VAT Threshold changes - please advise

[Dido]

Hi - we are permanent residents in SA and have just started farming vines - we started in 2008. We were advised to register for VAT in order to claim start up costs and advised SARS that we would not be actually trading (as vendors) until 2011 and probably 2012. We have just received notification that we have been de-registered due to the changes in threshold and - although this looks like a standard letter from SARS - it looks like we may have to pay back what we have claimed already. Our sales will be more than the threshold once we are trading fully, and it will be year on year so we will have to register at some stage. My question is, can SARS apply the new rules retrospecively? Have the rules for VAT and start up business costs changed too? Help needed - we will be calling SARS to discuss but would like to do so from a position of some knowledge! Many thanks...

[Dave A]

When you register for VAT as a going concern, you can claim input VAT on certain items in your business already. This would include shop-fittings, qualifying vehicles and other capital equipment, stock on hand...

When you deregister, you pretty much face the reverse process.

I have no idea what the practice notes and precedents might be for your industry, though. The long establishment period before the money starts landing in the wine industry certainly presents an interesting challenge. At worst (if the situation is unfavourable now for some reason), you'll have time to consider how to maximise the first input VAT claim when time comes to re-register again.

In querying this with SARS, it wouldn't hurt to ask if there are any relevant practice notes or precedents they could provide you.

Could you also update this thread as to how this turns out?

[LindaH]

Potential VAT deregistration

I am a tax advisor in Cape Town, specialising in VAT matters and have recently seen a number of these letters being issued to our clients. SARS is currently in the process of "cleaning" the VAT register to ensure that only vendors who indeed should be registered are on register, which would generally mean that you must have made taxable supplies of R1 million in the past 12 months. That being said, there are also a number of instances where someone may be registered for VAT, without meeting the R1 million threshold, including vendors in certain industries where returns are only expected after a couple of years (such as farming).

The bottomline is that a written submission need to be made to SARS as to why you should be allowed to remain on register without meeting the compulsory VAT registration threshold - otherwise, if SARS deregister you, some of the input tax claimed will need to be repaid to SARS. It is also possible for SARS to argue that you should never have been registered, in which case the input tax may have to be repaid, together with penalties and interest.

The submission to SARS is of a rather technical nature and would also depend on your specific circumstances. You are welcome to contact me directly should you require further assistance in this regard. (linda@capetax.co.za

[Dave A]

... which would generally mean that you must have made taxable supplies of R1 million in the past 12 months.

The threshold for voluntary registration used to be R20 000.00 per annum. Has that changed?

[geraldenek]

yes, it has changed to R50 000 (R60 000 in the case of commercial rental)

[Dave A]

Any chance of demonstrating that sort of annual turnover for the VAT registered entity in the meantime, Dido? Rental income, perhaps? That would make for a very simple motivation to SARS.