I am really passionate about accounting.
These notes will really help you to understand the theory behind the work that you are doing. It will enable you to see the bigger picture, and surely improve your grades.
Happy studying!
Chapter 13 – vat
LEARNERS SHOULD BE ABLE TO:
Perform VAT calculations:
• Use current rate
• Add VAT to cost price plus mark-up amount
• Calculate VAT on VAT inclusive amount
• Invoice or receipt base
Demonstrate understanding of the concept of VAT relating to bad debts.
Integrate ethics to VAT – VAT fraud etc.
Integrate internal audit and internal control processes over collection of
VAT from customers and payment of VAT to SARS.
Introduction
Value Added Tax:
- The tax that is charged whenever goods are sold or
services are rendered by a registered VAT vendor.
Compulsory registration
Any business whose annual
income exceeds R1 million is Voluntary registration
required to register as a VAT Any business whose annual
vendor. income is less than R1 million, but
more than R50 000, may
voluntarily register as VAT vendor.
,VAT rates
VAT is charged at a rate of 15% of the normal selling price of the goods or services. This rate
is known as the STANDARD RATE.
Exempt items
Examples include: Exempt items:
Financial services - Goods or services on which VAT is not
Rental of a private residence charged at either the standard rate or
Transportation of people by road or rail zero rate.
Educational services supplied by the State
Zero-rated items
Examples include:
Zero-rated items:
Brown bread, maize products & rice - Goods or services which are taxed
Milk, milk powder & milk blends at a rate of 0%. These items
Fruit and vegetables compromise mainly of basic
Lentils, dried beans & legumes foodstuffs and certain exports.
Vegetable oil
Eggs
Canned pilchards
Export of movable goods
Petrol & diesel
International transport of passengers and goods.
, How does VAT work?
Registered VAT vendors are
responsible for collecting VAT from
their customers or clients on behalf
It is thus ultimately the customer who
of SARS. Whenever a registered VAT
pays VAT.
vendor sells a product or service, VAT
must be included in the price charged
to the customer or client.
The business neterprise is merely
This is callesd OUTPUT TAX responsible for collecting this VAT and
passing it on to SARS.
Output tax vs. input tax
Output tax Input tax
VAT charged by a business enterprise when VAT charged to or paid by a business
it sells goods or renders services. enterprise in acquiring goods or services
from another VAT vendor.
The price that the customer is charged for The business enterprise will be charged
the goods or services includes the output input tax when it purchases trading stock,
tax. packaging materials, equipment etc.
Input tax is also charged for services
rendered by the business enterprise such as
repairs, legal fees, telephone bills etc.
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