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What's the solution if you've been charging Vat without a Vat registration number?

by , 14 May 2015
Some companies charge Vat without a Vat registration number. The regulations in this situation are quite specific so we'll give you an example to make this clearer.

So, in the following specific case, a start-up (PTY) Ltd has been charging some of their clients Vat without being Vat registered or having a Vat registration number. They did this to be considered for certain business opportunities. They have later registered for Vat but didn't backdate the registration all the way to when they originally started charging our clients Vat.

In a nutshell, they levied and collected the output tax, but never paid it. What happens to this tax? Should they refund their clients seeing as that's what they would've claimed as input tax?

Here's our answer:

No, you must issue the clients with proper tax invoices, and pay that Vat over to SARS. Only a registered Vat vendor is entitled to levy Vat on the supply of goods or services. The vendor is then required to issue a tax invoice containing, amongst other details, its Vat registration number when supplying goods or services in the course of its enterprise.

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The recipient of the goods or services is similarly only entitled to an input tax deduction provided they're in possession of a valid tax invoice at the time they claim the input tax deduction. The recipients of the supplies would therefore not have been entitled to an input tax deduction on the basis that they wouldn't have been in possession of a valid tax invoice containing your (the suppliers) Vat registration number.

Note that on the basis that your entity wasn't liable to register as a vendor and wasn't registered for Vat, you, weren't entitled to levy Vat on supplies made prior to registration. (Section 7 read together with the definition of 'output tax' in Section 1 of the Vat Act).

Moreover, suppliers who aren't registered as vendors for Vat purposes aren't entitled to levy any Vat and can only issue an invoice without Vat.

As a consequence, your company has committed an offence in terms of Section 58(j) of the Vat Act and if convicted will be liable to a fine or imprisonment. The Vat previously levied should be credited and refunded to clients concerned

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