Registered for VAT late: backdating and past sales
What a South African business should do when it crossed the compulsory VAT threshold months ago without registering, and how backdating works.
By Achekam · · 5 min read · For Running a business businesses in South Africa
It often surfaces when the accountant prepares the annual financial statements. Turnover has grown well, which is good news, until someone points out that it went over the compulsory VAT registration threshold some months ago and nobody registered. Since then the business has been selling at its usual prices, with no VAT on its invoices.
This is a common situation for a growing South African business, and it is fixable. But it does not fix itself, and the longer it runs the larger the problem becomes. This article explains how a late registration happens, how far SARS will backdate it and through which channel, what it means for the sales already made, and what to change in your invoicing once the VAT number arrives.
How a late registration happens
SARS says an application for compulsory VAT registration must be made within 21 business days from the date the R2.3 million threshold is or will be exceeded. That threshold is the figure at the time of writing; check SARS's current position.
Note the words "is or will be". The test can be met before the money is in: a signed contract that will take turnover over the threshold can start the clock before the sales are made. The usual ways a business misses the window are simple. Nobody was watching a rolling total of taxable sales; one large contract pushed turnover over in a single month; or the owner assumed the accountant would notice at year end. The threshold and how to measure against it are covered in the compulsory VAT registration threshold.
How far back SARS will backdate, and where
A late registration is backdated towards the date the threshold was exceeded, and the route SARS offers depends on how far back that date is.
SARS says eFiling, using the RAV01 form, only allows a compulsory VAT registration to be backdated up to 6 months from the date the R2.3 million threshold was exceeded. Longer backdating requires a branch appointment with supporting documents such as financial statements, contracts or invoices.
| How long ago you crossed the threshold | Route SARS describes |
|---|---|
| Up to 6 months | eFiling, on the RAV01 form |
| More than 6 months | A SARS branch appointment, with supporting documents |
For a branch application, prepare the evidence of when the threshold was crossed before you book: the financial statements or management accounts showing turnover by month, the contracts that drove it, and the sales invoices themselves. What SARS generally asks for with any VAT application is covered in supporting documents for VAT registration. SARS's page on registering for VAT sets out the threshold, the 21-business-day rule and the backdating limits, and it is worth reading before you choose a route.
Prices, past sales and VAT-inclusive pricing
SARS's VAT 404 guide for vendors says all prices charged, advertised or quoted by a vendor must include VAT at the applicable rate, currently 15% for standard-rated supplies.
Once a registration is backdated, the business is a vendor from that earlier date, and the sales it made since then were made by a vendor. That raises the hard question in this situation: what VAT is due on sales already invoiced at prices that never mentioned VAT, and can any of it be recovered from customers? The answer depends on your contracts, your customers and the period involved, so work it out with your accountant rather than guessing. Do not issue fresh invoices for old sales, or add VAT to them, until you have agreed the approach.
From the date the registration takes effect going forward, every price you quote or advertise should include VAT.
The cost of paying late
SARS says late payments of VAT attract penalty and interest. The VAT 404 guide says a vendor that fails to pay VAT within the period allowed is charged a penalty of 10% of the unpaid tax, in addition to any understatement penalty included in an assessment.
A backdated registration means returns for past periods, and VAT for those periods that was not paid when it would have been due. Expect SARS to look at penalty and interest on those amounts. The sooner the registration is done and the back periods are filed, the smaller that exposure becomes, which is the strongest argument for acting the day the problem is discovered rather than at the next year end.
Switching Achekam over
Once SARS issues the VAT number, change how the business invoices.
Enter the VAT number. In Achekam a business enters its VAT registration number in Settings, under Firm Profile. Documents made by the server print it, and they are titled Tax Invoice only when a VAT number is set. Until then they are not headed Tax Invoice; what to issue in the meantime is covered in invoicing before VAT registration.
Watch the invoice date. When an invoice line states no rate, VAT is taken at the rate in force on the invoice date. A credit note uses its original invoice's date and tax codes, so a credit against an invoice issued before the change follows that invoice's treatment, not today's.
Know what Achekam does not check. Achekam does not check whether the business is VAT-registered before charging VAT on its documents. Combined with the rule that a line with no stated rate takes the rate in force on the invoice date, that means documents can carry VAT whether or not the business is registered. Before registration, check that nothing you issue charges VAT; after it, check that new invoices carry the VAT they should.
A short switch-over checklist:
- Enter the VAT number in Settings as soon as SARS confirms it.
- Update price lists and quotes to VAT-inclusive prices from the effective date.
- Review the first few invoices after the change for the heading, the number and the VAT on each line.
- Leave old invoices alone until your accountant has agreed how past sales will be treated.
Act on the day you find out
If you suspect you crossed the threshold without registering, establish the date, gather the evidence and apply through the right channel straight away. Every month of delay adds to the back periods, and to the penalty and interest that come with them.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
