Sars fails to settle small businesses' VAT registration nightmare completely

JOHANNESBURG- Small businesses, the lifeblood of our economy, frustrated by the confusion around VAT registration requirements and the refusal by accountants to assist in the process, have finally been given some clarity by the South African Revenue Service (Sars) to lessen their burden but start ups will still have practical difficulties (listen to the podcast below for all the info).

Small businesses which earn revenue in excess of a R1m a year have to register for VAT, or those with annual turnover greater than R50 000 can register voluntarily, a process which was made increasingly onerous by Sars's changing documentation and registering requirements (see: Small businesses' VAT headache and Small business relief). In fact the constant changes seem to have confused its own staff as various Sars offices were treating registration and information requirements differently.

At one office you could register quickly and hassle free; at others it was like visiting the dentist, says Ferdie Schneider, a VAT director at KPMG and a member of the Saica VAT sub-committee.

One MoneywebTax Community member, who is a tax practitioner in Pretoria, told us that on Friday March 5 he drove all the way to Rustenburg to register two companies for VAT as they fall in the North West district. "Both of the companies' registrations were declined due to small amounts owed on PAYE,SDL etc, despite Sars saying in November: "Applications cannot be rejected or declined if any of the directors, shareholders or members of the CC have personal outstanding returns."

The other problem was that Sars required the vendor to personally go to a local Sars office to be interviewed by specially trained Sars officials as part of the VAT registration application process. Sars could also require a physical visit to the enterprises business premises to ensure it is a genuine business. This process was extremely time-consuming and very often very frustrating, says Colin Wolfsohn, a member of the Saica National Tax Committee. So much so, he adds, that accountants refused to assist their clients with these VAT registrations.

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VAT registration changes (Afrikaans)

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After complaints from members battling to get businesses registered for VAT and discussions with Sars, says Schneider, Sars finally released a letter on March 30 offering more clarity and making registration a bit easier.

Those registering now require the following documents

• Original cancelled cheque or original letter from bank
• Copy of identity document or passport of the representative vendor

o This copy does not have to be certified

• Recent copy of the business municipal account

o This is to confirm the physical business address

o This must not be older than three months from date of application

o Where the business municipal account is not in the name of the relevant business, provide reasons during the interview as to why this is not the case and provide alternative proof of the said business' physical address eg, Telkom account if it reflects a physical address

• Recent copy of the residential municipal account of the individual, partner or representative vendor as applicable

o This is to confirm the physical residential address of the relevant person

o This must not be older than three months from date of application

o Where the residential municipal account is not in the name of the relevant person, provide reasons during the interview as to why this is not the case and provide alternative proof of the said person's physical address eg, Telkom account if it reflects a physical address

o Accounts reflecting post box or other delivery addresses will not be accepted

o Where the residential property is leased, a copy of the lease agreement is required

Copies of three month's bank statements which are not older than one month from date of VAT application.  Where three months bank statements are not available provide reasons at the interview for such unavailability and provide copies of such shorter period that are available

o Copies of financial information listed as source in part 4 of the application form. Acceptable sources of financial information proving turnover will include but not be limited to the following:

• Copies of invoices issued
• Copies of written signed contracts
• Written approval confirming that the tender was awarded
• Copies of signed lease agreements
• Plans, rezoning documents, financing methods and/or signed offers of purchase which indicate occupation date for property developers

This last requirement could still create practical difficulties for the vendor. For example, if one is applying for VAT registration it may be difficult to comply with the required financial information as Sars have made it clear that orders, tender documents etc, will not be accepted, says Saica's Muneer Hassan. This creates practical difficulties particularly for start up businesses, he adds, something that Saica will continue to engage with Sars to seek a resolution to this issue.

Write to Monique Vanek: monique@moneywebtax.co.za

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responses to this article

VAT registrations Thank you for attending to these problems. The latest in the Nelspruit Branch: (1) The small business must first prove at least three month's trading and no order or accepted tenders or cash flow projection is acceptable. The CC . .more can thus not do any big business before this. It is crazy. Most applications by a small start up business is geared at this type of contract, but he looses it because he now has to first try and do small jobs to trade for three months, and normally lcanot produce enought turnover to register. Sars is killing the goose that wants to lay the golden egg. . .less by Elsie on April 26 2010, 11:00 Find this comment inappropriate? Report it

