DISPLAYED PRICES DIFFERING FROM ACTUAL PRICE – WHICH MUST I PAY?

DISPLAYED PRICES DIFFERING FROM ACTUAL PRICE – WHICH MUST I PAY?

Recently we have noticed a few retailers displaying notices in their stores stating that even where shelf prices have not been updated to reflect the updated value added tax (“VAT“) rate on certain products (now being 15%), and the shelf display price still reflects VAT to be 14% on that product, consumers will be charged for those products at the new VAT rate of 15% at the till point. In practice it means that the price on display may be R114 but at till point the price would be R115. From a Consumer Protection Act (“CPA“) point of view, this raised a few concerns, the biggest being whether a consumer can be legally obligated to pay a higher price than the price displayed.

The VAT rate increase

For the first time in many years, the VAT rate was increased from 14% to 15% on all taxable goods or services supplied by VAT registered vendors, effective from 1 April 2018. Although the increase is only 1% (which seems like a negligible amount), this will have a large impact on consumers and businesses alike, and according to estimates, will ultimately bring in an estimated R22,9 billion for government.

The VAT increase started to apply on1 April 2018, and you can expect to pay VAT at the new rate on any invoices issued or payments made from 1 April 2018. However, if goods were supplied or services rendered before 1 April 2018, you will not be required to pay VAT at 15% on those goods or services, even if only paying for them after 1 April. Therefore, where you are paying for services in arrears or purchased goods on credit during the interim period (22 February 2018 – 31 March 2018), make sure that you are paying the correct VAT rate for those goods and services, even if you are only paying for them after 1 April 2018.

The CPA provisions on prices

The CPA, in section 23(3), requires suppliers to display the price in relation to any goods that are displayed for sale. Further on in section 23(6), the CPA states that a supplier must not require a consumer to pay a price that is higher than the displayed price or, where more than one price is displayed for the same good/service, the supplier must not require the consumer to pay the higher of the two (or more) prices.

Therefore, suppliers are required to display the price that the consumer will pay for goods/services when displaying goods/services for sale and must not require consumers to pay more than this displayed price – “the price you see is the price you pay”.

However, section 23(7) states that subsection (6) does not apply where the price of any goods or services are determined by or in accordance with public regulation.

Applicability in practice

When reading the CPA, it is clear that, as a consumer, you should only be required to pay the actual price displayed and the lowest price displayed where there are multiple displayed prices. However, section 23(7) of the CPA “throws a spanner in the works” with the VAT rate increase and the requirement to pay a price that is more than the displayed price.

The VAT Act is “public regulation” for purposes of section 23(7) of the CPA, and where suppliers are VAT vendors, VAT will be added to goods and services and VAT will therefore be a determining factor used to calculate the price of goods and services. So, the rule that the supplier may not charge an amount higher than the price displayed will not apply in the scenario where the displayed price differs to the amount charged due to the VAT increase.

Further to this exception in section 23(7) of the CPA, the commissioner for SARS granted permission, in terms of proviso (iii) of section 65 of the VAT Act, for suppliers to require consumers to pay the increased VAT rate on goods and services despite the displayed price still indicating that VAT is included at 14% PROVIDED that the supplier prominently displays notices at the entrances to the premises and at all points where payments are made (i.e. consumers must be aware of these notices when in the store).

Conclusion

Generally speaking, consumers do not have to pay a higher price than the price displayed and where there are two prices for the same product displayed, the consumer can insist on paying the lower price.

Regarding the VAT increase, this CPA “right” is not available where the supplier has adequately notified consumers that the displayed prices may differ from prices at till point – due to the VAT increase. Suppliers have until 31 May 2018 to ensure that their shelf display prices have been updated to account for the VAT increase and to remove the notices in store that shelf and till prices may differ.

Registering your company for VAT

Registering your company for VAT

WHY DO I NEED TO REGISTER MY BUSINESS FOR VAT?

Businesses, whether large or small, have a vital role to play as taxpayers in our economy. Any business (whether a CC, a company, a partnership or a sole proprietor) has various tax obligations it must meet. If certain conditions are met, it is required to register and pay value added tax (VAT) to SARS, which is the amount that is levied on the value of most goods and services, whether supplied by sale, rental agreement, instalment credit agreement or any other form of supply. The standard VAT rate is currently 14%.

