The following notes contain theory concepts dealt with in VAT. This includes:
VAT registration
Standard rate items, zero rated items, exempt items
Input tax
Output tax
VAT payable to SARS
Tax periods
Submission of VAT returns and VAT payments
Accounting basis: Invoice basis, Payment basis
...
Value added tax
VAT is an indirect tax charged whenever goods are sold or services are rendered by
a registered VAT vendor. Goods and services on which VAT is not levied:
• Salaries and wages.
• Hobbies or private recreational pursuits (unless a business)
• Private sales of domestic/personal items.
• Exempt supplies.
VAT registration
• Compulsory registration: any business whose annual income exceeds R1
million is required to register as a VAT vendor.
• Voluntary registration: any business whose annual income is less than R1
million may voluntarily register as a VAT vendor, provide that the business
has an annual income in excess of R50 000.
Standard, zero rated and exempt items
Standard rate
The standard rate is the normal rate at which VAT is charged when goods are sold
or services are rendered. The current standard rate is 15%.
Zero-rated items
Goods and services on which VAT is charged at a rate of 0%.
• Basic foodstuffs e.g. brown bread, maize products, rice, milk, fruit, vegetables,
eggs etc.
• Paraffin
• Petrol and diesel
• Property rates
• Export of moveable goods.
• International transport of passengers or goods.
Exempt items
Goods or services on which no VAT is charged.
• Financial services.
• Rental or private residence.
• Transport of people in SA by railway or road.
• Educational services provided by the state.
• Childcare services.
Input tax, output tax and VAT payable to SARS
Output tax
• VAT charged by a vendor when it sells goods or renders services.
Input VAT
VAT charged to/paid by a vendor in acquiring goods and services from another VAT
vendor. A vendor will be charged input tax when it:
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