VAT Registartions Regarding the above article on VAT Registrations. I do not agree with having to go to the specific office to register for VAT, they should allow the accountants to go to their local office. So as per above as an example. IF the business is in . .more Rustenburg then if owner applies himself then fine he must go to Rustenburg, but if the Accountant is applying then he should be allowed to go to the Pretoria office to register as his firm is based in Pretoria. SARS doesnt seem to realise the high costs involved in registering in another province. Then if you are average over R83 333 per month which in turn is R1 000 000 p.a. you will be in contrevention of the act and have to register for VAT, but then they will reject your application because of something silly like a small amount outstanding in another company for example. They are then forcing the applicant to be in contrvention of the act, and at the same same time loosing out on VAT payable to them as VAT cannot be charged!!!! I think the problem lies with the "Higher" Management at SARS they dont understand what is going on at the grass roots level and dont understand the frustration that people have just to get a simple VAT number, I would love to see SARS implement a system whereby you can register for VAT on E-filing get an instant VAT number. . .less by Bernard De Gouveia on April 26 2010, 11:39 Find this comment inappropriate? Report it

VAT NIGHTMARE I am a Chartered Accountant, and can honestly say I would prefer not to handle any VAT registrations - but I do help my existing clients. New clients - sorry sir, I cannot assist you with a VAT app. SARS rules are crazy!!! by Koos on April 26 2010, 12:28 Find this comment inappropriate? Report it

SARS killing small business I will have a problem with VAT leakage until my new company is big enough - although I have all the forms and a business plan showing that I should be "big enough" within 9 months - SARS won't register me. by Killing us on April 26 2010, 12:47 Find this comment inappropriate? Report it

Laduma another SA own goal by Watcher on April 26 2010, 15:58 Find this comment inappropriate? Report it

VAT Registartions @ by Bernard De Gouveia on April 26 2010, 11:39 "They are then forcing the applicant to be in contrvention of the act, and at the same same time loosing out on VAT payable to them as VAT cannot be charged!!!! " I think as long as you have proof that you tried to register, not only once, then you've . .more got a point. . .less by Aki on April 27 2010, 01:38 Find this comment inappropriate? Report it

VAT REG How come you can buy a VAT registered PTY LTD THEN? Also what happens in the event of me having a CC registered with the name I wanted now I go buy a VAT registered PTY LTD and decide to deregister my CC and apply for a name change on the PTY LTD to the . .more same name as the CC I deregistered will this work or not? . .less by Yeehoo on April 27 2010, 21:36 Find this comment inappropriate? Report it

Vat....reason for visiting the premises Reason why auditors of Sars visit the trading business is because Sars get a lot of false leases and vat applications that the clients is not really going to trade. It is important to verify that tenants really exist and the client intention is really to . .more trade. You cannot obtain that info from just any completed form. That is impossible. Let say the member/trustees/directors owes taxes in other taxes they can also owe taxes in the entity they are going to register in future. You can always tell by doing a proper profile on a client what they are going to ...like itc and other checks. One of the main problems for Sars is debt that is why SA struggle so much. The main idea is not to add more debt to Sars books. If you sell or buy a property...money is available for Sars to reduce debt. If the seller or buyer or estate agent or even the conveyances owes taxes collect it. Appoint as agent. If they got money to buy a property and cars then they can pay the debt on Sars books. I fully agree that when clients apply for Vat numbers Sars (and this is done in all other first world countries as well) must visit the trading premises to ensure the client is going to trade and that Sars must make sure that all parties in that specific application is up to date with all taxes. SA and Sars can only benefit from this method. . .less by Vat and Sars on April 28 2010, 05:20 Find this comment inappropriate? Report it

To Vat and Sars You are being silly. Do you work for SARS that you are so defensive? Apart from the examples in the article and other posts which disprove what you have written, what about the laid-off person who wants to start trading from his/her garage or . .more indenting from the family lounge. Will SARS accept these "trading premises"? It is quite legal to register a CC/Company and do this (or do so as a trader/sole proprietor): will "Joe Bloggs Trading As Mammoth Deals" be able to get a VAT registration? To inexperienced and naive tax bureaucrats and politicians this would be infra dig, but the article is about small business. . .less by Micro business - Macro mind on April 29 2010, 12:28 Find this comment inappropriate? Report it

Vat and Sars In fact I am not working for them maybe I will apply for a job at Sars. Just think what I can do with my recommendations...reduce the debt on Sars books and everyone can pay less tax...then everyone benefit. by To Micro business on May 02 2010, 05:37 Find this comment inappropriate? Report it

Vat Registartion Numbers I sit possible to apply for a vat number maybe in the maximum time of one or days. by Kavida Naidoo on August 03 2010, 12:09 Find this comment inappropriate? Report it

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