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Value-Added Tax

VAT 404. Value-Added Tax Guide for Vendors 2009/02/25 SP C 10 IMPORTANT PRINCIPLES. 1. All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies). 2. Vendors collect VAT on behalf of the State please make sure that you pay it over on time, otherwise penalties and interest will be charged. 3. VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable. 4. You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.

VAT 404 – Guide for Vendors Foreword 2 FOREWORD The VAT 404 is a basic guide where technical and legal terminology has been avoided wherever possible. Although fairly comprehensive, the guide does not deal with all the legal detail associated with VAT

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Transcription of Value-Added Tax

1 VAT 404. Value-Added Tax Guide for Vendors 2009/02/25 SP C 10 IMPORTANT PRINCIPLES. 1. All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies). 2. Vendors collect VAT on behalf of the State please make sure that you pay it over on time, otherwise penalties and interest will be charged. 3. VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable. 4. You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.

2 5. Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic. 6. You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.

3 7. You are required to advise the South African Revenue Service (SARS) within 21 days of any changes in your registered particulars, including any change in your authorised representative, business address, banking details, trading name, or if you cease trading. 8. If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect. 9. You can pay your VAT by using various electronic methods, including e-filing, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks. 10. Report fraudulent activities to SARS by calling the Fraud and Anti-Corruption Hotline on 0800 00 28 70.

4 You may report an incident anonymously if you wish. 1. VAT 404 Guide for Vendors Foreword FOREWORD. The VAT 404 is a basic guide where technical and legal terminology has been avoided wherever possible. Although fairly comprehensive, the guide does not deal with all the legal detail associated with VAT and is not intended for legal reference. All references to the VAT Act or the Act are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. The terms Republic , South Africa or the abbreviation RSA , are used interchangeably in this document as a reference to the sovereign territory of the Republic of South Africa, as set out in the definition of Republic in section 1 of the VAT Act.

5 You will also find a number of specific terms used throughout the guide which are defined in the value added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference. The information in this guide is based on the VAT legislation (as amended) as at the time of publishing and includes the amendments contained in the Taxation Laws Amendment Act 17 of 2009 and the Taxation Laws Second Amendment Act 18 of 2009 both of which were promulgated on 30 September 2009 (as per GG 32610 and GG 32611 respectively). Below is a brief synopsis of some of the most important changes since the previous issue of this Guide: 1. Increase in the voluntary registration threshold The previous threshold of R20 000 for voluntary VAT.

6 Registration increased from R20 000 to R50 000 from 1 March 2010. Vendors that could not afford to pay the full amount of VAT on assets held in the enterprise as at 28 February 2010 were allowed to apply for an arrangement to pay the VAT in equal monthly instalments over a maximum period of six months without any penalty or interest. 2. Remission of interest With effect from 1 April 2010 the Commissioner's discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor's control. A draft interpretation note: Remission of interest in terms of section 39(7)(a) was issued in March 2010 to provide further guidance in this regard.

7 The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010. 3. Rulings The general rulings register was withdrawn in a phased approach, commencing from 1 August 2009. The final batch of rulings was withdrawn on 1 November 2009. The effect is that these rulings may not be relied upon from the date of withdrawal. 4. Offences - False statements on any VAT forms, and not just returns, are considered to be an offence. 5. Registration requirements - Enabling provisions were introduced to permit the use of biometric information to verify the identity of applicants for VAT registration. These provisions will, however, only become effective on a date to be announced by the Minister of Finance (the Minister).

8 6. Tax invoices - A transitional measure was introduced regarding the particulars to be contained in tax invoices, debit and credit notes in certain instances where the transaction involves the purchase of an entire business and the supplier ceases to be a vendor. A period of 6 months is then allowed during which tax invoices, debit and credit notes issued or received by the new owner may be accepted for VAT. purposes if they reflect the name, address and VAT registration number of the previous owner of the business. 7. Payment of tax (the pay-now-argue-later principle) Amendments were effected to clarify that the payment of tax, penalty and interest is not suspended due to an objection being lodged and formalises the circumstances where payment will be required despite the objection.

9 Provision is also made for the payment of interest to the vendor where a payment is made pending consideration of an objection that is ultimately allowed. These provisions will, however, only become effective on a date to be announced by the Minister. 2. VAT 404 VAT Guide for Vendors Foreword 8. Calculation of interest - As part of the SARS modernisation agenda, the imposition of interest across all tax types will be aligned and charged on a compound basis instead of as simple interest. As part of the first stage of this alignment the Commissioner is granted discretion to determine the date from which, and the period for which, the compound interest will be payable on the daily balance of any tax owing.

10 9. Environmental levy - The environmental levy of 2 cents per kWh on electricity generated from non- renewable resources came into effect on 1 July 2009. VAT is calculated on the final price of the electricity supplied, including the amount of the levy. 10. Reorganisations The VAT reorganisation provisions have been narrowed so that they are now limited to supplies contemplated in sections 42 or 45 of the Income Tax Act where the supply is a going concern. The following guides have also been issued and may be referred to for more information relating to the specific VAT topics: AS-VAT-08 - Guide for Registration of VAT Vendors Trade Classification Guide (VAT 403).


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