Page 1142 - SAIT Compendium 2016 Volume2

EXPLANATORY MEMORANDUM ON THE TAXATION LAWS AMENDMENT BILL, 2015
III. Proposal
It is proposed that the section 11(2)(r) be amended to ensure that vocational training is zero rated to include instances where the training is provided through a third party vendor for the bene t of an employer who is not resident in South Africa. In order to clarify the policy intent a proviso has been introduced in section 11(2)(r) to exclude situations where the employer contracts with a vendor or resident to provide the training and this vendor or resident further sub- contracts the services to another vendor.
IV. Effective date
The proposed amendments will come into operation from 1 April 2016.
6.4 TIME OF SUPPLY: CONNECTED PERSONS (UNDETERMINED AMOUNTS)
[Applicable provisions: New proviso to Section 9(2)(a) and Section 10(4)(a)]
I. Background
Section 9(4) of the VAT Act provides that where goods are supplied (other than in terms of an installment credit agreement or a rental agreement) and the consideration for the supply of such goods is not determined at the time the goods are appropriated, the supply of the goods is deemed to take place at the time when payment for the supply is due or is received, or an invoice relating to the supply of goods is issued, whichever is the earlier. However, this rule does not apply to connected persons. With regard to connected persons, a special time of supply rule available in section 9(2)(a) applies. Where the supplies are made between connected persons and the consideration for the supply cannot be determined when the goods are appropriated, VAT is payable when the goods are removed or are made available or when the services are performed, whichever is the earlier.
II. Reasons for change
If the supply is between connected persons, then the provisions of section 9(2)(a) apply. These rules trigger output tax when the goods are removed or when the services are rendered. Where the value of goods cannot be determined when the goods are removed or services rendered, then the amount of the output tax payable cannot be calculated. This leads to an impractical situation of making the provisions of the VAT Act dif cult to implement.
III. Proposal
It is proposed that the following amendments be made in the VAT Act to make provision for the time of supply between connected persons in instances where the recipient vendor is fully taxable and where the recipient is partially taxable.
• Recipient vendor fully taxable
It is proposed that a new proviso be inserted to section 9(2)(a) of the VAT Act that renders the provisions of section 9(2) (a) not to apply to connected persons who are fully taxable and where the consideration cannot be determined at the time the supply is deemed to be made.
• Recipient vendor partially taxable
It is proposed that an amendment be made to section 10(4)(a) to deem the consideration to be the open market value in instances where the supply is between connected persons and the consideration cannot be determined at the time of the supply. In instances where the open market value is dif cult to quantify at the time of supply, the taxpayer may make an application to the Commissioner in terms of Section 3(4) for approval of an alternative method of determination.
IV. Effective date
The proposed amendments will come into operation from 1 April 2016.
6.5 SABC VAT ACCOUNTING METHOD
[Applicable provision: Section 15(2)(a)]
I. Background
The South African Broadcasting Corporation (SABC) Ltd., a Public Finance Management Act (PFMA) Schedule 2 major public entity, derives its revenue from advertising, sponsorships, grants and television license fees. In terms of the Broadcasting Act No. 4 of 1999, anyone who acquires a television set or possesses or uses a television set or any device capable of receiving a broadcast television signal must have a valid TV license and pay their annual television license fee. The SABC issues notices of renewal 2 months prior to the expiry of the TV license. These notices are viewed as tax invoices. Under normal VAT rules, the SABC should account for output tax on the earlier of an issued invoice (i.e. on issued TV license notices) or payment made for the supply. However, there is a high level of non-payment of TV license fees by television owners. The VAT requirement to account for output tax on an invoice basis on the revenue it might not be able to collect, places a signi cant nancial constraint on the SABC.
II. Reasons for change
Due to the high level of non-payment of TV license fees and the resulting nancial constraint on the SABC, the proposal is to afford the SABC an option to request to be allowed to account for VAT output on a payment basis. The major bene t of adopting the payments basis is that a vendor will account for output tax only when payment for the supply is received. However, input tax incurred may be deducted only to the extent that payments of consideration for the supplies have been made by the vendor.
III. Proposal
It is proposed that the SABC be allowed to apply to the South African Revenue Services (SARS) Commissioner to account for VAT on the payments basis, if it chooses (i.e. it is not obliged to so). However, in exercising this option, the SABC will have to operate its entire business on a payment basis.
1134 SAIT CompendIum oF TAx LegISLATIon VoLume 2