Tax Clearance, VAT Registration and Accounting: a Guide for SA Entrepreneurs

A Tax Clearance Certificate is a legal document (valid for one year) that proves your South African Business Tax affairs are in order at SARS.

SARS issues this certificate if you request it and only if your Tax submissions and payments are up to date.

However, you can use fast-tracked documentation services like ours to get your Tax Clearance Certificate faster and with less hassle.

How does fast-tracked documentation services work? We have over 30 company document experts who know exactly what documents you need to get the certification you need for your business. Rather than taking weeks to figure everything out and waiting for feedback, our specialists get your legal documentation from SARS, the Department of Labour of whatever legal entity you need documentation from for in record-breaking time.

You would most likely need a Tax Clearance Certificate to apply for most RFQ’s, Tenders and contracts in SA, simply because no business wants to work with someone who’s in arrears with SARS.

A business that skips their SARS payments is most probably an unreliable partner in any project.

You would most definitely need a Tax Clearance Certificate.

There are three ways of getting a Tax Clearance Certificate:

1. You can request it directly from SARS from an online efiling account. This can often be quite confusing for first-timers and entrepreneurs without a background in finance.
2. You can use of a fast-tracked company compliance company like us to assist you. We have a team of SARS specialists who ensure clients like you get what they need as soon as possible with as little hassle as possible. We are ready to assist you – call us Toll Free on 0800 007 269 (free to dial from Cellphones and Landlines).
3. You can ask your accountant to assist you (small business often don’t employ accountants, because it usually implies higher costs).

1. In short, VAT is value added tax. It’s a form of tax that’s added on top of the products and services we buy.

   NOTE: You must be VAT registered in order to include 15 % VAT on your services/products.

   Most countries have some form of it. In England it’s 20%, in South Africa it’s just 15%.

   • If you’re a general consumer, you’re paying VAT when you buy things without realizing it.
   • If you’re a business owner or an entrepreneur and you’re wondering how VAT should impact your prices, income, and expenses, jump to the next toggle below.

   In South Africa, most companies mark up their product and service prices by 15% (so consumers will pay 115% rather than 100% of the sale price).

   SARS will eventually get any value-added tax that’s marked up on the supplies you buy. The business you buy from owe it to SARS.

   There are a few exceptions called zero-rated supplies (with 0% VAT added) and exempt supplies (where VAT isn’t relevant at all):

   • Among other things, zero-rated supplies are very basic necessities like milk, brown bread, petrol and diesel, paraffin etc (where the state feels it’s unfair to add cost to the consumer).
   • VAT exempt things are things like residential rent, many forms of basic public transport, recognized education services and interest you earn on your savings.

When do you have to register for VAT?
The only time you have to register for VAT at SARS is when your Business has more than R1 million in revenue (sales) in a 12-month period. Or when you’re likely to have more than R1 million in sales within 12 months.

Then it’s compulsory – you have to register according to South African legislation within 21 days of hitting the R1 million mark.

Registering for VAT, means you’ll have to add 15% (from 1 April 2018 it increased from 14% to 15%) to your services or products and pay that 15% to SARS. It also means you can claim back that 15% you pay on most of the business-related expenses you have.

When can you register for VAT voluntarily?
You can register your new Company for VAT voluntary, provided that: You can supply invoice(s) of R 50 000 or more OR provide invoices exceeding R 4300 per month for two consecutive months. If you are unsure, please contact us.

Why would you register for VAT voluntarily?
There are three reasons why a business would want to register for VAT voluntarily:

1. Being VAT registered means you can claim back almost all the VAT from SARS that you’ve paid on buying the things you need for your business. That includes any vehicles or equipment that you’ve bought to use for your company.
2. Being VAT registered means other companies can claim back the VAT they’ve paid for your services, so they’re more likely to do business with you in comparison with unregistered companies.
3. You require a VAT Number to Tender.

How does VAT affect product prices?
If you’re registered for VAT, you have to add 15% VAT to all your selling prices. That means, if you’re selling a shirt for R100, you’ll change the price tag to R115, because you’ll have to pay 15% (which is R15) to SARS eventually.

The only exception is if you sell or trade with zero-rated or VAT-exempt products.

When can you claim back VAT?

You have to be VAT registered to claim back any VAT.

If your business is VAT registered, you can claim back the 15% VAT you pay on supplies used for your business. You could, for instance, claim back the VAT you paid on a business vehicle or equipment.

