Value Added Tax - VAT
A tax charged on the supply of goods or services by a vendor.
Vendors registered for VAT are obligated to collect VAT from their customers or clients on
behalf of the South African Revenue Services (SARS).
Registered VAT vendors can claim any VAT paid on supplies or expenses needed to generate
the income for the business.
At present the VAT rate in South Africa is 15%, but the Minister of Finance can change this at
any time.
Standard rate of VAT = With the exception of zero rated and VAT exempt items, all items are
Standard rate of VAT = subject to the Standard VAT of 15%.
Zero-rated items
These items have 0% VAT, in aim to prevent hardship on indigent customers.
- Brown bread
- Milk and milk powders
- Maize
- Rice
- Lentils
- Dried beans
- Legumes
- Fruit and vegetables
- Paraffin
The Minister of Finance can adjust this percentage at any time.
VAT exempted items
These items are exempt from VAT by an Act of Parliament.
- Interest, excluding bank charges
- Rates
- Export services
- Childcare services
- Educational services
- Services provided by associations not for gain
- Salaries and wages
- Petrol
, Registered VAT vendors
Any business with a turnover of more than R 1 000 000 a year must register as a vendor.
Traders whose yearly turnover is less than this, may register voluntarily if they believe that it is in
their interest.
Any business with a turnover of less than R 20 000 a year may not register as a vendor.
Only once they are registered can they claim back the VAT that they pay on legitimate business
purchases and expenses.
The business has to adhere to the VAT regulations, involving record keeping and submission of
forms and VAT payments.
These VAT limits are subject to annual changes.
Methods of calculating how VAT is paid and claimed
Type 1: Invoice basis
This is the standard method used and will apply to all businesses unless they have applied in
writing and permission has been granted.
VAT is charged at the point when the goods are sold and becomes due to SARS at the end of
the two-month tax period for that business.
This can have cash flow implications for many businesses as the VAT will often need to be paid
before debtors have settled their accounts.
Type 2: Receipt basis
To assist smaller businesses who might experience cash flow problems as a result of the Invoice
basis being applied, businesses can apply in writing to SARS for permission to register on the
Receipt basis.
The business will only become responsible for the payment of the VAT, after the debtor has paid
his account.
Tax periods
The two-month tax period is the standard tax period which means that a return must be
submitted every two months, bi-monthly.
In order to spread the workload, half of the businesses in the country submit their returns at the
end of even months and the other half at the end of odd months.
VAT forms can be:
- Delivered to SARS offices
- E-filing system where submissions are made via the internet and payments made by electronic
- cash transfers.
- This has become increasingly popular amongst business owners as the preferred method.
- It is very safe as it requires a user ID and a password.
A tax charged on the supply of goods or services by a vendor.
Vendors registered for VAT are obligated to collect VAT from their customers or clients on
behalf of the South African Revenue Services (SARS).
Registered VAT vendors can claim any VAT paid on supplies or expenses needed to generate
the income for the business.
At present the VAT rate in South Africa is 15%, but the Minister of Finance can change this at
any time.
Standard rate of VAT = With the exception of zero rated and VAT exempt items, all items are
Standard rate of VAT = subject to the Standard VAT of 15%.
Zero-rated items
These items have 0% VAT, in aim to prevent hardship on indigent customers.
- Brown bread
- Milk and milk powders
- Maize
- Rice
- Lentils
- Dried beans
- Legumes
- Fruit and vegetables
- Paraffin
The Minister of Finance can adjust this percentage at any time.
VAT exempted items
These items are exempt from VAT by an Act of Parliament.
- Interest, excluding bank charges
- Rates
- Export services
- Childcare services
- Educational services
- Services provided by associations not for gain
- Salaries and wages
- Petrol
, Registered VAT vendors
Any business with a turnover of more than R 1 000 000 a year must register as a vendor.
Traders whose yearly turnover is less than this, may register voluntarily if they believe that it is in
their interest.
Any business with a turnover of less than R 20 000 a year may not register as a vendor.
Only once they are registered can they claim back the VAT that they pay on legitimate business
purchases and expenses.
The business has to adhere to the VAT regulations, involving record keeping and submission of
forms and VAT payments.
These VAT limits are subject to annual changes.
Methods of calculating how VAT is paid and claimed
Type 1: Invoice basis
This is the standard method used and will apply to all businesses unless they have applied in
writing and permission has been granted.
VAT is charged at the point when the goods are sold and becomes due to SARS at the end of
the two-month tax period for that business.
This can have cash flow implications for many businesses as the VAT will often need to be paid
before debtors have settled their accounts.
Type 2: Receipt basis
To assist smaller businesses who might experience cash flow problems as a result of the Invoice
basis being applied, businesses can apply in writing to SARS for permission to register on the
Receipt basis.
The business will only become responsible for the payment of the VAT, after the debtor has paid
his account.
Tax periods
The two-month tax period is the standard tax period which means that a return must be
submitted every two months, bi-monthly.
In order to spread the workload, half of the businesses in the country submit their returns at the
end of even months and the other half at the end of odd months.
VAT forms can be:
- Delivered to SARS offices
- E-filing system where submissions are made via the internet and payments made by electronic
- cash transfers.
- This has become increasingly popular amongst business owners as the preferred method.
- It is very safe as it requires a user ID and a password.
