

An odd situation could(and will) arise where the vat vendor de-registers, and is compelled to re-register when the threshold is is exceeded.

Hang in there, unless you have no hope of ever breaking the million mark.