These changes affect the way importers will need to handle VAT
In future, importers will be requested to provide security to SARS up to the value of the deferment limit and the amount of security requested depends on the risk profile of the applicant. According to Mondaq.com, SARS may allow the deferment of payment of duties subject to certain conditions and for such periods as it may determine. This is in terms of section 39(1) of the Customs and Excise Act, No. 91 of 1964 (Customs and Excise Act). This deferment also applies to import Vat levied in terms of section 13(6) of the Value-Added tax Act No. 89 of 1991 (Vat Act).
Currently, at the end of the 30 day period the importer is allowed a further seven days within which to pay the deferred import duty and Vat to SARS.
Moreover, the 30 day deferment cycle may commence on any day of the month beginning with the 1st up to the 28th day of the month, as actual regulations state.
Not any more.
When the changes are affected, there will be a pre-approved deferment limit in place which limits the amount of duty and Vat that may be deferred for the deferment cycle. If that amount is exceeded the importer won't be able to defer more import duty and Vat for the rest of that cycle, notes the same source.
Tax practitioners aren't happy with the changes and with SARS deferment scheme.
They say this produces certain complications with regard to the claiming of an input tax deduction on the Vat paid on imported goods. They also complained about the recent amendments to section 16(3)(a)(iii) of the Vat Act which deals with the claiming of input tax deductions.
From 1 April 2015, a vendor is now required to deduct the Vat payable on the importation of goods in respect of which tax period payment was made to SARS. According to Mondaq.com, the requirement for a taxpayer to have a tax invoice prior to claiming an input tax credit was therefore removed.
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More changes make this process even more compliacted for importers
Moreover, another change to section 16 was introduced by the Taxation Laws Amendment Act No. 43 of 2014 ("second amendment") on 20 January 2015. It stats thatan input tax deduction will be allowed to be made in respect of import Vat charged in respect of goods imported by the vendor and released in terms of the Customs and Excise Act.
SARS explained its new decision by the fact that the first amendment resulted in the input tax claim being potentially delayed by one or two months until the vendor has paid the import VAT in full and that this resulted in a negative cash flow implication for the importer.
As a consequence, the same source explains, SARS proposed that the requirement for payment to occur before the input tax deduction may be claimed be deleted and replaced with the requirement that the importer proves that Customs has released the goods in terms of the Customs and Excise Act.
Including the requirement of release by Customs means preventing the deduction of input tax in stances where the bill of entry is passed through Customs prior to the goods arriving in South Africa. This would occur in instances where the importer pre-clears the goods, pays the import taxes and would effectively be able to make a premature deduction of input tax before the goods arrive in South Africa.
According to the latest news, the second amendment became operational on 1 April 2015 and SARS plans to amend the deferment period as well by amending the Rules of the Customs and Excise Act to align it to the Vat period.
The business people in the field are not sure of how practical the calendar month deferment and the "one payment" date for all would be, saying that they will have to deal with a significant impact on the cash flow.
They are also concerned with respect to the current DA 650 application for deferment forms that were completed and approved and whether new applications need to be submitted to Customs. In this perspective, draft Rules will be released for comment in due course and the proposed implementation date is said to be 1 July 2015.
Importers are advised to express their concerns and state the problems they think they might encounter thanks to the new the deferment scheme.