VAT - Vat notes PDF

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Value-added tax Workings of a VAT system 

Value-added tax is an indirect tax which is based on the consumption of goods, and which is usually paid when goods are purchased.

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A supplier, who is a registered VAT-vendor, will supply goods that are charged with VAT to a consumer. The supplier will then pay the VAT which was collected over to SARS. Thus, even though the consumer bears the cost of the VAT, the supplier bears the burden of paying it over to the SARS.

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The VAT-rate changed on 01 April 2018, from 14% to 15%.

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The VAT payable to SARS is calculated using the subtractive input method, whereby a vendor subtracts any VAT it incurred in the making of taxable supplies in the course of its enterprise from the amount of VAT which was collected on the sale of goods to a consumer. VAT Payable to / (receivable from) SARS = VAT Output – VAT input

Collection of VAT 

A vendor will at the end of each tax period (the tax period refers to the tax periods described in section 27 of the Value-added Tax Act 89 of 1991) complete and submit a VAT 201 form and pay outstanding balance over to SARS.

Section 7 – Imposition of Value-added Tax 7. Imposition of value-added tax. (1) Subject to the exemptions, exceptions, deductions and adjustments provided for in this Act, there shall be levied and paid for the benefit of the National Revenue Fund a tax, to be known as the value-added tax — (a) on the supply by any vendor of goods or services supplied by him on or after the commencement date in the course or furtherance of any enterprise carried on by him; (b) on the importation of any goods into the Republic by any person on or after the commencement date; and (c) on the supply of any imported services by any person on or after the commencement date, calculated at the rate of 15 per cent on the value of the supply concerned or the importation, as the case may be.

Vendor “Vendor” means any person who is or is required to be registered under this Act: Provided that where the Commissioner has under section 23 or 50A determined the date from which a person is a vendor that person shall be deemed to be vendor from that date;

Person “Person” includes any public authority, any municipality, any company, any body of persons (corporate or unincorporate), the estate of any deceased or insolvent person, any trust fund and any foreign donor funded project;

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V alue-Added Tax

Section 23: Registration for VAT Section 23 (1): Compulsory registration

Section 23 (3): Voluntary registration

Person becomes liable to register as VAT-vendor when: 

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Unregistered person may apply to register as VAT-vendor when:

The value of all taxable supplies made by that person exceeds R1 000 000 during any 12 month period, where that period ends at the end of the current month. The value of all taxable supplies to be made during a 12 month period, starting at the beginning of the current month and resulting from a written contractual obligation, exceeds R1 000 000.

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That person is a “municipality” as defined in section 1 or is carrying on any enterprise as contemplated in paragraph (b) (ii), (iii) or (v) of the definition of “enterprise” in section 1; or

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The value of taxable supplies made / supplied by that person has exceeded R50 000 during the immediately preceding 12 month period.

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The value of taxable supplies has not yet exceeded R50 000 but is reasonable expected to exceed R50 000 within 12 months of registration.

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A person acquires an enterprise as a going concern, where the value of the taxable supplies made by the seller of the enterprise has exceeded R50 000 in the preceding 12 month period.

Provided: 

Taxable supplies of that person will not exceed R1 000 000 solely as a consequence of: o Any cessation of, or any substantial and permanent reduction in the size or scale of, any enterprise carried on by that person; or o

The replacement of any plant or other capital asset used in any enterprise carried on by that person; or

o

Abnormal circumstances of a temporary nature. Section 1A: Foreign electronic services

Every person who carries on any foreign electronic service and is not registered becomes liable to be registered at the end of any month where the total value of taxable supplies made by that person has exceeded R1 million in any consecutive 12-month period.

Compulsory registration

Voluntary registration

Value of taxable supplies (value excludes VAT)

Section 23 (1) >R1 000 000 during:  Prior 12 month period, ending at end of month. OR  Next 12 month period, beginning at start of current month.

Section 23 (3) > R50 000 and ≤ R1 000 000 during:  Prior 12 month period; OR  Next 12 month period

If a person carries on >1 enterprise and joint taxable supplies exceeds R1 000 000, that person must register as VAT vendor. The onus of registering for VAT purposes falls on person. Person must complete and submit within 21 days of becoming liable to register a VAT 101 form.

Section 50: Separate registration Sole Trader

Branch / Division / Enterprise 

Branch / Division / Enterprise

Branch / Division / Enterprise

When a vendor carries on several enterprises, or a single enterprise is carried on in branches or divisions, the vendor may register each of the divisions separately if: o The divisions / branches can be separately identified in respect of their location or activities; AND o

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Each of the divisions / branches keep independent accounting records Value-Added Tax

Section 50A: Separate persons deemed to be the same person Company A 

Company B

Where two or more persons carry on the same enterprise and the Commissioner is satisfied that one of the main reasons for the split is to avoid registration for VAT purposes, the persons are deemed to be the same person. If joint taxable supplies have a value of at least R1 000 000 they must register as vendors.

