Value added tax (VAT)

What is value added tax?

• VAT is an indirect tax that imposed by the government on the consumption of goods and
services
• Charged on the supply of goods or services by entities in the furtherance of an enterprise
• It is indirect because the end user who pays the VAT is not the final consumer of the product
(the customer consumes the goods and services , and the business pays the VAT to SARS, more
like the business is the middle man between SARS and the consumer)
• VAT is currently charged at 15% standard rated supplies

Who pays VAT( registration for VAT: compulsory and voluntary)

Voluntary registration
Compulsory registration
• Entity can voluntarily register if
f your taxable supplies
value of taxable supplies made/to
(standard-rated and zero-rated) be made <R1m but made R50m
have exceeded R1 million within taxable supplies in the last
the past 12 months, you must 12months

register for VAT with SARS. You

have 21 days from date the R1m
threshold is exceeded to
register
 aspects of VAT( standard rated, zero rated and VAT exempt)

Standard rated Zero-rated Exempt

• Vat is charged at a standard rate VAT is charged but at a rate of goods on which VAT is exempt are
of 15% in the supply of goods or 0% in the supply of goods and not taxable supplies as a result they
services by entity in the services are not taken into account when
furtherance of a business Don’t confuse with VAT determining whether the entity
exempt goods needs to register with SARS
Examples:
Examples:
examples:
Anything else that is not zero-rated nor Exports
Non-fee related financial
VAT exempt 19 basic food items
services
Illuminating paraffin
Educational services
Goods which are subject to
provided by an approved
the fuel levy (petrol and
educational institution
diesel)
Residential rental
International transport
accommodation, and
services
Public road and rail
Farming inputs
transport.
Sales of going concerns, and
Certain grants by
government.
 CALCULATING THE VAT PAYABLE /RECEIVABLE FROM SARS

INPUT VAT
OUTPUT VAT
When an entity buys goods from the supplier, the
supplier will charge them the cost of the good plus VAT that the reporting entity charges to
the input VAT customers on behalf of SARS

You can say it is input because the
entity(customer in this case) will be
receiving the goods or services
If an entity is registeres with SARS it will
be able to claim the input VAT ( by
deducting it from the outputs vat payable
to SARS
The accounting entry will be
e,g; purchase of inventory to make taxable
supplies(sale to customers of goods that are
standard rated and zero-rated)
You can say it is output because the
entity(supplier in this case) will be
giving/transferring the goods or
services to the customer
VAT charged to customers is payable
to SARS
This amount is a liability as the entity
has an obligation to pay the output
VAT to SARS and the past event is the
supply of goods or services to the
customer

dr inventory 100%

dr input VAT 15%

cr Bank 115%

However if entity is not a registered

VAT vendor, they can’t claim Vat so
the VAT paid to the supplier will form
the cost of the goods bought:

Dr inventory 115%

Cr Bank 115%

input tax may be deducted from the

output tax liability only to the extent that
the VAT is incurred on goods or services
acquired for the purpose of use,
consumption or supply in making taxable
supplies

if entity makes 80% taxable supplies it can

only claim 80% of the input VAT, so it
would be 80%*15%
 • in calculating the VAT payable or receivable we com pare the total balance of the input vat that
can be claimed V.S the sum of all output vat.
• The calculation can be done systematically or using the VAT control T ledger account
• If total output VAT> total input VAT= VAT payable to SARS vice Vesa

Dr input VAT Output VAT

Includes amounts such VAT that was charged on

sale transactions that was refunded

Its like an asset so if greater than output VAT it is a

tax receivable(our claims exceed our obligation to
SARS)
Exempt supplies
Supplies of the following goods or services are exempt:
• certain financial services, such as long-term insurance, interest and the
provision of credit, exchange of currency, transactions involving letters
of credit, equity securities, debt securities shares, derivatives and
cryptocurrency
• donated goods or services supplied by an association not for gain
• residential accommodation in a dwelling
• leasehold land that is or will be used to erect a dwelling
• land (including existing improvements) situated outside South Africa
• management services supplied by bodies corporate of sectional title
property schemes, share block companies, housing development
schemes for retired persons, homeowners’ associations and body
corporates
• passenger transport by road or railway
• educational services
• crèche and after-school services
• services supplied by employee organisations against payment of
membership contributions
• goods supplied in South Africa by a person who is not a resident of the
country, and is not a vendor, if the goods have not been entered for
home consumption (unless approval is obtained to zero-rate the supply)
• goods or services by a bargaining council against payment of
membership contributions
• goods or services by a political party against payment of membership
contributions.

Zero-rated supplies
Supplies of the following goods or services are zero-rated, provided that all
documentary and procedural requirements have been met.
Zero-rated goods
• exportation of goods
• leasing of goods for exclusive use in an export country
• supply of an enterprise (or separately registered branches) as a going
concern
• unmanufactured gold supplied to the South African Reserve Bank, the
South African Mint Company or a registered bank
• certain gold coins
• certain agricultural products supplied under prescribed circumstances
 • fuel levy goods and petroleum oil
• goods transferred to a foreign branch
• basic foodstuffs such as brown bread, brown wheaten meal, maize
meal, samp, mealie rice, dried maize, beans and lentils, pilchards or
sardinella, rice, vegetables, fruit, vegetable oil, milk, cultured milk, milk
powder, dairy powder blend, eggs, edible legumes, cake wheat flour
and white bread wheat flour
• illuminating paraffin (kerosene) used for illuminating or heating
• movable goods (excluding a motor car) sold to a registered vendor in a
customs-controlled area (CCA) (in an industrial development zone), if
the goods are physically delivered to the CCA recipient by the supplier
or their cartage contractor
• certain mining rights
• goods associated with animal disease grants
• goods supplied by a vendor to a person who is a non-resident and non-
vendor, but delivered to a vendor-recipient who will use the goods
wholly for taxable supplies
• supply of goods by an inbound duty- and tax-free shop
• supply of goods in a licensed customs and excise storage warehouse, if
the goods have not been entered for home consumption (if approval has
been obtained to zero-rate instead of exempting the supply)
• sanitary towels (pads).
Zero-rated services
• international transport of passengers or goods — outside, to or from
South Africa
• local leg of international carriage by aircraft
• local leg of international transport of goods
• certain services rendered to a foreign branch
• services relating to land and improvements outside South Africa
• certain services relating to goods outside South Africa, foreign-going
ships or aircrafts, goods temporarily admitted, goods exported or a
foreign-operated railway train
• services rendered elsewhere than in South Africa or to a registered
vendor in a CCA
• services supplied to a non-resident, if not directly in connection with
movable or immovable property in South Africa (with certain exceptions)
or to any person who is in South Africa at the time that the services are
rendered
• the granting of, and other services relating to, intellectual property rights
to the extent that the rights will be used outside South Africa
• services rendered by welfare organisations, to the extent that the
services are funded by national or local government
• certain services funded by government grants
• services funded by international donor funds
• vocational training of employees of non-resident, non-vendor employers
• housing subsidies
• certain warranty services
• municipal property rates
• horse-race winnings
• certain services supplied to international telecommunications service
providers (as contemplated in the International Telecommunication
Union Regulations) in certain circumstances.