Industry is gearing up for another fight with the South African Revenue Service – and this time billions of rands are at stake. Sars earlier this month published a proposal for a fixed deferment period of one calendar month to apply to all deferment account holders, beginning on the 1st of each month and ending on the last day. Payment to Sars of the deferment account will be due on or before the 7th of the following month.
“This is going to have a massive financial impact on industry,” a source told FTW. Currently deferment account holders make payments at different times of the month on a date agreed in each case with Sars. Payments are thus staggered at different company offices and more than one deferment at the same company office also occurs on different dates. That means that companies can stagger their payments and control their cash f low. This will now change if this proposal is accepted and everyone in the country will have to pay before the 7th of every month, which essentially means that ertain large companies will be unable to meet their payment obligations.”
With public comment due on March 9, industry stakeholders maintain that the financial impact on big companies would be the equivalent of making a 13th payment every month. “It all comes down to cash flow. Some companies even have more than one deferment payment – one for sea freight and one for airfreight at the same company office for example – so that they have better cash flow throughout the month.” The changes will impact heavily on invoicing and affect the bonds companies hold with finance companies for duties and VAT. “We are talking billions of rand here. It will totally change the landscape of freight forwarding and customs clearing in South Africa,” said another source. “The clearing agent is going to have to take massive risk to ensure these payments are made once a month prior to the 7th. This will mean renegotiating payment terms with most clients, or scaling down the size of the business and the number of employees: choose one.” According to the Sars website, implementation of the proposal, if accepted, will be July 1 this year. “It also seems as if the Sars plan may be a foregone conclusion, judging by the recent amendment to section 54(3) of the VAT Act, gazetted on 20 January 2015, which will take effect on April 1, 2015. In terms of this amendment agents are required to furnish their clients with a statement within 21 days of the end of the month in which the goods were imported. This statement must, among other things, contain a receipt number proving the payment of deferred duty and VAT to Sars. This amendment therefore does not permit staggered deferment payments, in respect of which a receipt would only be received after the required 21 days of the following month. However, the amendment would make perfect sense if all deferments ran from the first to the last day of each month.”