November 8, 2024 • 9 mins
Listen to Micaela Paschini, Tax Attorney at Tax Consulting South Africa, on Hot FM as she delves into the essentials of VAT compliance for businesses.
Micaela covers key topics such as the threshold for mandatory VAT registration, the process of paying VAT, and the implications of failing to register. Do not miss this segment to keep your business compliant and informed on VAT essentials!
For more information on VAT compliance, contact us: https://bit.ly/40EGkYC
#HotFM #TaxConsulting #TaxCompliance #VAT
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Jerremy Maggs (00:07):
now every wednesday on the program, our
weekly question.
Give us a financial problem ora query on business at hot 1027.
co.
za and we'll find the very bestperson to answer it.
And in this case, it's michaelapaschini, who is a tax attorney
at Tax Consulting South Africa,who is answering a question
(00:27):
from Mario Berrario who writesDear Jeremy, I run a small
business which is now eligibleto charge VAT value-added tax.
However, I don't have thecapacity to manage the
administration of this.
I don't charge VAT on myinvoices and I haven't been
successful in registering.
In any case, am I breaking thelaw?
Basically, what are theimplications of me not charging
(00:51):
VAT to my clients?
So, michaela, good evening toyou and a very warm welcome.
Let's see if we can help.
Mario, what are the legalrequirements, first of all, for
VAT registration in South Africa, and is it any different for
small business?
Micaela Paschini (01:05):
Good evening, Jeremy, and thank you so much
for having me.
So a vendor is generallyrequired to register for VAT and
account for VAT once the valueof their taxable supplies
exceeds a million rand in a12-month period.
So the moment thoserequirements are met, it is
required by law that the vendorregisters for VAT.
Jerremy Maggs (01:28):
So that's all encompassing, because a million
rand, while it might sound a lotto many people, for a business
it's a fairly low threshold,isn't it?
Micaela Paschini (01:36):
No, you do make a very good point on that,
but unfortunately that's therequirement set by law, and the
obligation to levy VAT andcharge VAT on your goods or
services arises the moment thatthreshold is exceeded.
Jerremy Maggs (01:51):
Now I'm assuming that Mario is not doing the
right thing by not charging VAT,so before we work out how he
can get this right, I'm assumingthat his business could be
penalized for not doing this nowthat he is eligible.
Micaela Paschini (02:07):
Yes, unfortunately that is the case.
So it's important to rememberthat it's not VAT registration
that makes him liable, it's themoment he exceeds the threshold,
as mentioned.
So by not registering for VATat this point, if SARS does
catch a business like that, itcan be an absolute disaster,
because SARS does then end upsaying that all prices are
(02:29):
inclusive of VAT.
Just to put that into anexample say you made two million
Rand in turnover last year.
Sars will then say 15% of thatbelongs to them and must be paid
over to them, even though youknow you might have already
spent that money or used it.
Sars will also then likelyconduct an audit and raise
(02:50):
interest and penalties.
Jerremy Maggs (02:52):
Michaela, do you think that this is a common
problem?
Is it your sense that manypeople might be in the same
position as Mario and arerunning foul of the law?
Micaela Paschini (03:01):
I don't think it's a rare issue to have.
I do think there are certainindividuals or companies who
aren't registered, eitherbecause of as mentioned by the
listener administrative hurdles,or perhaps they're just not
unaware.
But unfortunately these aren'texcuses in terms of our tax
legislation and can evenconstitute a criminal offence
(03:23):
for failing to register andsubmit returns.
Jerremy Maggs (03:26):
All right, maria, I hope you're listening very
closely to this, because I'msensing after this conversation,
you need to start moving fairlyquickly.
But he does raise aninteresting point, michaela why
might he be struggling toregister for VAT and what steps
can he take to overcome this?
Micaela Paschini (03:45):
Look.
Registration can be done eithervia e-filing or it can be done
by making an appointment withSARS.
What we have seen is that thereare a range of supporting
documents that SARS requests,and sometimes an individual or
company is not able to sourceall of those documents or comply
with the requirements.
In such a case, it is ourrecommendation to consult with a
(04:13):
tax professional just to assistin bringing the vendor's
situation up to compliance.
