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Case Law: Don't make the same mistake this guy did with his VAT registration. Avoid a 200% penalty today!

by , 03 February 2016
It's common for VAT vendors to deregister when they fall below the threshold, or for SARS to deregister them when they're non-compliant.

Don't find yourself at the backend of the law, as shall be seen with 'AD CC' in the following VAT case...

AD CC vs. SARS (VAT case #1069) 25th July 2014

What were the facts of the case?

SARS deregistered VAT vendor AD CC in January 2000 because he failed to submit his VAT returns.

He would charge the VAT and issue tax invoices, but he didn't submit the VAT returns or pay over the VAT to SARS.

What happened?

SARS did an audit on AD CC in 2010, in which he was assessed for unpaid VAT.

This resulted in him facing a 200% understatement penalty in terms of the Tax Administration Act.

The vendor then objected and appealed the penalty, stating that he had taken over the business from his father, and didn't know that it had been deregistered.

But he STILL didn't submit VAT returns or pay the VAT.

What did the Court say?

The Court noted that once the vendor was caught, he cooperated fully with SARS, and so it decided to reduce the penalty from 200% to 100%.

The Court held that a fine was still applicable as the vendor was charging VAT and not paying it over to SARS.

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What can you learn from this case?

1.       If you take over a business, check its Vat registration status.
 
2.        If you charge VAT, declare it and pay it over to SARS.
 
3.       DON'T charge any VAT if you're not registered for it!
 
4.       If SARS decides to audit you, always remember that your cooperation can really be to your advantage.
 
*Do you want to learn more useful information on VAT registration? Then subscribe to the Practical VAT Loose Service today. 


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