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South Africa

market-related price been paid, the recipient would not be entitled to a full input tax deduction – value is the open market value of the supply;

  • cancellation of vendor’s VAT registration – value is the lesser of the cost or the open market value of all assets at deregistration;

  • instalment credit agreement – value is the cash value (i.e. cash price, excluding finance charges);

  • application of goods (which were acquired for taxable purposes), for non-taxable purposes – value is the open market value of the goods;

  • supply of certain residential accommodation for an uninterrupted period exceeding 28 days – value is 60% of the all- inclusive charge;

  • exportation of secondhand goods

    • value is the purchase price to the supplier;

  • fringe benefits – value is the cash equivalent of the benefit for income tax purposes;

  • supply of entertainment if input tax was denied on the goods or services acquired to supply the entertainment – value is nil;

  • no price is paid and a special rule does not apply – value is nil.

VAT compliance

Accounting basis and tax period

Tax periods are periods of one, two, four, six or twelve months, depending on the vendor’s circumstances:

  • 1 month – compulsory for vendors with annual taxable turnover in excess of ZAR30 million; other vendors may apply;

  • 4 months – small businesses with annual taxable turnover not exceeding ZAR1.5 million may apply;

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  • 6 months – farming enterprise with annual taxable turnover not exceeding ZAR1.5 million may apply;

  • 12 months – companies and trusts letting goods and providing administrative services to related persons on an annual basis may apply;

  • 2 months – all other vendors.

Returns and payment of VAT

VAT returns must be filed by the 25th day after the end of the tax period. The return may be filed electronically, in which case the time limit for filing the return is the last business day of the month.

VAT payments can be made in cash, by cheque (limited to ZAR5 million), debit order (limited to ZAR500,000), by bank transfer or electronically. VAT payments must be made to SARS by the 25th day after the end of the tax period (or the last preceding business day). When paying by debit order or when using the e-filing and e-payment options, payment must be made by the last business day of the month.

Interest and penalties

Interest and penalties are levied in the case of:

  • late payment by a vendor – penalty of 10% is levied on the outstanding VAT amount;

  • payment made after the first day of the month in which payment is due – interest is levied on the outstanding VAT due at a rate fixed from time to time by the Minister of Finance; and

  • evasion of VAT or fraud – additional tax of up to 200% and criminal prosecution.

Refunds

If a payment is not made within 21 business days of the return being

received, interest is payable by SARS, provided the return was completed correctly and SARS was not prevented from auditing the refund claim.

Objections and appeals

A person who is aggrieved with an assessment or certain decisions may lodge an objection in the prescribed form within 30 business days. If the person is dissatisfied with SARS’ decision, an appeal may be lodged within 30 business days. Depending on the specific circumstances, an appeal may be dealt with by:

  • the ‘alternative dispute resolution’ process – an informal and cost- effective method of dispute resolution, outside the litigation arena;

  • the Tax Board – a more informal and inexpensive process (compared to the Tax Court) for appeals not exceeding ZAR500,000;

  • the Tax Court – a formal court process; or

  • the High Court and/or Supreme Court of Appeal – appeal by any party who feels aggrieved by the judgment of the Tax Court.

Time limits

The maximum period for the recovery of VAT by SARS is five years. This limitation does not apply where the VAT has already been assessed during the five-year period, the failure to pay VAT was intentional, the responsible person did not act in good faith and any assumption as to VAT liability was not based on reasonable grounds but was due to negligence.

Input tax must generally be deducted within five years of the time when the input tax was first claimable. However, if the non-deduction of input tax was

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