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.

[Dave A]

It sounds like SARS has been scammed!

[CharlesM]

I think if there's one organisation whose had their fair share of being scammed, it's SARS. They really tried hard to simplify processes and trust people... but there will always be a handful of chancers exploiting whichever opportunities they can.

[Dave A]

And in the end it's the honest people who pay

So this is mainly going to affect new registrations?

[duncan drennan]

So this is mainly going to affect new registrations?

Based on what it says, I think the people who are going to mainly be affected are those claiming VAT refunds (exporters come to mind), and new registrants (longer vetting process, which means longer process to start a business).

It also sounds like they will be confirming all vendors (and possibly asking us all to come in for fingerprinting?)

Everyone should make sure their contact details with SARS are up to date so that your VAT account is not suspended (if they can't get hold of you).

· VAT vendors will be required to confirm their SIC codes

What is a SIC code?

[CharlesM]

What is a SIC code?

SIC = Standard Industrial Classification Codes

You can read more in detail on the CIPRO website.

[CharlesM]

Hi guys and gals!

SARS is absolutely fantastic in the way they value input from everyone. Here is an update to their new process, once again quoting their e-mail:

DATE:


7 November 2008

NOTICE NUMBER


26/2008

SUBJECT:


UPDATE: CHANGES TO THE VAT PROCESS

IMPORTANCE:


CRITICAL

Dear Colleague

We would like to thank all those practitioners who gave us feedback and input on the proposed changes to the VAT registration process as outlined in yesterday’s note.

To accommodate your feedback we have revised the proposed changes by catering for registrations by practitioners on behalf of vendors and by suspending the introduction of biometric screening (fingerprints and photographs). As pointed out in the note yesterday, we are constantly grappling with the balance between our commitment to service to honest taxpayers and our obligation to protect taxpayers’ money from unscrupulous and dishonest elements within our society. We would like to invite practitioners to help us find appropriate measures to ensure that the VAT system is administratively efficient while also effective at mitigating risk and your suggestions in this regard would be welcomed.

The following changes have now been made to the new VAT registration process to be implemented at SARS branches from Wednesday 10 November 2008:

1. Only practitioners in possession of a valid PR number will be accommodated. This is not a new requirement.
2. A practitioner must submit an original letter of authority or power of attorney together with the application form, in which they are duly authorised to act on behalf of the vendor. This is also not a new requirement.
3. SARS will do the following validation on new applications at branches:
1. Completeness of the form – incomplete forms will not be processed.
2. Each application must include FICA proof – including valid ID document and a municipal or telephone account with physical address and a recent bank statement – original, not more than 3 months old.
3. Confirmation that the applicant is a valid enterprise. This will entail a short interview with a SARS auditor. We advise practitioners to either empower themselves with all relevant information relating to the vendor upfront, or to ensure that the vendor is available telephonically to answer any questions SARS may have during the interview.
4. This may be followed up by a site visit to the vendor if required.

On concerns that the new process will result in unacceptable delays in the issuing of VAT registration numbers, we are mindful that additional verification measures – especially site visits – may take more time. However, in piloting the new process at a number of branches this week we have been pleased to see that the new process is not significantly longer than before – especially where the applicant provides sufficient and correct information with their application.

We will provide more details of the various anticipated changes as they become available.

Regards,

For tax-specific queries, please contact us on:

0860 12 12 19

pcc@sars.gov.za

[Dave A]

I'm impressed.

We would like to invite practitioners to help us find appropriate measures to ensure that the VAT system is administratively efficient while also effective at mitigating risk and your suggestions in this regard would be welcomed.

You know what? Government should be taking this approach in all spheres. Effective consultation where they actually listen instead of looking to just validate their view no matter what.

Thanks for keeping us up to date, Charles.

[Peace]

My experience of SARS, especially VAT is not heathy. Possibly they are excellent in writing letters and memos to the public, but when it comes to the actual work, done in the offices (Durban), this leaves a lot to be desired. It appears, management are writing the letters and lower level are not getting the memo's/letters.

My last, not final conversation with SARS over a VAT reg. was " I hope this conversation has been recorded , as over a years delay, is making me think; why I'm trying so hard to be legal."
My reg. was sorted, after an employee discovered my reg forms, along with numerous others underneath a huge pile of other documents, forgotten and ignored.