Page 450 - Juta's Indirect Tax

IN 61 VaLue-added tax act: InterPretatIOn nOtes IN 61
• did not result in nancial loss (including loss of interest) to the state, having regard to the output tax and input tax relating to the supply in respect of which interest is payable; or
• did not bene t the person concerned or any other person under the control or acting on behalf of that person nancially (taking interest into account) by not effecting payment within the prescribed period.
2.2 From 1 April 2010
The interest charged in respect of the late payment of tax post 1 April 2010 may be remitted by the Commissioner where he or she is satis ed that the non-payment of VAT was due to circumstances beyond the control of the person concerned or any other person under the control or acting on behalf of that person.
3. The law
For ease of reference, section 39 of the VAT Act is quoted in the Annexure.
4. Application of the law
4.1 General principles
Interest is, in terms of section 39, charged in situations where a person has failed to pay an amount of VAT or additional tax as required in terms of the VAT Act. The interest on unpaid VAT is payable for each month or part thereof and is calculated from the rst day of the month following the month during which payment of the VAT was due. In order for the Commissioner to consider remitting interest that has been levied in terms of section 39, the person concerned must make a request in writing. The person bears the burden of proving that the facts and circumstances of the case meet the requirements of the applicable law for the remission of the interest in whole or in part. Each case will be considered on its own merits.
Example 1 — Interest imposed pre- and post 1 April 2010
Facts:
A vendor who is liable to pay VAT by 25 January 2010 fails to make the necessary payment until 10 May 2010.
Interest was charged on the unpaid VAT at the prescribed rate for February, March, April and May 2010.
Result:
Any request for remission of interest charged for February and March 2010 must meet the criteria for remission of interest which applies for the period before 1 April 2010 (see 2.1) whereas the request for remission of interest charged for April and May 2010 will be considered against the criteria which came into effect on 1 April 2010 (see 2.2).
4.2 Five year limitation on refund of interest
Notwithstanding the fact that the Commissioner may be satis ed that the interest imposed in terms of section 39 may be remitted under section 39(7)(a), such refund cannot be made in terms of section 44(2) read with section 44(3) where the application for the refund is made more than ve years from the date on which the payment of interest was made. An application for the remission of interest resulting in a refund that will fall within the aforementioned ve year limitation will not, therefore, be considered by the Commissioner.
Furthermore, no refund will be made where the Commissioner is satis ed that the payment of interest was made in accordance with the practice generally prevailing when the payment was made, unless the claim for the refund is received by the Commissioner within six months of the date of payment.
4.3 Remission of interest
4.3.1 Pre-1 April 2010
(a) No nancial loss to the state
The rst alternative mentioned in 2.1 allows the Commissioner to consider the remission of interest, in whole or in part, taking into account whether the state suffered a loss as a result of the non-payment of the tax on a supply, having regard to the input and output tax relating to that supply. A vendor who did not pay the tax on a taxable supply of goods or services and who can satisfy the Commissioner that the recipient of the supply who is a vendor was entitled to deduct the full amount of the input tax but did not deduct such amount, can request the Commissioner to remit the interest on the non-payment of the tax because having regard to the input tax and output tax on the supply, there was no loss to the state.
The rst alternative in 2.1 is not applicable to a vendor who failed to pay the VAT levied on the importation of goods into the Republic of South Africa due to the fact that section 39(7)(a)(i) requires an enquiry regarding output and input tax relating to the supply. As the VAT payable in respect of the importation does not fall within the ambit of output tax as de ned, this provision does not apply. A vendor who applies for remission of interest in situations where the vendor alleges that having regard to the input and output tax of a supply there is no loss to the state, needs to provide a written statement setting out the facts and a statement from the recipient of the supply con rming the facts relating to the recipient.
Example 2 — Circumstances determining whether or not the state suffers a nancial loss
Facts:
Vendor A made a standard-rated supply of equipment to vendor B. Both vendors fall within Category A. Vendor A who is liable to pay VAT by 25 March 2010 made payment on 2 April 2010 and interest was levied in terms of section 39(1). As vendor A did not issue a tax invoice in respect of the supply of the equipment to vendor B, vendor B could not deduct the VAT incurred as input tax in its return which was submitted on 25 March 2010.
442 Juta’s IndIrect tax 2016