Persons who may charge VAT 

Only registered vendors may charge VAT, if the vendor produces taxable supplies in its enterprise.

Section 27: Tax periods Category A

Tax periods 2 months ending Jan, Mar etc…

B

2 months ending Feb, Apr etc…

C

1 month tax period

D

6 month tax period end 28 / 29 Feb and 31 Aug

E

12 month tax period

Requirements The taxable supplies during a 12 month period is ≤ R30 million (Farmers > R1,5 million) The taxable supplies during a 12 month period is ≤ R30 million (Farmers > R1,5 million) The taxable supplies during a 12 month period > R30 million. Apply for this period in writing, or qualify by default if above amount exceeded. Farmers: Taxable supplies during a 12 month period ≤ R1,5 million. Micro business applies for this period in writing. Company / trusts for the letting fixed property, rental of movable property, and the administration of companies which are connected persons to a vendor.

Claiming of VAT input 

Input VAT may only be claimed if the vendor has a valid tax invoice, provided that the input is not specifically denied and it is used in the making of taxable supplies.

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Exception: The acquisition of second-hand goods from a non-vendor is subject to a notional input.

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Input VAT may be claimed on the importation of goods.

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Value-Added Tax

Valid tax invoice Valid Tax Invoices

Section 20 (6) Optional tax invoice only issued at recipient’s insistence

Section 20 (5) Shorter invoice

Section 20 (4) Extended invoice

Supply which was supplied was exchanged for consideration of ≤ R50.

Supply which was supplied was exchanged for consideration of > R50 and ≤ R5 000.

Supply which was supplied was exchanged for consideration of > R5 000.

A supplier must issue an invoice within 21 days of a supply being made.

Extensive tax invoice

Abridged tax invoice 

The words “tax invoice”, “VAT invoice” or “invoice”.

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Name, address and VAT registration number of the supplier.

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The name, address and, where the recipient is a registered vendor, the VAT registration number of the recipient.

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An individualised serial number and the date upon which the tax invoice is issued.

The value of the supply, the amount of tax charged and the consideration for the supply

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A full and proper description of the goods (if applicable, whether second-hand or not) or services supplied.

Where the amount of tax charged is calculated by applying the tax fraction to the consideration, the consideration for the supply and either: o The amount of tax charged.

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The quantity or volume of the goods or services supplied.

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The words “tax invoice”, “VAT invoice” or “invoice”.

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Name, address and VAT registration number of the supplier.

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An individualised serial number and the date upon which the tax invoice is issued.

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A description if the goods (if applicable, whether second-hand or not) or services supplied.

And either: 

OR 

And either: 

OR o

A statement that it includes a charge in respect of the tax and the rate at which the tax was charged.

The value of the supply, the amount of tax charged and the consideration for the supply

OR 

Where the amount of tax charged is calculated by applying the tax fraction to the consideration, the consideration for the supply and either: o

The amount of tax charged. OR

o

A statement that it includes a charge in respect of the tax and the rate at which the tax was charged.

Section 9: Time of supply 

The time of supply shall generally be the earlier of: o The time an invoice was issued. o The time payment in consideration was received.

Section 10: Value of supply 

The value shall be the amount of the consideration for the supply, less the VAT.

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Value-Added Tax

Accounting basis Payments basis VAT is accounted for on payment

Invoice basis VAT is accounted for at the earlier of invoice or payment

Section 15 (2) (a) If a vendor applies in writing to account for tax payable using the payments basis, the Commissioner may order that vendor to account for tax payable in such manner, where the direction takes effect either:  From the vendor’s registration in terms of the Act; or  If the vendor has previously accounted for tax payable using the invoice basis, the tax period immediately following the tax period in which the Commissioner gave such an order. Provided that the vendor is a:

Section 15 (2) (a) Public authority. A municipality. An association not for gain. Carrying on an enterprise as contemplated in paragraph (b) (vi) (a foreign electronic service) of the definition of “enterprise” in section 1.

   

Section 15 (2) (b) Natural person, and:  The total value of the natural person’s taxable supplies has not exceeded R2,5 million at the end of any tax period.  The total value of the natural person’s taxable supplies is unlikely to exceed the above amount.

Provided that the provisions of this Act relating to the determination of the value of any supply of goods or services, whether such supply is made before or on or after the commencement date, shall apply for the purposes of this subsection, but no regard shall be had to any tax charged in respect of such supply.

Provided that: Any supply of goods or services, for which the consideration in money (including VAT) is R100 000 or more, the vendor shall account for the tax payable on the invoice basis, excluding any transaction where the supply is fixed property. Any voluntarily registered vendor shall account for tax payable on the payments basis until such time where the total value of the taxable supplies of that enterprise has exceeded R50 000, from which that enterprise will account for VAT using the invoice basis in the tax period immediately following the tax period in which the value has exceeded R50 000.

