Value-added tax (VAT) - Standard Bank

1 Value-added tax (VAT) VAT ( Value-added Tax) is an indirect tax based on consumption of goods and services in the economy. Revenue is raised for the government by requiring certain traders or vendors to register and to charge VAT on taxable supplies of goods or services. The essential characteristics of a VAT-type tax are as follows: The tax applies to transactions related to goods and services It is proportional to the price charged for the goods and services It is charged at each stage of the production and distribution process The taxable person (vendor) may deduct the tax paid during the preceding stages.

2 This means the burden of the tax is on the final consumer VAT is only charged on taxable supplies made by a vendor. Taxable supplies include supplies for which VAT is charged at either the Standard rate or zero rate. It does not include: salaries and wages hobbies or any private recreational pursuits (not conducted in the form of a business) occasional private sale of personal or domestic items exempt supplies VAT is therefore paid on the supply of goods or services in South Africa as well as on the importation of goods into South Africa. It s levied at the Standard rate of 14% on most supplies and importations, but there is a limited range of goods and services which are either exempt, or which are subject to tax at the zero rate (for example, exports are taxed at 0%).

3 The importation of services is only subject to VAT if the importer is not a vendor, or where the services are imported for private or exempt purposes. Certain imports of goods or services are exempt from VAT: Financial services such as interest earned and life insurance benefits Public transport of fare paying passengers by road and rail The supply of residential accommodation under a lease agreement Certain educational services, for example, in primary and secondary schools, and tertiary institutions Medical services and medicines supplied by government (provincial hospitals)

4 But excluding municipal medical facilities Any goods or services supplied by an organisation to its members to the extent that the supplies are funded from membership contributions Child minding services in cr ches and after-school centres Checklist 1 If you carry on a business and its total value of taxable supplies (taxable turnover) exceeds, or is likely to exceed, the compulsory VAT registration threshold, you must register for VAT. The threshold is currently R1 million in any consecutive 12-month period. 2 You can register as a vendor voluntarily, if you carry on a business where the total value of taxable supplies (taxable turnover) exceeds R50 000 (but does not exceed R1 million) in the preceding 12-month period.

5 3 You will not qualify to register as a vendor if you do not fall within these categories. No VAT registration will be allowed if the annual turnover is below the minimum voluntary registration threshold. 4 To apply for registration as a vendor, complete form VAT101 (obtainable from your local SARS office or on the SARS website), within 21 days of becoming liable to register. The reference guide available on the SARS website will assist you in the completion of the VAT101 form. 5 Once completed, you are required to submit the application in person to your local SARS Branch Office falling in the area where your business is situated.

6 6 Once the registration has been successfully processed, you will receive a VAT registration certificate (VAT 103). 7 VAT may be submitted manually, electronically or by payment at the bank.