On 19 May the South African Revenue Service (SARS) published a draft regulation in terms of section 74(1) read with section 23(3)(b)(ii) of the Value-Added Tax Act (89 of 1991). The regulation sets out the requirements that must be met by a person applying voluntarily for registration as a "vendor" in terms of section 23(3)(b)(ii).
Section 23(3)(b)(ii), in essence, allows every person who satisfies the Commissioner of SARS that he/she is carrying on any enterprise and the total value of taxable supplies made by that person has not exceeded R50 000, "but can reasonably be expected to exceed that amount" within 12 months from the date of registration, to apply to the Commissioner for registration as a vendor.
However, where one person may expect his enterprise to make taxable supplies in excess of R50 000 in the following 12 months, another person may be of the view that the same enterprise may not reach the target of R50 000 within the required 12 month period. The draft regulation seeks to provide guidance in this regard by prescribing the information that must be provided to the Commissioner, in addition to the information required in terms of section 22 of the Tax Administration Act (28 of 2011), to substantiate a claim that the enterprise is reasonably expected to make the required taxable supplies.
The draft regulation provides for five sets of circumstances, each with its own informational requirements. A prospective vendor only has to meet the one requirement to be able to apply for registration.
- First, where taxable supplies have been made for two months or more, the Commissioner must be furnished with proof that the average value of taxable supplies made in the months preceding the date of application for registration exceeded R4 200 per month. In order to determine the average value of monthly taxable supplies, the value of taxable supplies made for a minimum of two and a maximum of 11 months immediately preceding the date of application must be used (where average monthly taxable supplies of R4 200 for 12 months have been made, the person would have exceeded the R50 000 threshold and would be able to apply in terms of section 23(3)(b)(i)).
- In the event that taxable supplies have only been made for one month, the Commissioner must be furnished with proof that the value of the taxable supplies made in that month exceeded R4 200.
- Where a written contract has been entered into, in terms of which taxable supplies in excess of R50 000 are required to have been made in the 12 months reckoned from the date of registration, the person will be able to apply for registration as a vendor.
- Where a finance agreement has been entered into with a bank, a credit provider (as defined in the National Credit Act), an agreement with a designated entity, public authority or any other person who continuously or regularly provides finance and the agreement provides that the provider of the finance will fund the expenditure incurred or to be incurred in the commencement or furtherance of the person’s enterprise and the total annual repayments in terms of the agreement will exceed R50 000, an application may be made to the Commissioner for registration.
- Last, if proof can be provided of expenditure incurred or to be incurred in connection with the enterprise, in the form of a written agreement entered into or of capital goods acquired together with proof payment (or any extended payment agreement entered into) and the total repayment for the expenditure will exceed R50 000 in the 12 months from the date of registration, the person may apply to the Commissioner to be registered as a vendor.
Entrepreneurs will welcome the fact that the scope of section 23(3)(b)(ii) has been broadened to allow voluntary registration as a vendor even where that person has not yet made any taxable supplies.
All comments on the draft regulation were due on June 30. We await the publication of the final regulation during the latter half of 2014.