A couple of weeks ago, I wrote an article on the changes to the threshold
above which it would be compulsory to register for VAT, and also the amount
of letting income which must be received, or accrued, in order to qualify
as a commercial rental establishment. (This latter provision will become
effective on the date of promulgation of the act, at which point it may be
necessary to consider whether you need to deregister your commercial rental
establishment).
The main point I raised in that article was that it is important to be
aware that if you deregister, there may be VAT output liability.
However, insofar as the threshold is concerned, you need not deregister.
You have the choice to continue to be registered voluntarily. However, a
further change to the proposed act is the fact you may no longer be
registered on a voluntary basis, for VAT purposes, if your taxable supplies
do not exceed R20 000, unless the enterprise is a welfare organisation,
shareblock company, or a local authority.
Thus, if you are currently registered for VAT on the basis that you applied
to the commissioner for voluntary registration, because your annual taxable
supplies do not exceed the threshold (previously R150 000, now to be R300
000), but your taxable supplies do not exceed R20 000, you will need to
deregister.
As I mentioned in the last article, on deregistration, you generally have
to pay output tax to the South African Revenue Service (SARS), based on the
lower of the cost, or the market value of all the assets you have, on the
date of deregistration. So, for example, if you use office furniture and
equipment in your business which cost you R10 000, and is now worth R8000,
you would have to pay VAT of R982 to SARS.
But in this instance, concessions have been made to help you:
n You will not have to pay the output tax if you stop qualifying for
registration on or before June 30, 2000, and you were not entitled to claim
a refund of the input VAT you paid when you acquired the assets or rights
in question (this concession also applies if you cease to qualify as a
commercial rental establishment);
n You will not be required to pay the output tax on fixed property to the
extent that you were not permitted to claim an input tax deduction in
respect of that fixed property, provided you request SARS, in writing, to
deregister you for VAT on or before June 30, 2000.
n If you are have to deregister, and the total amount of output VAT you
will be required to pay will be more than R3 000, you will be able to pay
the output tax to SARS in equal monthly instalments, the last of which must
not fall later than February 28, 2001. You will need to request SARS to
approve the number of instalments you wish to make.
The concessions are limited in that they only apply to assets for which you
were not previously allowed to claim an input VAT credit or refund. Thus,
you probably will have some VAT to pay and if it exceeds R3 000 you will
need to apply to SARS. In taking the deferred payment option, though,
remember you will still be charged interest on the outstanding balance and
that payments that you make will be set off first against interest and only
then against the outstanding balance.