Summary
Summary - VAT
- Course
- Accounting
- Institution
- 10th Grade
Understand the basics of VAT with these concise notes that include the calculation for VAT, the journals and all the little pieces of information that are considered NB!
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VALUE ADDED TAXINTRODUCTION
• Value-added tax (VAT): Tax charged on the supply of goods/services by a vendor.
→ An indirect tax levied by a vendor on the consumption of goods and services.
• Governed by the Value-Added Tax Act 89 of 1991.
• Percentages through the years:
1) 1991 = 10%
2) 1993 = 14%
3) 2018 onwards = 15%
VAT
INPUT OUTPUT
Paid by the vendor on goods or services Collected or levied by a vendor when
purchased or received from a supplier. goods are sold, and services are rendered
to a client.
All supplies of goods or services to a All goods or services supplied by a vendor
vendor are subject to VAT input if it is are subject to VAT output.
obtained from other registered vendors.
1) Example: SL Vendors renders services to business client M McNiss for R4 000
(exclusive).
General journal for SL Vendors:
details debit credit
Business client: M McNiss 4 600
Fees 4 000
VAT Output 600
(Services for client)
Calculation: 4 000 x 0.15 = 600
2) Example: R Hairdressers purchases equipment for R9 200 (inclusive).
General journal for R Hairdressers:
details debit credit
Equipment 8 000
VAT input 1 200
Bank 9 200
(Purchased equipment)
100
Calculation: 9 200 x 115 = 8 000
CALCULATIONS
𝒘𝒉𝒂𝒕 𝒘𝒂𝒏𝒕
𝑿 ×
𝒘𝒉𝒂𝒕 𝒉𝒂𝒗𝒆
Exclusive VAT Inclusive
100% 15% 115%
, CATEGORIES
Cat A
• The vendor must report to SARS every two months ending on uneven months.
• Eg: Every January, March, May, July, September, or November.
Cat B
• The vendor must report to SARS every two months ending on even months.
• Eg: Every February, April, June, August, October, and December.
Cat C
• The vendor must report to SARS in monthly periods provided that:
a) The value of the taxable supplies is more than R30 million for 12 months.
b) The vendor applied for this category.
c) SARS classified the vendor into this category as a result of default.
Cat D
• The vendor must report to SARS in six-month periods ending February and August unless
SARS indicates otherwise.
• This applies to vendors:
a) Conducting farming activities that don't fall into category C.
b) Where the value of taxable supplies is less than R1.5 million for 12 months.
Cat E
• The vendor must report to SARS in annual periods ending on the last day of the year of
assessment for income tax purposes.
• Done when the vendors' enterprise consists solely of business with connected persons.
WHO IS A VENDOR?
• Any person that is required to be registered under the VAT Act.
This person can include
1) A public authority.
2) Municipality.
3) Company.
4) Closed corporation.
5) Body of persons.
6) A deceased or insolvent estate.
7) A trust fund.
8) Any foreign donor-funded project.
• An agent who collects VAT for the South African Revenue Services (SARS).
REGISTRATION
• As of 2008: An entrepreneur is compelled to register as a vendor if the total value of the
taxable supplies exceeds R1 million in a period of 12 months.
• As of 2014, a person may register voluntarily as a vendor if:
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