VAT amendments effective August 1 200

In this series of articles, Cameron Kotze – the Tax Partner at Ernst and Young – discusses some topical tax issues for our readers.

THE amendments to the Value-Added Tax Act become effective August 1 2007 in terms of the Government Gazette that was issued earlier this month. The amendments include a change to the rules relating to claiming deemed input VAT which is effectively backdated to November 27 2000.The VAT Act will have a definition of the term debt security and explicitly confirms that the transfer or ownership of a debt security is exempt from value-added tax.There were conflicting views on the tax status of debt securities in the past but this is now cleared up with this amendment.Although the definition of used goods was clear in the past, an amendment to its definition has been made which explicitly excludes animals.The sale of used goods by a registered person is subject value-added tax provided the input tax was claimed on acquisition of the goods.An example of a used good where a registered person will not charge VAT on the sale of it is the sale of a passenger vehicle where the input VAT on acquisition was denied.A deemed input tax is claimable on the acquisition of used goods provided the seller was not entitled to claim input tax when the goods were originally acquired.The amendments to the VAT Act also requires two further conditions to be fulfilled before a deemed input VAT can be claimed.Firstly, the used goods that are sold must have been acquired in Namibia by the seller and, secondly, a deemed input VAT claim on the acquisition of immovable property is specifically prohibited.As indicated above, these amendments are deemed to have been effective from November 27 2000.Although the prescription period for claiming input VAT has always been three years from the start, the Act has now been amended to confirm the three-year prescription period in the section that deals with the calculation of the VAT payable for a tax period.All motorcycles are excluded from the definition of passenger vehicles with effect August 1 2007.Therefore, irrespective of the purchase price of a motorcycle, the VAT paid on the acquisition of a motorcycle can be claimed by a VAT registered person as input VAT.The VAT Act did not allow the Receiver of Revenue to consider an objection to a VAT assessment unless the taxpayer had either paid the tax under the assessment or gave sufficient security for the tax under the assessment and the penalties that could be payable.As from August 1 2007 the Receiver can consider an objection without payment of the tax or provision of security for the tax and penalties.The previous requirement made it almost impossible for taxpayers to object where assessments were issued for large amounts of tax and is constitutionally more acceptable.As from August 1 2007 specific rules are contained in the VAT Act for agents and auctioneers.This is a welcome improvement because there was no provision in the Act in the past that provided guidance on the procedures that had to be complied with when goods were auctioned.A practice note was issued by the Receiver of Revenue that provided guidance for the treatment of sale transactions at auctions which was generally followed but the provisions thereof clearly needed to be incorporated in the law.Where any amendment to the VAT Act affects you, you should ensure you are informed about it and the effect it may have on you to ensure you comply with the law.The penalties for non-compliance are harsh and the Receiver does not view ignorance of the law as a valid excuse for failure to comply with the law.*Should readers have queries, they are invited to send them to cameron.kotze@za.ey.comThe amendments include a change to the rules relating to claiming deemed input VAT which is effectively backdated to November 27 2000.The VAT Act will have a definition of the term debt security and explicitly confirms that the transfer or ownership of a debt security is exempt from value-added tax.There were conflicting views on the tax status of debt securities in the past but this is now cleared up with this amendment.Although the definition of used goods was clear in the past, an amendment to its definition has been made which explicitly excludes animals.The sale of used goods by a registered person is subject value-added tax provided the input tax was claimed on acquisition of the goods.An example of a used good where a registered person will not charge VAT on the sale of it is the sale of a passenger vehicle where the input VAT on acquisition was denied.A deemed input tax is claimable on the acquisition of used goods provided the seller was not entitled to claim input tax when the goods were originally acquired.The amendments to the VAT Act also requires two further conditions to be fulfilled before a deemed input VAT can be claimed.Firstly, the used goods that are sold must have been acquired in Namibia by the seller and, secondly, a deemed input VAT claim on the acquisition of immovable property is specifically prohibited.As indicated above, these amendments are deemed to have been effective from November 27 2000.Although the prescription period for claiming input VAT has always been three years from the start, the Act has now been amended to confirm the three-year prescription period in the section that deals with the calculation of the VAT payable for a tax period.All motorcycles are excluded from the definition of passenger vehicles with effect August 1 2007.Therefore, irrespective of the purchase price of a motorcycle, the VAT paid on the acquisition of a motorcycle can be claimed by a VAT registered person as input VAT.The VAT Act did not allow the Receiver of Revenue to consider an objection to a VAT assessment unless the taxpayer had either paid the tax under the assessment or gave sufficient security for the tax under the assessment and the penalties that could be payable.As from August 1 2007 the Receiver can consider an objection without payment of the tax or provision of security for the tax and penalties.The previous requirement made it almost impossible for taxpayers to object where assessments were issued for large amounts of tax and is constitutionally more acceptable.As from August 1 2007 specific rules are contained in the VAT Act for agents and auctioneers.This is a welcome improvement because there was no provision in the Act in the past that provided guidance on the procedures that had to be complied with when goods were auctioned.A practice note was issued by the Receiver of Revenue that provided guidance for the treatment of sale transactions at auctions which was generally followed but the provisions thereof clearly needed to be incorporated in the law.Where any amendment to the VAT Act affects you, you should ensure you are informed about it and the effect it may have on you to ensure you comply with the law.The penalties for non-compliance are harsh and the Receiver does not view ignorance of the law as a valid excuse for failure to comply with the law.*Should readers have queries, they are invited to send them to cameron.kotze@za.ey.com