There's no escape from the VAT registration net
Taxing problem
CAN you own two businesses that both turn over less than R150 000 per annum and not register for VAT?
Can you ever deregister?
Beric Croome, tax partner of Grant Thornton Kessel Feinstein, replies: Where one sole proprietor owns two businesses that both turn over less than R150 000 a year and in total do not exceed R150 000 a year, there is an obligation to register for VAT.
Any person whose turnover in any 12-month period exceeds or is likely to exceed R150 000 is obliged to register as a vendor.
Any person who fails to apply for registration when required to do so commits an offence and may be subjected to a fine not exceeding R4 000 or imprisonment for a period not exceeding 12 months, or both.
If a sole proprietor, for example, owns two separate businesses, one with a turnover, say, of R80 000 and another with a turnover of R100 000, the sole proprietor would be obliged to register because the total turnover exceeds R150 000.
In terms of a recent amendment to the Act, the commissioner can regard separate businesses as one insofar as VAT is concerned, especially where a person registers different close corporations or companies in order to prevent registration for VAT purposes.
Once a vendor has registered for VAT it is possible to deregister, but only where the turnover drops to below R150 000 or where the vendor passes away or the business is disposed of.
In the event that turnover drops to below R150 000, VAT would have to be paid on all assets owned by the business at the date of deregistration.
In order to deregister, an application must be lodged with the commissioner for the SA Revenue Service, who will then ascertain the value of the assets in the business at the date of deregistration and will seek the VAT on these before the date of deregistration. VAT must be paid on the lesser of the cost of the assets and the open market value of the assets at the date of deregistration.
If the assets cost R100 000 and the market value amounted to R80 000 at date of deregistration, VAT of R9 824 (14/114 x R80 000) will become payable.
Howto go offshore
HOW do I invest in offshore unit trust funds directly, without a local go-between?
I am a South African citizen interested in funds in the US.
Galia Dviri, area manager with Barclays Offshore Services in Johannesburg, replies: The first step is to go to your Receiver of Revenue and get your tax clearance certificate which is needed for foreign investments.
After that, there are two routes you can take.
You can contact the institutions with which you would like to invest directly and, once you have decided how much to invest, you can approach your local bank, which will arrange a US dollar draft cheque.
Many local brokers are marketing offshore investments and the commissions which they charge are in line with what the institutions themselves charge.
It is often preferable to deal with a local agent for ease of service and because it is easier to obtain further information.
The other option is to open an offshore current account with one of several offshore banks that now have local offices. Once such an account is in operation, you can then do a telegraphic transfer to any of the funds you have selected.
The advantage of an offshore current account is you can use it as a conduit for other transactions, and for receiving payments from your investments.
Insurance tax breaks
IN reply to a question by a medical doctor on whether subscriptions to the Medical Protection Society (MPS) and others are tax deductible, as published in Rands and Sense on August 30, the advice you gave was that if the subscriptions provide disability benefits, the premiums are tax deductible.
But what about the portion of the premiums which provide for professional indemnity cover?
Eras Reyneke, a tax consultant with KPMG, replies: The MPS provides medical doctors with professional indemnity cover in addition to other cover such as disability.
These premiums are, in fact, tax deductible.
Malpractice insurance is recognised as a legitimate business expense by the Revenue authorities.
We regret no personal correspondence can be entered into. The Sunday Times accepts no responsibility for the advice given in BT Money.
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