Effective 23 May 2015, the VAT Act (Act) was amended to increase the sales threshold of VAT registration to P1 million. This means that ordinarily, any person needs to have made taxable sales of at least P1m in any 12-month period for them to register for VAT.
What then tends to happen is that taxpayers believe that they do not have to register for VAT without reaching the P1 million in sales. But BURS is becoming tougher with taxpayers who register for VAT after reaching P1 million as it registers them retrospectively and demands VAT when the businesses would not have in fact charged VAT. We want to help you avoid the penalties that come with retrospective VAT registration today.
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The threshold for voluntary registration was also increased from P0 to P500 000, which means that whilst persons could previously register for VAT without making any sale, they are now required to register for VAT only upon attaining a turnover of P500 000. However, unlike the P1 million as just noted, the P500 000 is not matched to a 12-month period. Therefore, one needs to prove through invoices that one would have sold goods or services in excess of P500 000 if one is to register for VAT.
This is what is called voluntary registration, which means that one is not compelled to register due to attaining a turnover of P1 million but chooses to become a VAT registrant. We advise businesses to register once they reach the P500 000 so as to avoid retrospective VAT registrations.
Having analysed voluntary registration, we now turn our attention to mandatory or compulsory registration. This is a scenario which is linked to the attainment of P1 million in turnover.
In other words, if one sells taxable goods or services worth more than the stated P1 million in any 12-month period, one has no option but to apply for registration within 21 days of reaching that threshold in order to avoid hefty penalties from BURS.
Apart from using the above-mentioned sales threshold, one may also apply for registration in terms of a provision of the Act that allows for such registration on the basis that one has a reasonable expectation to attain P1 million in a 12-month period.
In other words, this applies where one would not have attained a turnover of P1 million but expects to reach the threshold in the ensuing 12 months. This may be proved by submitting a tender awarded to the applicant, a sale agreement, delivery notes or any other such documentation that shows that the applicant has reasonable expectation to reach the P1 million in the ensuing 12 months.
Another scenario that may be used as a basis for registration is where one would have traded for, say, four months and their sales would be, say, P700 000, which is a clear sign that one is likely to breach the P1m mark.
We believe that we have managed to demonstrate that one does not necessarily have to reach P1 million in sales for one to register for VAT. Infact, to avoid BURS registering you retrospectively, say, a month or two after reaching P1 million in sales, register when you reach P500 000 instead.
It may also happen that one may intend to invest considerable amounts in a certain project and will not have any revenue but still an application for VAT registration may be made. Each case is evaluated on its merits, and this is where professional tax advice becomes handy.
Well, folks, we hope that was insightful. As we the two Yours Trulies say goodbye, remember to pay to Caesar what belongs to Caesar. If you want to consult, join our free Tax WhatsApp group or to know about our 9 tax e-books, send us a text to +267 71815836. You can read more tax articles on our website, www.aupracontax.co.bw under the ‘Tax articles’ tab.