Page 447 - Juta's Indirect Tax

IN 57 VaLue-added tax act: InterPretatIOn nOtes IN 57
Once ful lment of the suspensive conditions and transfer of ownership to the purchaser occurs, the purchaser will be liable to account for input and output tax of that enterprise and for the obligations and responsibilities imposed by the VAT Act from the date of the ful lment of that condition.
In this regard, the supplier is required to account for input and output tax of that enterprise until such time that the suspensive conditions are ful lled and the enterprise is transferred to the purchaser. The obligations and responsibilities imposed by the VAT Act on that enterprise rests on the supplier.
4.16 Tax invoices
Generally, the sale of a business results in the change of a vendor’s registered details. This change in the vendor’s details is not communicated or takes time to be communicated to suppliers of that business to update their records. Accordingly, these suppliers issue tax invoices bearing the incorrect details of the vendor (e.g. name or VAT number).
This creates an administrative dif culty as the purchasing vendor is in possession of tax invoices that are not in compliance with section 20 (4) resulting in the input tax deduction being denied in terms of section 16 (3).
Sections 20 (5A) and 21 (8) make provision for a transitional arrangement for vendors who have acquired an enterprise from another vendor that has subsequently deregistered as a vendor. In this regard, the requirement that a tax invoice, debit or credit note be issued re ecting the name, address and VAT number of the supplier or recipient, as the case may be, will not be applicable for a maximum period of six months from the date of the supply of the enterprise. As a result, the tax invoice, debit or credit note may re ect the name, address and VAT registration number of the vendor that sold the enterprise. This transitional arrangement therefore allows vendors to comply with the provisions of sections 20, 21 and 16.
4.17 Documentary proof
The supply of a going concern which can be zero-rated in terms of section 11 (1) (e) is subject to the supplying vendor retaining certain documentary proof.
In this regard, Interpretation Note 31, ‘Documentary Proof Required to Substantiate a Vendor’s Entitlement to Apply the Zero Rate to the Supply of Goods or Services in terms of Section 11 (3)’, dated 31 March 2005 deals with the documentary proof required for the zero rating of goods and services.
In Interpretation Note 31, the documentary proof required for a supply contemplated in section 11 (1) (e) is the—
• seller’s copy of the zero-rated tax invoice;
• contract of sale between the purchaser and the seller con rming the disposal as a going concern and any other
agreements applicable; and
• purchaser’s notice of registration (VAT103) or proof that purchaser has applied for registration before concluding the
agreement.
5. Conclusion
A vendor applying the zero rate to a supply that does not comply with the requirements set out in this Note is liable for the tax, interest and penalties applicable to that supply.
Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE
Annexure — The Law
Section 1 — De nitions
‘enterprise’ means—
(a) in the case of any vendor, any enterprise or activity which is carried on continuously or regularly by any person in
the Republic or partly in the Republic and in the course or furtherance of which goods or services are supplied to any other person for a consideration, whether or not for pro t, including any enterprise or activity carried on in the form of a commercial, nancial, industrial, mining, farming, shing, municipal or professional concern or any other concern of a continuing nature or in the form of an association or club;
...
Provided that—
...
(v) any activity shall to the extent to which it involves the making of exempt supplies not be deemed to be the
carrying on of an enterprise;
‘invoice’ means a document notifying an obligation to make payment;
‘VAT registration number’, in relation to any vendor, means the number allocated to that vendor by the Commissioner
for the purposes of this Act;
Section 8 — Deemed supplies
(7) The disposal of an enterprise as a going concern, or a part thereof which is capable of separate operation, shall for the purposes of this Act be deemed to be a supply of goods made in the course or furtherance of such enterprise.
(16) (a) The supply by a vendor—
(i) of any goods (other than xed property acquired prior to the commencement date by a vendor who is a natural
person if such property was used by him mainly as his private residence and no deduction of any amount has been
made by him under section 16 (3) in respect of such property); or (ii) of services,
where such goods or services were acquired or imported by him partly for the purpose of consumption, use or supply in the course of making taxable supplies (including supplies which would have been taxable supplies if section 7 of this Act had been applicable prior to the commencement date) and were held or utilized by him partly for the said purpose immediately prior to the supply by him of such goods or services, shall be deemed to be made wholly in the course or furtherance of his enterprise.
(b) The supply by any vendor of xed property acquired prior to the commencement date by such vendor, being a natural person, shall be deemed to be made otherwise than in the course or furtherance of his enterprise provided—
Juta’s IndIrect tax 2016 439