Jerremy Maggs (04:16):
In your experience, whether you make the
appointment or do it viae-filing.
Is it fairly easy, though?
My understanding of this isthat it's quite quick and
painless.
Micaela Paschini (04:29):
It's generally quite quick and painless.
There are instances where itmight be difficult, perhaps due
to the nature of the vendor'sbusiness, the nature of their
supplies.
So it does unfortunately dependon a case-by-case basis and
again, best is to consult a taxprofessional.
Jerremy Maggs (04:47):
Maria doesn't tell us what type of business
he's in, but where might thosehiccups be?
Would you be able to tell mewhat sort of businesses might
find it more problematic thanothers?
Micaela Paschini (04:56):
So we generally see that where the
supplier, might you know, borderon making exempt supply
supplies that are not subject toVAT, or where they don't have
the correct contracts ordocuments in place in order to
show that they do actually meetthe requirements to register for
VAT, so, michaela, let's assumenow that Mario follows process,
(05:18):
he is registered forvalue-added tax.
Jerremy Maggs (05:22):
If he has invoices without VAT, is there
any way to retroactively accountfor the tax once he's
registered?
Micaela Paschini (05:30):
Look, the difficult position he's in is
that legislation deems theprices that he has charged
historically as inclusive ofthat.
Best would be, in such instance, to follow the voluntary
disclosure program implementedby SARS, just to let them know.
Look, you know, I made amistake.
(05:50):
I'd like to voluntarilydisclose that I was supposed to
register for VAT.
I did not.
I'm being full and frank here.
And in such an instance itmight be possible for SARS to
then waive those penalties thatthey would have charged.
But further than that, it's notreally possible to go back and
(06:10):
claim the VAT back from thecustomers etc.
Jerremy Maggs (06:14):
So I want to go back to the registration very
quickly.
Are there a lot ofadministrative burdens that come
with the registration and arethere tools, aside from handing
it over to a tax professional,to ease or overcome the process?
Micaela Paschini (06:27):
Yes, certainly , yes, certainly.
Sars has published on theirwebsite certain step-by-step
indications of how a vendor cango about registering for
value-added tax and generally.
Again, if it's a simplesituation, they can just follow
those steps, but it's importantto make sure it's done the right
(06:47):
way and in compliance with theguidance issued by SARS on that.
Jerremy Maggs (06:53):
And Michaela.
I think this might be the mostimportant question and I think
people have got to realize thatonce you become the VAT vendor,
it's not your money when itcomes in and often people don't
plan financially in terms ofcash flow once they have
registered for VAT.
Terms of cash flow once theyhave registered for VAT.
(07:14):
I guess the best advice is toput that aside completely and
not use it as part of youroperating expenses or cash flow
for business.
Micaela Paschini (07:20):
That is completely correct.
As you mentioned, you know, VATvendors are really just the
collecting agents for SARS,Collecting the VAT, paying it
over to SARS.
It never really becomes thevendor's money and shouldn't be
treated as such.
Jerremy Maggs (07:35):
So is there any advice, then, as we come to the
end of this conversation,michaela, that you would give to
small business ownersstruggling with VAT compliance,
given that I'm suspecting thatMaria is not the only person
that might be in this position.
So Maria is not the only personthat might be in this position.
Micaela Paschini (07:52):
Certainly.
I would definitely recommendthat such businesses have a look
and make sure whether they doin fact meet the threshold.
If they do, it's important tofirst of filed.
(08:12):
They can explore options, suchas the VDP program that's
implemented by SARS, to just tryand mitigate those penalties,
especially when it relates tohistorical noncompliance.
You know, sars can go back acouple of years and raise
interest in penalties, whichcould of course cripple a
business, and SARS is all aboutcompliance, compliance,
(08:35):
compliance.
So it's best to get thosematters sorted out sooner rather
than later.
Jerremy Maggs (08:40):
Mario Baradio.
I am reminded of that old adagethere are two things that are
certain in life.
What are they?
I'm looking at my engineer, EdEd death and taxes.
We're both nodding our head.
So, first of all, MichaelaPaschini, thank you very much
indeed.
