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South Africa Recounts Recent VAT Law Changes

by Lorys Charalambous,, Cyprus

29 September 2015

The South African tax authority has newly released guidance on value-added tax law changes that were introduced at the beginning of this year, in its latest edition of VAT Connect, released this month.

The most important amendments to South African VAT law were:

Electronic services - The VAT Act was amended with effect from June 1, 2014, to provide that certain non-resident suppliers of electronic services must register and account for VAT in South Africa. The different types of electronic services are set out in the Electronic Services Regulations which came into effect on June 1, 2014. This year the law was amended to clarify under which circumstances a supplier of electronic services is required to register and that they supply of such goods cannot be charged with VAT at the zero rate under any circumstances.

Relief periods for temporary letting of dwelling by developers – Section 18B was introduced in January 2012 to provide a relief period until December 31, 2014, during which there was a suspension of the liability to declare output tax under section 18(1) for developers that temporarily let dwellings whilst continuing to hold the dwellings as trading stock for sale. The relief period has now been extended until December 31, 2017.

Second-hand goods – Two legislative changes were made regarding second-hand goods. First, the definition of "second-hand goods" was amended with effect from April 1, 2015, to exclude gold and goods containing gold. Secondly, section 16(2)(c) was amended to make it clear that a completed form VAT 264 is an integral part of the records referred to in section 20(8), which must be held by a vendor when deducting notional input tax on second-hand goods acquired.

Imports and exports - The administration of certain rules regarding the import and export of goods from South Africa required some alignment between the VAT Act and the Customs and Excise Act. During 2014 the customs and excise legislative framework was fundamentally restructured by the introduction of the new Customs Control Act, 2014, and the Customs Duty Act, 2014, which are to replace the existing Customs and Excise Act. These new Acts will, however, only come into effect from a future date. Certain new definitions which were introduced and textual amendments which had to be made to the VAT Act, in this regard, will also come into effect on the said future date.

Timing of input tax deduction on importation of goods – Various provisions in the VAT Act were amended with effect from April 1, 2015, to allow a vendor to deduct input tax on imported goods as long as those goods have been released by Customs and provided the relevant documentary proof is held.

Duties and responsibilities of agents – Section 54 was amended with effect from April 1, 2015, to provide that an agent must issue a tax invoice within 21 days of making a supply on behalf of a principal if the agent is required to do so. Furthermore, an agent importing goods on behalf of a principal is, where the agent holds the bill of entry, required to issue a statement to the principal containing certain particulars in regard to importations for a particular period.

Farming inputs – The zero rating under section 11(1)(g), which applies in respect of the purchase of agricultural, pastoral or other goods described in Part A to Schedule 2 for farming purposes, will be repealed with effect from a future date. The date will be determined by the Minister of Finance and published by way of a notice in the Government Gazette, but this will not be before January 20, 2016. The exemption in respect of the importation of such goods in Paragraph 7 to Schedule 1 will also be repealed from the same date. In the meantime, and until the Minister determines the applicable date of repeal, the zero rating for certain farming inputs and the associated exemption on importation of those goods will continue to apply.

Elimination of Category F tax period – With effect from July 1, 2015, the four-monthly tax period known as "Category F" for small business is no longer available. Vendors registered under this category were absorbed into the Category B tax period (bi-monthly).

Bargaining councils – Section 12(l) provides that certain supplies made by bargaining councils to their members are exempt from VAT. The exemption was previously limited to situations where the supplies were covered by membership contributions.

TAGS: South Africa | compliance | Finance | VAT tax authority guidance | VAT special schemes | tax | small business | business | value added tax (VAT) | law | tax authority | services | VAT compliance matters | Africa | Regulations

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