VAT Registration at SARS

In this post, I will be discussing what VAT Registration is in South Africa, what the benefits are when you have to register and also the fastest way you can register for VAT in South Africa.

This post is for you if you have a business and you want to apply for a VAT number as soon as possible, but you first want to clarify a few things you have on VAT registration and its benefits.

We usually work with various South African entrepreneurs and businesses and they all always have a few specific questions on VAT in South Africa to figure out how it applies to their businesses. So that’s why we’ve decided to answer a few of the most common questions.

Expert Tip: Save time by calling 0800 007 269 toll free to get your VAT Registration Online.

Value-Added Tax is commonly known as “VAT”. It should not be confused with “Income Tax”. VAT is an indirect taxation on the value added to goods and services by Suppliers and Vendors in the economy. South African Companies that are registered for VAT must charge an additional 15% on the prices of their products and services. Most expenses will then be VAT deductible, such as rent, telephone, consumables, advertising and stock (depending if VAT was paid on these expenses). The difference will then be paid over to SARS, or claimed back from SARS. To start the process, apply on this page below or call 0800 007 269 toll free.

The most significant benefit is the association. Companies who pay VAT, might prefer working with companies who charge VAT.

Other significant benefit is having the ability to deduct the VAT you pay when purchasing things for your business from the VAT amount you owe SARS in terms of Value Added Tax to your products.

You only HAVE to register for VAT if your turnover / sales is more than R 1 million over 12 months. South African law requires you to register for VAT in this instance.

It is compulsory to register for VAT within the first 21 days after you’ve hit that R1 million mark.

You CAN voluntarily register for VAT if your turnover (sales) is more than R50 000 a year or if you have invoices that show you’ve earned more than R4200 per month – this can be done through us.

So essentially VAT is voluntary for smaller companies and compulsory for large companies. The reason why it’s voluntary for smaller companies or businesses is simply that your benefit largely depends on the nature and size of your business.

If you buy from or sell to, or if you aim to buy from or sell to, VAT registered companies, registering for VAT might be a good idea. If not, you can focus on other aspects of your business and revisit the benefits of VAT registration once you do have the need to trade with VAT Registered companies.

Legally nothing bad happens if your turnover is less than R1 million over 12 months. Before you hit the R1 million-mark, registration is voluntary.

That means you get to evaluate if it will financially benefit you to register for VAT or not. Once your annual turnover (sales) is over R1 million, it’s a criminal offence not to be VAT registered.

You can face charges and/or penalties and interest on your due payments.

There is a 21 days timeframe after you earn R1 million (in turnover over a 12-month period) to register.

How VAT is relevant to you largely depends on what you sell or offer as a business, how much you earn and with whom you’re doing business with. It’s also important to consider who you’d like to do business with in the future.

If you’re buying from companies who add VAT, you’re paying VAT and you can’t claim that back from SARS unless you register for VAT. In other words, the VAT portion forms part of your input cost.

It’s important to note that if you earn less than R50 000 a year or R4200 per month (for at least two consecutive months), you cannot register for VAT yet.

That means VAT is only relevant to those roughly exceeding R50 000 turnover (sales) a year.

Also note that there is one instance you can recover VAT if your business isn’t registered yet, however that usually applies to international companies or tourists.

If you buy items in South Africa and you export it overseas, you might want to look into that.

Expert tip: If you have any other questions about VAT, don’t hesitate to book your FREE consultation with our experts by clicking HERE (it will all happen online or via email/phone, so there’s no need for you to come into our offices)

Essentially, a Tax invoice is simply a normal invoice that included the amount of VAT added to your total price. You have to be registered for VAT in order to add VAT to your prices. However, this can relate to other forms of Tax you have to add too, like for e.g. Securities Transfer Tax (these unique forms of Tax only apply to very specific businesses).

There are a few specific things you HAVE to have on your Tax Invoice. If you are Vat registered you can simply make sure the following information is on your normal invoice:

• Explicitly use and add the term “tax invoice” on your invoice.
• Make sure the full details of the supplier (so that would be your business) is on the invoice (name, address, and VAT registration number).
• Also make sure the full details of the receiver (your client) is on the invoice (name, address, and VAT registration number).
• A unique serialized Invoice number (that refers to the way your number your invoices in order and according to the date issued).
• The date.
• A good description of the supplies or services you offered.
• The quantity provided, so that refers to an exact number of products or hours of service you offered.
• The cost of these individual products and/or hourly rate plus the total amount.
• The amount of VAT added.
• The price including the VAT and the price excluding the VAT.

If you are registered for VAT, you owe VAT – that is the 15% you have to add to the cost of your products or services. You only need to add 15% if you are VAT registered.

That also means you can deduct the VAT you pay when you purchase certain items for your business. If the total you owe to SARS is less than the amount of VAT you’ve paid, SARS will pay the difference back to you.

You can usually deduct any VAT that’s charged on any item, product or asset that you specifically use for your business.

However, you generally cannot claim back VAT on items you purchase that are for entertainment purposes for e.g. membership or subscription service to clubs, associations, nature or any recreational or social clubs.

There are also various products and services, that despite hailing from large companies that should register for VAT in terms of their earnings, don’t have to add VAT to their products. They are either called zero-rate supplies or exemptions. The point is there is no VAT added so you cannot claim any VAT back on these items.

There are various reasons for these exemptions and zero-rate supplies.

Most often it’s because the government feels these items are basic necessities and should be as affordable as possible to all South Africans.

Here’s a quick list of some items/service that does not have VAT added to their prices (so naturally that implies you can’t claim back any VAT):

• Financial Services
• Residential Accommodation
• Some forms of Education
• Some forms of Transport services
• Municipal Rates
• Some food and forms of fuel
• Some services provided by non-South African residents
• On some services provided outside South Africa
• International transportation of both items and people

Please note that other forms of taxation might apply to some of these items for e.g. Transfer Duty or Securities Transfer Tax.

Please note that the VAT law change from time to time, so please verify the above with your Accountant (or one of our Accountants).

Usually VAT Returns need to be summitted every two months. However if you earn more than R30 million over 12 months, you need to submit yours every single month.

So essentially VAT is voluntary for smaller companies and compulsory for large companies. The reason why it’s voluntary for smaller companies or businesses is simply that your benefit largely depends on the nature and size of your business.

If you buy from or sell to, or if you aim to buy from or sell to, VAT registered companies, registering for VAT might be a good idea. If not, you can focus on other aspects of your business and revisit the benefits of VAT once you do have the need to trade with VAT Registered companies.

To apply for a VAT number, you have to register at SARS or use a SARS-expert like ourselves to help you.

Your first option is filling out this VAT 101 – Application for Registration form and then submitting it at your local SARS branch.

Book your FREE consultation with our experts by clicking right HERE or contact us Toll Free on 0800 007 269 (free to dial from Cellphones and Landlines).

You can view our VAT Registration brochure here.