Tax attorney at Tax ConsultingSouth Africa.
(09:03):
If you have a query, if you'vegot a financial problem, email
us at business at hot1027.coza,and, as we did with Michaela, we
will find the very best personto try and answer that query.
Mario, you need to go and getregistered and Michaela, thank
you very much.
now every wednesday on the program, our
weekly question.
Give us a financial problem ora query on business at hot 1027.
co.
za and we'll find the very bestperson to answer it.
And in this case, it's michaelapaschini, who is a tax attorney
at Tax Consulting South Africa,who is answering a question
(00:27):
from Mario Berrario who writesDear Jeremy, I run a small
business which is now eligibleto charge VAT value-added tax.
However, I don't have thecapacity to manage the
administration of this.
I don't charge VAT on myinvoices and I haven't been
successful in registering.
In any case, am I breaking thelaw?
Basically, what are theimplications of me not charging
(00:51):
VAT to my clients?
So, michaela, good evening toyou and a very warm welcome.
Let's see if we can help.
Mario, what are the legalrequirements, first of all, for
VAT registration in South Africa, and is it any different for
small business?
Micaela Paschini (01:05):
Good evening, Jeremy, and thank you so much
for having me.
So a vendor is generallyrequired to register for VAT and
account for VAT once the valueof their taxable supplies
exceeds a million rand in a12-month period.
So the moment thoserequirements are met, it is
required by law that the vendorregisters for VAT.
Jerremy Maggs (01:28):
So that's all encompassing, because a million
rand, while it might sound a lotto many people, for a business
it's a fairly low threshold,isn't it?
Micaela Paschini (01:36):
No, you do make a very good point on that,
but unfortunately that's therequirement set by law, and the
obligation to levy VAT andcharge VAT on your goods or
services arises the moment thatthreshold is exceeded.
Jerremy Maggs (01:51):
Now I'm assuming that Mario is not doing the
right thing by not charging VAT,so before we work out how he
can get this right, I'm assumingthat his business could be
penalized for not doing this nowthat he is eligible.
Micaela Paschini (02:07):
Yes, unfortunately that is the case.
So it's important to rememberthat it's not VAT registration
that makes him liable, it's themoment he exceeds the threshold,
as mentioned.
So by not registering for VATat this point, if SARS does
catch a business like that, itcan be an absolute disaster,
because SARS does then end upsaying that all prices are
(02:29):
inclusive of VAT.
Just to put that into anexample say you made two million
Rand in turnover last year.
Sars will then say 15% of thatbelongs to them and must be paid
over to them, even though youknow you might have already
spent that money or used it.
Sars will also then likelyconduct an audit and raise
(02:50):
interest and penalties.
Jerremy Maggs (02:52):
Michaela, do you think that this is a common
problem?
Is it your sense that manypeople might be in the same
position as Mario and arerunning foul of the law?
Micaela Paschini (03:01):
I don't think it's a rare issue to have.
I do think there are certainindividuals or companies who
aren't registered, eitherbecause of as mentioned by the
listener administrative hurdles,or perhaps they're just not
unaware.
But unfortunately these aren'texcuses in terms of our tax
legislation and can evenconstitute a criminal offence
(03:23):
for failing to register andsubmit returns.
Jerremy Maggs (03:26):
All right, maria, I hope you're listening very
closely to this, because I'msensing after this conversation,
you need to start moving fairlyquickly.
But he does raise aninteresting point, michaela why
might he be struggling toregister for VAT and what steps
can he take to overcome this?
Micaela Paschini (03:45):
Look.
Registration can be done eithervia e-filing or it can be done
by making an appointment withSARS.
What we have seen is that thereare a range of supporting
documents that SARS requests,and sometimes an individual or
company is not able to sourceall of those documents or comply
with the requirements.
In such a case, it is ourrecommendation to consult with a
(04:13):
tax professional just to assistin bringing the vendor's
situation up to compliance.
Jerremy Maggs (04:16):
In your experience, whether you make the
appointment or do it viae-filing.
Is it fairly easy, though?
My understanding of this isthat it's quite quick and
painless.
Micaela Paschini (04:29):
It's generally quite quick and painless.
