VALUE ADDED TAX:
GENERAL PRINCIPLES OF VAT:
VAT applies to all people (most wide spread tax levy)
Tax charges on the supply of goods or services.
Vendors registered for VAT are obligated to collect VAT from their customers on
behalf of SARS.
Registered VAT vendors may also claim any VAT paid on supplies or expenses
needed to generate income.
VAT rate in SA is 15% (this may change at any time)
VAT CAN BE CLAIMED BACK:
CBC tuck shop buys trading stock from Sammy’s wholesalers of R10 000.
CBC is therefor charged R10 000 + R1 500 (VAT) = R11 500 for the stock.
Since CBC is not using the stock for personal use, CBC can present the VAT
statement to SARS and they will refund CBC the VAT of R1 500.
This can cause cash flow issues because it takes long to get the money back.
Then CBC sells the trading stock at R14 500 (remember the mark-up)
CBC then has to add vat to this stock of R2 175.
CBC charges their customers R16 675.
CBC then has to pay the VAT of R2 175 over to SARS.
CBC claims R1 500 and pays R2 175 to SARS.
This is double the work load.
Therefor we say R2 175 – R1 500 = R675.
Then CBC only has to pay R675 to SARS.
WHO NEEDS TO REGISTER FOR VAT:
, A business with a turnover of more than R1 million a year must register as a VAT
vendor.
A business with a turn over between R50 000 and R1 000 000 can voluntarily
register if they believe it’s to their interest.
A businesses with a turnover of less than R20 000 may not register.
Only once they are registered are they able to claim back VAT that they pay on
legitimate purchases of expenses.
This can be a huge benefit for businesses that have large outlays.
Businesses need to adhere to VAT regulations by record keeping, and
submission of forms and VAT payments.
SUPPLIES ON WHICH VAT IS NOT LEVIED:
Private sales of personal or domestic items.
Hobbies.
Salaries and wages.
Suppliers that are exempt from VAT or zero-rated.
ZERO-RATED ITEMS:
These items are still charged VAT but it is 0%.
This is to prevent hardship to indignant customers.
Items that are deemed necessities are zero-rated.
These items include: paraffin, milk-powders, lentils, canned pilchards, fresh fruit
and veg, rice, eggs, legumes, maize products, cooking oil, dried beans, milk and
brown bread.
VAT EXEMPT ITEMS:
These items are not charged VAT at all.
VAT exempt will never change unlike zero-rated can be changed by the minister
of finance at any time.
These items include: interest, childcare services, export services, educational
services, charitable services, salaries and wages, petrol.
TAX PERIODS:
The two month tax period is the standard tax period.
Returns must be submitted every two months (Jan, Mar, May, Jul, Sep, Nov)
Businesses have 25 days to submit the returns.
Can submit the forms to SARS office or E-filling online.
VAT EXCLUSIVE AND VAT INCLUSIVE:
GENERAL PRINCIPLES OF VAT:
VAT applies to all people (most wide spread tax levy)
Tax charges on the supply of goods or services.
Vendors registered for VAT are obligated to collect VAT from their customers on
behalf of SARS.
Registered VAT vendors may also claim any VAT paid on supplies or expenses
needed to generate income.
VAT rate in SA is 15% (this may change at any time)
VAT CAN BE CLAIMED BACK:
CBC tuck shop buys trading stock from Sammy’s wholesalers of R10 000.
CBC is therefor charged R10 000 + R1 500 (VAT) = R11 500 for the stock.
Since CBC is not using the stock for personal use, CBC can present the VAT
statement to SARS and they will refund CBC the VAT of R1 500.
This can cause cash flow issues because it takes long to get the money back.
Then CBC sells the trading stock at R14 500 (remember the mark-up)
CBC then has to add vat to this stock of R2 175.
CBC charges their customers R16 675.
CBC then has to pay the VAT of R2 175 over to SARS.
CBC claims R1 500 and pays R2 175 to SARS.
This is double the work load.
Therefor we say R2 175 – R1 500 = R675.
Then CBC only has to pay R675 to SARS.
WHO NEEDS TO REGISTER FOR VAT:
, A business with a turnover of more than R1 million a year must register as a VAT
vendor.
A business with a turn over between R50 000 and R1 000 000 can voluntarily
register if they believe it’s to their interest.
A businesses with a turnover of less than R20 000 may not register.
Only once they are registered are they able to claim back VAT that they pay on
legitimate purchases of expenses.
This can be a huge benefit for businesses that have large outlays.
Businesses need to adhere to VAT regulations by record keeping, and
submission of forms and VAT payments.
SUPPLIES ON WHICH VAT IS NOT LEVIED:
Private sales of personal or domestic items.
Hobbies.
Salaries and wages.
Suppliers that are exempt from VAT or zero-rated.
ZERO-RATED ITEMS:
These items are still charged VAT but it is 0%.
This is to prevent hardship to indignant customers.
Items that are deemed necessities are zero-rated.
These items include: paraffin, milk-powders, lentils, canned pilchards, fresh fruit
and veg, rice, eggs, legumes, maize products, cooking oil, dried beans, milk and
brown bread.
VAT EXEMPT ITEMS:
These items are not charged VAT at all.
VAT exempt will never change unlike zero-rated can be changed by the minister
of finance at any time.
These items include: interest, childcare services, export services, educational
services, charitable services, salaries and wages, petrol.
TAX PERIODS:
The two month tax period is the standard tax period.
Returns must be submitted every two months (Jan, Mar, May, Jul, Sep, Nov)
Businesses have 25 days to submit the returns.
Can submit the forms to SARS office or E-filling online.
VAT EXCLUSIVE AND VAT INCLUSIVE:
