Adv. van Dijk explains the transitional rules that all VAT vendors need to follow in order to comply with the new VAT amendments.
It was one of the most awaited tax amendments for years, and now it finally has an implementation date. As from 1 April 2018, the standard VAT rate will be increased from 14% to 15%.
Since the announcement of this amendment in the 2018 Budget Speech, we were inundated with queries on the practical implication, especially for VAT registered businesses (i.e. VAT Vendors). Applying the correct VAT rate to supplies are important as it directly determines the output VAT liability payable to SARS and taking into account supplies made before and after 1 April 2018, the difference VAT rates might create an issue and result in penalties and interest for wrongful submissions.
The amended VAT Act, therefore, contains certain “transitional rules” to clarify any uncertainty that may arise. However, even though a special transitional rule may be applicable, the VAT must still be declared and paid to SARS in the normal time of supply rule (i.e. the earlier of an invoice issued or payment received).
The transitional rules announced by SARS are as follows:
Goods provided or services performed before 1 April 2018
- 14% VAT rate will apply
- Irrespective of when an invoice is issued or payment received
Good provided or services performed on/after 1 April 2018, but invoice was issued or payment was received before 1 April 2018, but goods were provided after 21 days from 1 April 2018 or services were performed any time after 1 April 2018
- 15% Vat rate will apply
- This is an Anti-Avoidance provision to ensure that supplies are not structured with the intention of avoiding the new increased VAT rate
Supplies commencing before 1 April 2018 but ending after 1 April 2018
- The value of the supply must be reasonably split between 14% and 15%
Sale of Residential Property
- If the sale agreement was signed before 1 April 2018; and
- Amount including VAT was indicated in such agreement; and
- The time of supply (e.g. registration of deed) is done on/after 1 April 2018
- The 14% VAT rate will apply
Should there be any transactions that appear to fall outside the ambit described above, it is highly recommended that you contact your Tax Advisor in order to avoid any penalties and interest being imposed by SARS for wrongful submissions.