The minister of finance recently announced that the standard rate of value added tax (VAT) will increase from the current rate of 14% to 15% from April 2018. Unfortunately, the date of introduction of the new rate leaves vendors little time to amend their systems and implement procedures to ensure that VAT is correctly accounted for from that date. There is also uncertainty as to when supplies still qualify for VAT at 14% and when VAT should be levied at 15%.
The South African Revenue Service recently issued Binding General Ruling 41, in which it ruled that non-executive directors (NEDs) should register and account for value added tax (VAT) on their directors' fees where the fees exceed the VAT registration threshold of R1 million in a 12-month period. SARS recently issued an updated ruling in which it determined that, in accordance with the VAT Act, the VAT registration liability date for NEDs was June 1 2017.
Many residential property developers will begin 2018 with a major cash-flow challenge, as they may be faced with a substantial value added tax (VAT) liability in respect of the temporary letting of residential units which have been developed for resale. It is hoped that the South African Revenue Service and the National Treasury will urgently address the problems with regard to the VAT rules concerning the change-in-use adjustments for property developers.