An update on the streamlining of the VAT registration process

The Taxation Laws Amendment Act, No. 31 of 2013 (TLAA) introduced legislative amendments aimed at streamlining the Value-Added Tax (VAT) registration process as contained in the Value-Added Tax Act, No. 89 of 1991 (VAT Act).

In the 2013 Budget, the Minister of Finance, Pravin Gordhan (Minister) indicated that there would be efforts to reorganise the VAT registration process to ease the burden of complying with the requirements for registration. This culminated in amendments being made to s23(3)(b)(ii) and s23(3)(d) of the VAT Act, respectively.

Prior to the amendments, s23(3)(b)(ii) of the VAT Act required any person who carried on an enterprise in South Africa to register as a VAT vendor, where the total value of the taxable supplies made from the carrying on of such an enterprise exceeded, or was reasonably expected to exceed, R1 million in a 12-month period.

Persons who did not meet this R1 million threshold were entitled to register voluntarily as VAT vendors where the total value of taxable supplies made from the carrying on of an enterprise had already exceeded R50 000 in a 12-month period and where it was expected that the value of such taxable supplies would exceed R50 000 in future.

Previously, s23(3)(d) of the VAT Act provided that a person who continuously and regularly carried on an activity which, in consequence of the nature of that activity, could reasonably be expected to result in taxable supplies being made for consideration, only after a period of time, and where the total value of taxable supplies could reasonably be expected to exceed R50 000 in a period of 12 months, was entitled to register as a VAT vendor.

A South African Revenue Service (SARS) Briefing Note on the Draft Regulations for Registration as VAT vendors was released earlier this year and draft regulations in terms of s23(3)(b)(ii) and s23(3)(d) of the VAT Act were published for comment.

In an attempt to ‘ease the compliance burden while guarding against fraud’, the following amendments to the VAT registration process have been introduced with effect from 1 April 2014:

• S23(3)(b)(ii) of the VAT Act has been broadened to allow a person to register voluntarily as a VAT vendor where the person has not yet made any taxable supplies or has made taxable supplies which do not exceed R50 000, and there is a reasonable expectation that such a person would make taxable supplies exceeding R50 000 within 12 months from the date of registration; and
• S23(3)(d) now provides that if a person is continuously and regularly carrying on an activity of a nature set out in the regulations published by the Minister and in consequence of the nature of such activity is likely to make taxable supplies only after a period of time, such person will be entitled to register as a VAT vendor. The draft regulations provide that these activities include:

- Agriculture;

- Forestry;

- Aquaculture;

- Mining;

- Construction;

- Property Development; and

- Infrastructure.

It will be interesting to see whether the promulgation of these regulations will indeed improve the process of VAT registration and ease the compliance burden that prospective VAT vendors have struggled with over the years.

The closing date for comments to the draft regulations is 30 June 2014.