Your business must register as a VAT vendor if its income earned in any consecutive 12-month period exceeds the prescribed threshold. If your income earned is less than the threshold, it may still be beneficial for your business to register on a voluntary basis – although this will add to your administration, you can then claim VAT back on your expenses (which is then deducted from the VAT you owe SARS).

WHEN DO I REGISTER MY BUSINESS FOR VAT?

Compulsory registration: It is mandatory for a business to register for VAT if the total value of the taxable supplies made in any consecutive 12-month period exceeded or is likely to exceed R1 000 000.

Voluntary registration: A business may also choose to register voluntarily for VAT if the value of the taxable supplies made or to be made is less than R1 000 000, but exceeded R50 000 in the past 12-month period.

VAT registration when the value of your taxable supplies is less than R50 000: Per the new VAT Registration Regulations, an enterprise which has not made R50 000 in taxable supplies in the past 12 months may still register for VAT if it can satisfy SARS that, as at the date of the application, the following circumstances exist:

  • where you have made taxable supplies for more than two months (but not exceeding 11 months), you must prove that the average value of taxable supplies in the preceding months prior to the date of application for registration exceeded R4 200 per month;
  • where you have made taxable supplies for only one month preceding the date of application for registration, you must prove that the value of the taxable supplies made for that month exceeded R4 200;
  • where you have not made taxable supplies yet, you must have a written contract, in terms of which you are required to make taxable supplies exceeding R50 000 in the 12 months following the date of registration;
  • in any other case, you have entered into a finance agreement with a bank, specified credit provider, designated entity, public authority, non-SA resident or any other person who continuously or regularly provides finance, wherein finance has been provided to fund the expenditure incurred or to be incurred in furtherance of the enterprise, and the total repayments in the 12 months following the date of registration will exceed R50 000; or
  • in any other case, you have proof of expenditure incurred or to be incurred in connection with the furtherance of the enterprise as set out in a written agreement or proof of capital goods acquired in connection with the commencement of the enterprise and proof of payment or an extended payment agreement evidencing payment has either exceeded R50 000 at the date of application for registration; or that it will in any consecutive period of 12 months beginning before and ending after the date of application, exceed R50 000; or will in the 12 months following the date of application for registration exceed R50 000.

HOW DO I REGISTER MY BUSINESS FOR VAT?

You can either elect to register your business for VAT yourself or you can make use of the services of a registered tax practitioner to handle the whole process for you. In both instances, the VAT 101 application form must be submitted to the SARS branch nearest to the place where your business is situated, together with the following supporting documentation:

  • if your business is operated through a company, certified copies of your company registration documents (i.e. CoR 14.1 Notice of Incorporation, CoR 14.1A Notice of Incorporation – Initial Directors, CoR 14.3 Registration Certificate, CoR 15.1A Standard Short Form MOI or custom-drafted MOI (as the case may be);
  • certified copies of the identity documents of all the directors / members / partners;
  • originally signed and stamped letter from the bank confirming the business account’s banking details;
  • latest original copy of the business municipal account;
  • if the business’ property is leased, a certified copy of the signed lease agreement;
  • latest three months’ bank statements; and
  • latest three months’ invoices to confirm income.

THINGS TO NOTE WHEN REGISTERING / PAYING VAT

  • For any sale of more than R50, you must issue a tax invoice (with the words “tax invoice” printed on it). This is the most important document in the VAT system so make sure you get it right.
  • The frequency with which you have to pay VAT to SARS depends on your “taxable period”. For businesses who file their returns and make payments electronically, VAT is due by the 25th day of the first month commencing after the end of the taxable period, while for businesses that file via eFiling, the due date is the last business day of the month after the end of the taxable period.
  • Failure to submit a VAT return at the end of each VAT cycle can lead to a business facing heavy penalties and interest on late submission.
  • You must keep your records for a period of five years from the date of the last entry in any book, as SARS can ask to see these records at any time within this timeframe.