The Tax Increase And Your Guide To Value Added Tax

Are you aware that the South African National Treasury has raised the VAT rate from 14% to 15% effective from 1 April 2018.

This means that from 1 April 2018, all taxable goods or services supplied by vendors, goods imported, as well as certain services supplied by non-residents to residents for non-taxable or private use (imported services), are subject to the VAT rate of 15%.

TRANSACTION DATE
The VAT rate to apply depends on the time of supply rules. In simple terms, this is the date on which the transaction is deemed to occur according to the VAT Act. The general time of supply rule is the earlier of when –
• an invoice is issued; or
• payment is received.

RATE SPECIFIC RULES

Goods delivered or services performed before 1 April 2018 – VAT at the rate of 14% applies to goods (excluding non-residential fixed property) delivered, or services actually performed before 1 April 2018. This rate specific rule does not apply if the time of supply has been triggered by the issuing of an invoice or payment being made.

Supplies starting before and ending on or after 1 April 2018 – Where goods are delivered or services are performed during a period commencing before 1 April 2018 and ending on or after 1 April 2018, the VAT-exclusive price of the supply must be apportioned on a fair and reasonable basis and allocated to the respective periods. The VAT rate is then applied accordingly. That is, the rate of 14% is applied to the value of supplies before 1 April 2018 and the rate of 15% is applied to the value of supplies from 1 April 2018 onwards.

This rate specific rule applies to –
• goods supplied under rental agreements;
• goods supplied progressively or periodically;
• goods or services supplied in construction activities; and
• services rendered over the period concerned, but does not apply to supplies of fixed property (including residential fixed property).

Goods delivered or services actually performed on or after 1 April 2018 in respect of contracts concluded between 21 February 2018 and 31 March 2018 – Rate specific rules also apply where the time of supply occurs between 21 February and 31 March 2018 (that is, on or after the date of the announcement of the increased VAT rate, but before the effective date of the increased rate). Under this rule, when goods are delivered on or after 23 April 2018, or services are performed on or after 1 April 2018, but the time of supply is triggered between 21 February and 31 March 2018 as a result of any invoicing or payment in relation to the supply, then VAT at the rate of 15% applies. However, if the goods are delivered before 23 April 2018 (that is, within 21 days after 1 April 2018), or the services are rendered before 1 April 2018, then the supplies concerned will be subject to VAT at 14%.

These rate specific rules do not apply –
– where it is an established business practice for payments to be made, or invoices to be issued before the supplies are made;
– in respect of the sale of residential property, certain real rights in residential property and shares in residential share block companies;
– to the construction of a new dwelling by a construction enterprise.

The rate specific rules do, however, apply to non-residential
fixed property.

Supply of residential fixed property
Even if the time of supply is triggered after 1 April 2018 due to payment or registration of the property in the purchaser’s name in a Deeds Registry taking place, the supply of residential fixed property could be subject to VAT at 14%.

This rate specific rule only applies if –
• the contract for the supply was concluded before 1 April 2018; and
• both the payment of the purchase price and the registration of the property will occur on or after 1 April 2018; and
• the VAT-inclusive purchase price was determined and stated as such in the agreement.

For purposes of this rule, “residential property” includes a dwelling and certain real rights and shares in share block companies relating to a right of occupation of or interest in a dwelling. The construction of a new dwelling by a construction enterprise is also included.

Click HERE to download SARS’s Value-Added Tax FAQ Guide.