Property Poser: Landlord Does Not Have to Deregister From VAT

www.MyPE.co.za: A
reader has contacted our panel of experts and asked them to explain the
consequences of deregistering for Value-Added Tax (VAT).

He appears to be the owner of a commercial property that he is renting
out to the company he is currently employed by. The reader is a VAT
vendor and so is the company that is currently the tenant.

The current tenant is now moving out and it appears that the new tenant
is not VAT registered and our reader is therefore questioning his
status as a VAT vendor and whether he should deregister.

Rian du ToitRian du Toit
from Du
Toit Strombeck Attorneys
in Port Elizabeth says one must
first consider who has to be registered in terms of the provisions of
the VAT Act No 89 of 1991.

“The act provides that all persons who make taxable supplies in excess
of R1 million (from March 1, 2009) in any 12-month consecutive period
are liable for compulsory VAT registration.”

But, says Du Toit, a person may also choose to register voluntarily
provided that the minimum threshold of R50 000 (from March 1, 2010) has
been exceeded in the past 12-month period. “Persons who are liable to
register and those who have registered voluntarily, are referred to as
vendors.”

The threshold compelling one to register for VAT has been increased
significantly in recent times, with compulsory registration therefore
becoming a less likely event, according to Du Toit.

“Once you are a registered vendor, there are duties that have to be
complied with, including the submission of regular VAT returns to
SARS.” Du Toit says along with the payment of any VAT due, the
provision of so-called “tax invoices” to customers and maintaining
proper records of all relevant information for a period of at least
five years are important.

Charlotte VermaakCharlotte Vermaak
from Chas
Everitt Port Elizabeth
says VAT vendors therefore have to
provide their customers with an invoice, in this instance in respect of
rental, and add the VAT payable, which currently stands at 14%.

“During each VAT cycle, vendors are in turn entitled to deduct certain
relevant amounts of VAT payable by them (so-called input VAT claims)
from the VAT they eventually have to pay to SARS.”

Vermaak says the above therefore makes it clear that a vendor may still
charge VAT, even if the other party to the transaction (the new tenant)
is not registered. “Our reader therefore does not have to deregister
for this particular reason.

“If he feels the process of being a VAT vendor is an administrative
burden and in terms of the new thresholds he is no longer obliged to be
registered as such, he can complete the necessary VAT cancellation
forms and hand these in at the office of SARS where he is a registered
vendor.”

SARS will commence with the cancellation process and he will in due
course be informed of the so-called suspension date as well as the next
tax period and VAT return that is due, according to Vermaak.

“It will therefore be quite clear what amounts still need to be paid to
SARS and from which point in time VAT no longer has to be charged.”

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