BURS loses landmark VAT legal dispute
Staff Writer | Friday May 5, 2017 18:00
In a case that is likely to set a precedent that will dent BURS’ tax collections while opening up a pocket of respite for homebuyers, the CoA has declared that the sale of property by a Non-VAT registered Deputy Sheriff under authority of a court order (sale of execution) is not liable to VAT charges.
The VAT Act prescribes that every person who conducts business (taxable activity) of a value reaching or exceeding P500, 000 in any proceeding 12 months period is required to register under the Act.
According to court papers, the couple, O’brien and Forgiveness Bvindi bought a house at an auction conducted by a Deputy Sheriff for P850, 000 in 2015, and were billed another P91, 000 on top as VAT, which they paid without prejudice to their rights, so that the transfer could proceed.
The buyers then met with BURS afterwards to argue their case but the tax agency insisted that the sales transaction was liable for VAT not withstanding that the Deputy Sheriff may not himself be registered for such tax.
The two then sought legal recourse, which resulted in the matter ending up at the COA after the High Court ruled in favour of BURS.
While BURS conceded that the Deputy Sherriff was not VAT registered, it also argued that when he conducted the sale of a house attached for breach of a mortgage bond he acted on behalf of FNBB, the mortgagee.
BURS were also arguing that the sales of execution of immovable properties through a public auction by a Deputy Sheriff should be deemed a taxable activity.
However in his ruling, CoA judge president Ian Kirby declared that BURS erred in levying VAT on the transaction that was carried out by a person who is not VAT registered, while immovable property sales executions may or may not be deemed a taxable activity.
According to Kirby’s judgement, there was no evidence that the Deputy Sherriff met the P500, 000 threshold in the preceding twelve months so as to require him to register, and so as to deem him to be a registered person.
“Registration under the VAT Act, and the liability to make VAT returns and payments is directed at individuals rather than transaction. Not all taxable supplies attract VAT, but only taxable supplies made by registered persons or persons deemed to be so registered in terms of the Act.
It will be particular activities of each Deputy Sherriff which determine whether he or she conducts auctions of seized goods on a sufficiently regular basis to make this a taxable activity under then act,” he declared.
Most Deputy Sheriffs are not VAT -registered as they are generally seen as earning less than the P500, 000 threshold in a year in commissions.
Kirby also agreed with the appellants that in conducting the auction, the deputy sheriff was not an agent of FNBB, but was executing his duties as an officer of the court.
“I find that the appellants are entitled to the refund of the VAT paid on their behalf by the conveyancing attorneys to BURS. Obviously such repayment will not affect any other claims for tax or otherwise which BURS may choose to pursue against the appellants,” ordered Kirby.
BURS was also ordered to pay the cost of the lawsuit.