There is increasing discussion surrounding the highly contentious subject of a VAT rate increase. As a result, very little, if anything, is being said of the other areas of the VAT Act that require amending. In this regard, VAT amendments cannot be ignored as it is essential that the VAT Act remains applicable to business and technological advancements to ensure an efficient and well-designed VAT system.
According to PwC, the current provisions to tax e-commerce services, which were implemented with effect from 1 June 2014 are very limited and subsequent undertakings to review the scope of services have not, as yet, gained any momentum. The time has therefore come for the relevant provisions to be updated taking into account worldwide trends and the OECD’s VAT/GST Guidelines on the taxation of the cross border supply of services and intangibles.
Certainty is required after the relief provided to property developers expired on 1 January 2018, creating a significant VAT liability. As such, developers who temporarily let their properties as dwellings for a period not exceeding 36 months, whilst retaining the intention to sell the properties, are now required to pay output tax on the market value of such properties. National Treasury has not extended this relief despite numerous requests. It is strongly recommended that a proposed amendment be included in the Budget to make provision for payment terms for the output tax liability due as at 1 January 2018 to ease the cash flow burden on developers. These payment terms are well justified considering that the property developers are required to pay the output tax on properties not yet sold. Furthermore, such assistance has been previously been granted to other classes of taxpayers.
The 2017 amendment to update the reference of an obsolete regulation defining brown bread resulted in much debate. SARS issued an arrangement under section 72 of the VAT Act, to maintain the status quo of all classes of brown bread being zero rated. This interim measure however expires on 31 March 2018. Undertakings by National Treasury to the Portfolio Committee on Finance confirmed that the Budget will provide more clarity on the future VAT rate applicable to the categories of brown bread.
The refusal by SARS to allow the backdating of an alternate apportionment method for the deduction of input tax has been the centre of many debates in recent years. In this regard, it is important to note that the refusal to allow the backdating of an alternative apportionment methodology impacts a vendor’s entitlement to deduct the correct amount of input tax for prior years. Furthermore, it prevents a vendor from rectifying the over deduction of input tax for prior years as the vendor is not in possession of an approved alternative methodology, despite the fact that SARS may have granted approval for the use of the alternative method for future years. It is therefore strongly recommended that the backdating of apportionment methodologies be allowed in certain instances and that the Budget makes provision for this.
The re-write of the export regulation in 2014 rectified considerable shortcomings of the previous export regulation. However, the export regulation urgently requires an update to keep abreast with an ever advancing commercial environment.
The promulgation of the Insurance Act No.17 of 2018, which now provides for both long and short-term insurance, will require certain amendments to the VAT Act to ensure alignment.
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