VAT registrations in South Africa can be challenging and SARS has tightened its controls to avoid the risk of inappropriate VAT registrations. However, the correct preparation can make the process much smoother.
The primary reason why VAT registrations have become challenging is a direct result of SARS tightening its controls to avoid the risk of inappropriate VAT registrations. The sad reality is that certain individuals will always seek to conduct fraudulent activities and SARS has suffered losses from such fraudulent cases. As a result, the registration processes have been amended so as to ensure that only qualified vendors may register for VAT purposes.
There are two common areas where the taxpayers generally struggle to meet the registration requirements to become a VAT vendor. The first is the collation of the acceptable documents to meet the SARS requirements and the second is to sufficiently justify the turnover requirements.
SARS has become critical when it comes to reviewing the acceptability of documents submitted in the verification process. For example, for the directors of the company it is not acceptable to provide a pure copy of their ID document. It must be an original certified copy. In addition, that certification may be no older than three months. If, for instance, you have a foreign director on the entity, an original scanned copy of that passport document must be presented.
When moving on to the verification of the business premises, if you are using a lease or rental agreement to confirm the premises from which the business is conducted, that lease must be signed, current and valid. If it so happens that there are no documents issued in the name of the business confirming the address where the enterprise is conducted, what is accepted is for the owner of the premises to sign a declaration confirming that he owns these premises and that the enterprise is in fact conducted from that location.
The final element where SARS is very strict is the acceptance of the details confirming the bank account of the entity. Documentation from your bank must be in an original format and it must reflect the branch stamp of the bank that issued the documents
SARS requires actual proof of historical sales or a committed entitlement to future income so as to justify their turnover requirements. If you're referring to historical sales to justify your VAT registration, you will need to provide copies of the actual sales invoices, which SARS will carefully consider, together with the bank statements that evidence these sales transactions have actually been settled. In the event that your business has not yet generated any turnover but you have a committed entitlement to a future income stream, that signed agreement can actually be used to justify you meeting the turnover requirements.
Then some subtle differences can apply in the case of the acquisition of a business as a going concern. In these cases, the reference would be made to the seller entity’s historical sales transactions together with copies of their VAT 201 declarations confirming the sales that have been generated. Another alternative to still qualify as a vendor when you have not yet generated income is with reference to the expenditure incurred. In the case when an entity has not yet generated the income but has actually incurred expenses which will be directly related to the production of future taxable supplies, it can meet SARS’s requirements. A good example of this is where you acquire a capital asset that can be proven will be directly used to produce your taxable suppliers.
The first step to ensure an efficient registration process is to have an active e-Filing profile in the name of the taxpayer. By submitting your application through the online process, it avoids the need to capture all the details in your local sales branch office. The next step is that the automated e-Filing application channel will issue a case number to the applicant submitting the registration. This case number is necessary so that when you still visit your local sales branch office to complete the verification process, they can identify the details already completed online.
When you're submitting your documents in branch for the verification process, this is where the officials will carefully scrutinise all of the paperwork that you have gathered. They will scrutinise the composure, completeness and the validity of details to ensure that this is a valid application.
In some rare circumstances they may flag your case for a site visit, however if you have put the necessary care into gathering your documents, it is quite possible that you can walk out of the SARS office with the VAT registration number in hand. The timeline surrounding the VAT registration is dependent on the effort that you place into the information gathering process to ensure that your submission pack presented to the SARS officials will meet all of their new strict requirements.