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Section 28 and 31: Administrative procedures 

A vendor must complete and furnish SARS with VAT 201 form and the outstanding balance of VAT payable before: o Manual submission: 25th day of month following end of tax period.

o E-filing: End of month following end of tax period.  If the 25th day or the end of the following month does not fall on a business day, it must be submitted on the last immediately preceding business day.

Section 39: Late payment and penalties  

If payment is late, may be penalised by amount of up to 10% of the amount of tax due. If interest is levied, it is calculated at the prescribed rate from the 1st day of the month following the month in which payment was due.

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The commissioner may prescribe the time at which payment is due. If payment is not made in time, it will be deemed that the payment was made on the next business day.

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Value-Added Tax

Levying of VAT Section 7 (1) (a): Output tax on domestic items “Output tax”, in relation to any vendor, means the tax charged under section 7 (1) (a) in respect of the supply of goods and services by that vendor;

Taxable supplies

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Standard-rated supply, including deemed supply

Exempt supply

Zero-rated supplies

@ 15%

No VAT applicable

@ 0%

All other supplies

Listed in Section 12 of the VAT Act

Listed in Section 11 of the VAT Act

Value-Added Tax

Charging section 7. Imposition of value-added tax. (1) Subject to the exemptions, exceptions, deductions and adjustments provided for in this Act, there shall be levied and paid for the benefit of the National Revenue Fund a tax, to be known as the value-added tax— (a) on the supply by any vendor of goods or services supplied by him on or after the commencement date in the course or furtherance of any enterprise carried on by him; calculated at the rate of 15 per cent on the value of the supply concerned.

Defined terminology “Supply” includes performance in terms of a:

Supply

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Sale.

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Rental agreement.

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Instalment credit agreement.

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All other forms of supply.

Whether voluntary, compulsory or by operation of law, irrespective of where the supply is effected, and any derivative of “supply” shall be construed accordingly; “Services” means: 

Services

Anything done or to be done, including the: o

Granting.

o

Assignment.

o

Cession.

o

Surrender.

Of any right, or the making available of any facility or advantage, but excluding a supply of goods, money or any stamp, form or card contemplated in paragraph (c) of the definition of “goods”. If something is not a supply of goods (and not specifically exempt) it will be a supply of services. A supply of services also includes supply of trade marks, patents, goodwill, and know-how payments. “Goods” means: 

Corporeal movable things.

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Fixed property.

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Any real right in any such thing or fixed property.

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Electricity.

Goods But excludes: 

Commencement date Vendor

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Money.

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Any right under a mortgage bond or pledge of any such thing or fixed property.

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Any stamp, form or card which has a money value and has been sold or issued by the State for the payment of any tax or duty levied under any Act of Parliament, except when subsequent to its original sale or issue it is disposed of or imported as a collector’s piece or investment article.

“Commencement date” means 30 September, 1991. “Vendor” means any person who is or is required to be registered under the Value-added Tax Act.

Value-Added Tax

“Enterprise” means a.

In the case of a vendor: (i) Any activity (ii) Carried on continuously or regularly by any person in the Republic or partly in the Republic. (iii) In the course or furtherance of which goods or services are supplied to any other person for a consideration, whether or not for profit, (iv) Including any enterprise or activity carried on in the form of a commercial / financial / industrial / mining / farming / fishing / municipal / professional concern: (v) Or any other concern of a continuing nature or in the form of an association or club.

b.

Without limiting the applicability of paragraph (a): (i) The supply of electronic services by a person from a place in an export country, where at least two of the following circumstances are present: i. The recipient of those electronic services is a resident of the Republic; ii. Any payment to that person in respect of such electronic services originates from a bank registered or authorised in terms of the Banks Act; iii. The recipient of those electronic services has a business / residential / postal address in the Republic. (ii) The activities of an intermediary.

Enterprise Provided that – (i) Anything done in connection with the commencement or termination of any such enterprise shall be deemed to be done in the course of that enterprise. (ii) Any branch or main business of an enterprise permanently situated outside the Republic shall be deemed to be carried on by a person separate from the vendor, if – a.

The branch or main business can be separately identified; and

b.

An independent system of accounting is maintained by the concern in respect of the branch or main business.

(iii) The rendering of services by an employee to his employer in the course of his employment, shall not be deemed to be the carrying on of an enterprise to the extent that any amount constituting remuneration is paid to such employee, provided that a.

Paragraph (iii) shall not apply in relation to any employment accepted by any person in carrying on any enterprise carried on by him independently of the employer by whom the amount of remuneration is paid or payable.

(iv) Any activity carried on by a natural person as a hobby shall not be deemed to be the carrying on of an enterprise. (v) Any activity shall to the extent to which it involves the making of exempt supplies not be deemed to be the carrying on of an enterprise. (vi) Where a person carries on an enterprise supplying commercial accommodation, and the total value of taxable supplies made by that in the preceding or following period of 12 months has / will not exceed R120 000, shall be deemed not to be the carrying on of that enterprise.

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Value-Added Tax

Section 7 (1) (b): Imported goods 

Vat will be charged at a rate of 15% on any goods that are imported into the Republic, whether or ...