There are instances where itmight be difficult, perhaps due
to the nature of the vendor'sbusiness, the nature of their
supplies.
So it does unfortunately dependon a case-by-case basis and
again, best is to consult a taxprofessional.
Jerremy Maggs (04:47):
Maria doesn't tell us what type of business
he's in, but where might thosehiccups be?
Would you be able to tell mewhat sort of businesses might
find it more problematic thanothers?
Micaela Paschini (04:56):
So we generally see that where the
supplier, might you know, borderon making exempt supply
supplies that are not subject toVAT, or where they don't have
the correct contracts ordocuments in place in order to
show that they do actually meetthe requirements to register for
VAT, so, michaela, let's assumenow that Mario follows process,
(05:18):
he is registered forvalue-added tax.
Jerremy Maggs (05:22):
If he has invoices without VAT, is there
any way to retroactively accountfor the tax once he's
registered?
Micaela Paschini (05:30):
Look, the difficult position he's in is
that legislation deems theprices that he has charged
historically as inclusive ofthat.
Best would be, in such instance, to follow the voluntary
disclosure program implementedby SARS, just to let them know.
Look, you know, I made amistake.
(05:50):
I'd like to voluntarilydisclose that I was supposed to
register for VAT.
I did not.
I'm being full and frank here.
And in such an instance itmight be possible for SARS to
then waive those penalties thatthey would have charged.
But further than that, it's notreally possible to go back and
(06:10):
claim the VAT back from thecustomers etc.
Jerremy Maggs (06:14):
So I want to go back to the registration very
quickly.
Are there a lot ofadministrative burdens that come
with the registration and arethere tools, aside from handing
it over to a tax professional,to ease or overcome the process?
Micaela Paschini (06:27):
Yes, certainly , yes, certainly.
Sars has published on theirwebsite certain step-by-step
indications of how a vendor cango about registering for
value-added tax and generally.
Again, if it's a simplesituation, they can just follow
those steps, but it's importantto make sure it's done the right
(06:47):
way and in compliance with theguidance issued by SARS on that.
Jerremy Maggs (06:53):
And Michaela.
I think this might be the mostimportant question and I think
people have got to realize thatonce you become the VAT vendor,
it's not your money when itcomes in and often people don't
plan financially in terms ofcash flow once they have
registered for VAT.
Terms of cash flow once theyhave registered for VAT.
(07:14):
I guess the best advice is toput that aside completely and
not use it as part of youroperating expenses or cash flow
for business.
Micaela Paschini (07:20):
That is completely correct.
As you mentioned, you know, VATvendors are really just the
collecting agents for SARS,Collecting the VAT, paying it
over to SARS.
It never really becomes thevendor's money and shouldn't be
treated as such.
Jerremy Maggs (07:35):
So is there any advice, then, as we come to the
end of this conversation,michaela, that you would give to
small business ownersstruggling with VAT compliance,
given that I'm suspecting thatMaria is not the only person
that might be in this position.
So Maria is not the only personthat might be in this position.
Micaela Paschini (07:52):
Certainly.
I would definitely recommendthat such businesses have a look
and make sure whether they doin fact meet the threshold.
If they do, it's important tofirst of filed.
(08:12):
They can explore options, suchas the VDP program that's
implemented by SARS, to just tryand mitigate those penalties,
especially when it relates tohistorical noncompliance.
You know, sars can go back acouple of years and raise
interest in penalties, whichcould of course cripple a
business, and SARS is all aboutcompliance, compliance,
(08:35):
compliance.
So it's best to get thosematters sorted out sooner rather
than later.
Jerremy Maggs (08:40):
Mario Baradio.
I am reminded of that old adagethere are two things that are
certain in life.
What are they?
I'm looking at my engineer, EdEd death and taxes.
We're both nodding our head.
So, first of all, MichaelaPaschini, thank you very much
indeed.
Tax attorney at Tax ConsultingSouth Africa.
(09:03):
If you have a query, if you'vegot a financial problem, email
us at business at hot1027.coza,and, as we did with Michaela, we
will find the very best personto try and answer that query.
Mario, you need to go and getregistered and Michaela, thank
you very much.
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