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What is VAT

Value-Added Tax is commonly known as VAT. VAT is an indirect tax on the consumption of goods and services in the economy.

Revenue is raised for government by requiring a business, that carries on an enterprise (as defined in section 1(1) of the VAT Act), to register for VAT.

In doing so, the business will charge VAT on supplies of goods and services made by it, on the importation of goods and on imported services (subject to certain conditions).

The business will also be entitled to deduct any VAT charged to it, or under limited circumstances from a business that is not registered for VAT, in respect of a supply made to it. VAT is therefore non-cumulative, meaning that a credit/deduction is allowed for VAT paid in previous stages, within the production and distribution chain. The business is required to pay the difference between the VAT charged by it and the VAT charged to it, or claim a VAT refund where the VAT charged to it exceeds the VAT charged by it.

Vat Types

Subject to certain conditions, the vendor must then charge VAT on supplies of goods and services made by it (output tax). VAT is only charged on taxable supplies made. Taxable supplies are supplies for which VAT is charged at either the standard rate (currently 15%) or zero rate (0%). There is a limited range of goods and services which are subject to VAT at the zero rate or exempt from VAT.

Vat Input

Vat input is when you purchase supplies from a supplier/creditor and they are a registered vat vendor then you can claim the vat input on their invoices and slips.

Source Documents
  • Cash payment slips
  • Creditor invoices
  • Bank statement
Vat Output

Vat output is the vat which your company charges out upon invoicing your client and is payable to SARS.

Source Documents
  • Sales invoices
  • Cash sale receipts

DISCOVER THE

Vat Registration Categories

Businesses can either choose to wait until they reach the vat registration requirement threshold or register for vat voluntarily.

Compulsory Registration

Once a business reaches or is expected to reach R1 million in turnover then they are required to register for vat.

Voluntary Registration

Businesses may also opt to register for vat voluntarily, they will be required to meet certain registration requirements.

Registration

Vat Registration Requirements

There are six categories of vat registrations that applies to specific types of persons, as follows:

Compulsory Registration:

When a business reaches an annual turnover of R1 million or is expected to reach R1 million turnover, then SARS requires that you register for vat. This is compulsory and failing to register will result in back dated vat claims.

Voluntary Registration: Welfare Organisation

There is no voluntary threshold for the value of taxable supplies made by the person. This category includes for example the activities of a municipality or a “welfare organisation” as defined in the VAT Act.

Voluntary Registration:
R 50,000.00 Threshold

The value of taxable supplies made by the person exceeded the voluntary threshold of R50 000 in the past period of twelve months.
Or has no taxable sales but has a R50,000.00 contract.

Voluntary Registration:
R 4,200.00 Threshold

The value of taxable supplies made by the person did not exceed the voluntary threshold of R50 000. The value of the taxable supplies made for that month must exceed R4 200 for three consequtive months with tracable bank payments.

Voluntary Registration:
Going Concern

The person acquired the business as a going concern. For this category you have purchased a business which is currently trading and is currently undergoing change of ownership, for such instances, voluntary registration is acceptable.

Voluntary Registration: General Notice R.446 

The nature of business activity carried on is agriculture, farming, forestry, fisheries, mining, ship and aircraft building, manufacture or assembly of plant, machinery, motor vehicles, property development, infrastructure development and beneficiation.

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