BGR 36 “Circumstances Prescribed by the Commissioner for the Application of Section 16(2)(g)” explains circumstances under which a vendor may, as a last resort, apply for a VAT Ruling to deduct input tax on supplies where all efforts to obtain the required tax invoice from the supplier have failed.
It has recently been noted that where a company undergoes a name change, there is a tendency to apply to SARS for a VAT Ruling to invoke the provisions of section 16(2)(g) for the purposes of obtaining permission to deduct input tax on tax invoices issued in the old company name. In such cases, a tax invoice which has been issued to reflect the old company name is not invalidated merely because of the name change. This is on condition that all the other necessary details on the tax invoice are correct. The recipient vendor in that case should not apply for a VAT Ruling, but rather, maintain the documentary proof of the name change from the Companies and Intellectual Property Commission (CIPC) as part of the VAT records.
Once the name change has been effected by the CIPC and proof thereof has been issued, all suppliers should be informed immediately to correct their customer records as soon as possible and to issue tax invoices in future in the new company name. SARS should also be informed of the change in registered particulars on eFiling within 21 business days. These steps will ensure that all future tax invoices are issued in the correct (new) company name as soon as possible and will reduce the risk of having input tax denied by SARS.
Recipient’s VAT registration number
A vendor must be in possession of a valid tax invoice before input tax on goods or services acquired may be deducted. One of the requirements for a valid full tax invoice (where the consideration in money for the supply exceeds R5 000) is that the VAT registration number of the recipient must appear on the document where such recipient is a registered vendor.
There has recently been an increase in the number of VAT Ruling applications requesting SARS to confirm that a tax invoice is valid in a situation where the tax invoice was issued before the recipient became a registered vendor. This happens, for example, where a vendor’s compulsory registration is backdated to the date of liability in the past. As the recipient was not a registered vendor at the time the tax invoice was issued, the supplier could not have inserted the recipient’s VAT number on the tax invoice. On that basis, the tax invoice concerned remains valid for the purposes of deducting input tax, as long as the tax invoice contains all the other relevant details. In such cases, a VAT Ruling is not required to confirm the validity of the document.