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LEARNING UNIT 1
Learning unit
INTRODUCTION
LEARNING OUTCOMES
PRESCRIBED STUDY MATERIAL FOR THIS
LEARNING UNIT
SECTIONS OF THE PRESCRIBED
TEXTBOOK THAT CAN BE IGNORED
CONTENT OF LEARNING UNIT 1
1.1 Background
1.2 The accounting basis
1.3 Tax periods, returns, penalties and refunds
1.4 Output VAT
1.4.1 Supply of goods and services in the
course or furtherance of an enterprise
1.4.2 Importation of goods and services
1.4.3 Output VAT: zero-rated supplies
1.4.4 Output VAT: exempt supplies
1.4.5 Output VAT: deemed supplies
1.4.6 Output VAT: non-supplies and no
apportionment
1.5 Time of supply
1.6 Value of the supply
1.7 Input tax
1.7.1 Documentation
1.7.2 Determination of input VAT
1.7.3 Input VAT denied
1.7.4 Deemed input
1.8 Special rules
1.9 Adjustments
1.10 Tax rulings
1.11 Tax avoidance and unprofessional conduct
1.12 Influence of VAT on income tax calculations
1.13 Summary
Value-Added
WRAP-UP
SELF-ASSESSMENT QUESTIONS Tax (VAT)
ASSESSMENT CRITERIA
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INTRODUCTION
Generally, tax can be classified into two groups, namely direct taxes and indirect taxes. Indirect
taxes are included in the price you pay for the consumption of goods or services. Value-Added
Tax (VAT) is an example of an indirect tax.
In this learning unit, the calculations relating to Value-Added Tax (VAT) will be investigated. The
Value-Added Tax Act No. 89 of 1991 contains the details of how the VAT system works and how
the VAT Act should be applied. VAT is a separate tax from income tax, and it has its own rules,
based mainly on how and when goods or services are supplied. The VAT rate changed on 1 April
2018 to 15%.
It is important to understand how to calculate the VAT amount (that is, the portion of the tran-
saction value/amount that constitutes Value-Added Tax). The VAT amount is calculated by
multiplying the transaction amount by the tax fraction. The tax fraction is discussed below. When
calculating the VAT on a transaction, it is important to establish which amount was provided: It
could be the amount before VAT is added (the VAT exclusive selling price) or the amount after
VAT has been added (the VAT inclusive selling price). The following basic structure can be used
to calculate the different amounts:
Selling price excluding VAT R100
Add: VAT at 15% R 15
Selling price including VAT R115
This framework can be used to calculate any amount, for example if the selling price (including
VAT) is R230, the VAT and the selling price excluding VAT can be calculated as follows:
Value (selling price excluding VAT) R100 R200 (R230 x )
Add: VAT at 15% R 15 R 30 (R230 x ) or (200 x )
Consideration (selling price including VAT) R115 R230
When an amount includes VAT (i.e. VAT inclusive amount), the tax fraction will
be as follows: 15/115 (as shown in the example above: R230 x 15/115 = R30).
When an amount excludes VAT (i.e. VAT exclusive amount), the tax fraction will
be as follows: 15/100 or 15% (as shown in the example above: R200 x 15/100 =
R30).
VAT is a tax that is levied at every stage of the production process; therefore, every time a VAT
vendor (an entity that is registered for VAT purposes) sells goods or services, VAT must be levied
(called output tax). The VAT vendor buying the goods or services will be allowed to claim back
the VAT paid (called input tax).
Goods and services sold → Levy OUTPUT TAX
Goods and services purchased → Claim INPUT TAX
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