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What are the consequences of failing to register for Vat?

by , 14 March 2014
SARS takes Vat registration seriously. If you're liable to register for Vat, but fail to do so, you'll face the following consequences...

You can't get away with avoiding or failing to register for Vat!

The Practical Vat Loose Leaf Service says any person who is liable to register for Vat but fails to do so is guilty of an offence and will be liable on conviction to a fine or imprisonment for a period not exceeding 24 months.

That's not all.

The Loose Leaf Service goes on to say 'that person will also be liable for the output tax, which should have been charged on taxable supplies made - notwithstanding the fact that he hasn't charged Vat.'

Gross turnover would then be regarded as sales inclusive of Vat and this would have devastating consequences on the financial profile of the business.

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Registering for Vat allows you to claim input tax back on Vat returns.

To register for Vat your business must meet four requirements.

Find out what these are here.

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If you're liable to register for Vat, make sure you do so to avoid to a fine or two years in jail

If you get caught out in this way, you'll effectively be sacrificing part of your profits to pay the Vat you failed to collect from your clients. And you'll have no right of recourse to recover that money you've had to pay over to SARS once the transactions have been concluded.

In addition, interest and penalties may be imposed and this means you may be prosecuted.

Penalties are currently levied at 10% and interest at the prevailing rate.

While that may be the case, SARS has the power to also apply the provisions of Section 60 of the Vat Act, which allows the Commissioner to impose additional tax of up to 200%. This will be levied on the output Vat you'll be held accountable for.

As you can see, the penalties for failing to register for Vat are huge! Make sure you comply. If you need more info on Vat registration (the requirements, turnover thresholds and so on), be sure to check out this article.



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