Changes to VAT registration process

[CharlesM]

As a registered tax practitioner, I regularly receive updates from SARS. Here is one that relates to the registration as a VAT vendor, which I think everyone that is thinking of registering should take note of.

I quote their e-mail to me:

SARS’ compliance strategy is premised on three pillars: education, service and enforcement – which of these elements SARS applies in a specific situation is typically dictated by the taxpayers’ attitude towards compliance. In recent months SARS has introduced a number of new processes and applications that were aimed at making it easier, faster and cheaper to comply in the VAT arena. However, SARS remains a regulatory body with an obligation to the fiscus, and our service offerings need to be balanced with the inherent risk that certain processes pose. Where our compliance assessment indicates that taxpayers – and specifically VAT vendors - are deliberately setting out to defraud the fiscus, the balance in this model between service and enforcement needs to be adjusted.

The prevalence of VAT fraud and refund scams continues to grow, and SARS has noted a substantial increase in VAT refunds attributable to VAT fraud. In keeping with the principles of our compliance model, this requires a greater reliance on enforcement and assurance processes. We had been hoping to simplify the VAT registration process. Instead, as a result of the substantial impact that VAT fraud is having, SARS has had to review its VAT process to clamp down on fraudulent VAT claims. In the coming weeks we will be introducing a tightening of the VAT registration process, more closely monitoring the declarations made by vendors, reviewing actual payments against declarations, more closely reviewing refunded vendors with R0 turnovers, and resetting some of our systems stoppers and thresholds.

Some of the practical implications in the short term for practitioners include:

· VAT numbers will no longer be allocated on application, and will only be provided to new vendors after all validations have been passed.

· SARS will now be doing physical verification of new applicants, with no refunds being paid out until an applicant’s registered particulars have been verified.

· This will also require new VAT registrants to present themselves in person at a SARS office, as fingerprinting of new registrants – using biometric scanning functionality - will in future become a compulsory part of the registration process.

· VAT vendors will be required to confirm their SIC codes

· FICA validations – new applicants will be required to submit proof of residence (through eg a Telkom, utility or electricity bill). The statement must be an original and not more than 3 months old.

· Where vendors cannot be contacted or traced, their VAT accounts may be suspended

As a result, we anticipate that new VAT registrations and VAT refunds may unfortunately take longer to process than they did in the past.

The changes are intended to go live on Monday 10 November 2008.