However, as you owe SARS VAT on everything you sell, the VAT you’ve paid needs to exceed` the VAT you owe on your products sold before SARS will reimburse you.

Just keep in mind, if you’re VAT registered you need to give your clients a Tax Invoice (it has very specific elements) and you need to get a Tax Invoice when you buy things you’d like to claim back the VAT for.

If you’re eligible for compulsory VAT registration at SARS (when you earn more than R1 million in revenue in 12 months), you must complete and submit a VAT 101 form at your local SARS office within 21 days of hitting the R1 million mark.

If you’re applying for voluntary registration you must also fill out the VAT 101 form and submit it to your local SARS Branch.

HERE’S a document that SARS created that might assist you if you choose to apply yourself. Be warned, this guide is 19 pages long. If you want to make use of our experts who will tell you exactly what you need to submit and assist you with your VAT Registration, give us a call > Toll Free on 0800 007 269

If you’re a registered Company:
You’ll need an accountant or an accounting officer to sign off your books for SARS annually.

If you’re a sole proprietor:
You’ll most likely need an accountant when managing and submitting your business finances is too important, too complex or too exhaustive for you.

Why should you get an accountant or bookkeeper if it’s not compulsory yet?
When its not compulsory, getting a professional to do your finances can seem unnecessary. However, having an expert keep tab of your finances can be an investment well worth your money.

An accountant can help you with various things: from how to sort out legal structures in your business, to creating a rock-solid business plan to checking where you overspend and what you should be paying SARS.

Finances can be the clearest indicator of your business needs, where your financial risks lie, what areas deserve your attention and even why your money always seem to run out before you see it.

Having a bookkeeper or an accountant keep track of the numbers, is a great way to guide your business decisions.

It boils down to one question: would an expert help you grow, structure or organize your business and its future growth? If the answer is yes, we can help you with an Accountant close to you – just call 0800 007 269 to start.

What if I can’t hire a full-time accountant or bookkeeper yet?
You can:

Hire an hourly or part-time account/bookkeeper.
Sign up for our once-off Accounting Services – We are ready to assist you – call us Toll Free on 0800 007 269 (free to dial from Cellphones and Landlines).
Sign up for our monthly Accounting Services – call us Toll Free on 0800 007 269.
Learn more in the next tab!

When do you have to register for VAT?
The only time you have to register for VAT at SARS is when your Business has more than R1 million in revenue (sales) in a 12-month period. Or when you’re likely to have more than R1 million in sales within 12 months.

Then it’s compulsory – you have to register according to South African legislation within 21 days of hitting the R1 million mark.

Registering for VAT, means you’ll have to add 15% (from 1 April 2018 it increased from 14% to 15%) to your services or products and pay that 15% to SARS. It also means you can claim back that 15% you pay on most of the business-related expenses you have.

When can you register for VAT voluntarily?
You can register your new Company for VAT voluntary, provided that: You can supply invoice(s) of R 50 000 or more OR provide invoices exceeding R 4300 per month for two consecutive months. If you are unsure, please contact us.

Why would you register for VAT voluntarily?
There are three reasons why a business would want to register for VAT voluntarily:

1. Being VAT registered means you can claim back almost all the VAT from SARS that you’ve paid on buying the things you need for your business. That includes any vehicles or equipment that you’ve bought to use for your company.
2. Being VAT registered means other companies can claim back the VAT they’ve paid for your services, so they’re more likely to do business with you in comparison with unregistered companies.
3. You require a VAT Number to Tender.

How does VAT affect product prices?
If you’re registered for VAT, you have to add 15% VAT to all your selling prices. That means, if you’re selling a shirt for R100, you’ll change the price tag to R115, because you’ll have to pay 15% (which is R15) to SARS eventually.

The only exception is if you sell or trade with zero-rated or VAT-exempt products.

When can you claim back VAT?

You have to be VAT registered to claim back any VAT.

If your business is VAT registered, you can claim back the 15% VAT you pay on supplies used for your business. You could, for instance, claim back the VAT you paid on a business vehicle or equipment.

However, as you owe SARS VAT on everything you sell, the VAT you’ve paid needs to exceed` the VAT you owe on your products sold before SARS will reimburse you.

Just keep in mind, if you’re VAT registered you need to give your clients a Tax Invoice (it has very specific elements) and you need to get a Tax Invoice when you buy things you’d like to claim back the VAT for.