Tax3A

• Value-added tax (VAT) is an indirect tax
• VAT was initially established at 10% on 30 Sept 1991
• VAT was increased to 14% on 7 April 1993
• VAT was increased again to 15% on 1 April 2018
• VAT has two components: Output tax charged on supplies made by a vendor and Input tax paid on supplies acquired by a vendor
• VAT is levied on the supply of goods and services by a vendor in the furtherance of his enterprise at 15% or 0%
• Each transaction can be subject to VAT
• Vendors who are VAT vendors have to charge VAT and pay it over to SARS
• Purchasers who are VAT vendors can claim the VAT paid to vendors from SARS
• If a purchaser is not a VAT vendor, VAT paid cannot be claimed back
• All vendors must submit VAT returns at the end of each tax period
• VAT return accounts for all output tax (on goods supplied) and input tax (on goods acquired)
• VAT payable to SARS is calculated by determining whether VAT is payable to or refundable from SARS and paying the difference or claiming it back
• When calculating VAT on a transaction, it's important to consider whether the amounts include or exclude VAT
• If an amount excludes VAT, multiply by 15% to determine the VAT charged
• If an amount includes VAT, apply the tax fraction (15/115) to determine the VAT included
• VAT vendors must register if taxable supplies are over R1,000,000 within the previous 12 months
• Voluntary registration is possible if turnover in a 12-month period is over R50,000
• Registration must be on a payment basis initially and switch to invoice basis once R50,000 turnover is reached
• VAT vendors must automatically register for both separate enterprises they conduct
• SARS can refuse registration if certain criteria are not met
• VAT registration can be cancelled if requirements are no longer satisfied or turnover is less than R50,000
• Since 1 June 2014, suppliers of electronic services over the internet to SA customers must register if over R50,000
• Time of supply and value of supply are important considerations in VAT calculations
• Different categories of vendors have different VAT return periods
• Types of supplies include taxable supplies, standard-rated supplies, zero-rated supplies, and exempt supplies
• Vendors must levy output tax at 15% for standard-rated supplies and 0% for zero-rated supplies
• Vendors can claim input tax incurred on taxable supplies
• Exempt supplies are not subject to VAT
• Tax invoices must include specific information such as the word "TAX INVOICE," supplier and recipient details, individual serialized number, date issued, description of goods, quantity, value of supply plus tax, or consideration with a statement that VAT is included
• VAT payable on value of fringe benefits
• No output VAT if a fringe benefit is:

  • Tax-free (fringe benefit)
  • An exempt supply
  • A zero-rated supply
  • Supply of food, accommodation or entertainment
• Deemed output value = Fringe benefit value x 15/115
• Company gave the following fringe benefits to its employees:

  • Use of holiday accommodation: No, entertainment
  • Use of residential accommodation: No, exempt
  • Use of company yacht: No, entertainment
  • Shares and share options: No, excluded from 7th Schedule
  • Gifts of electronic equipment: Yes, 57,500 x 15/115
  • Meals: No, entertainment
  • Interest-free loans: No, exempt
  • Tax-free long service awards of watches: No, no fringe benefit
• Right of use of company car:

  • Motor car – 0.3% per month of determined value
  • Other vehicles – 0.6% per month of determined value
  • If employee has obligation to maintain vehicle, consideration for the deemed supply is reduced by the lesser of R85 per month or the deemed consideration
• Any goods forming part of enterprise (on which input VAT was claimed) deemed to be supplies made immediately prior to ceasing to be a vendor

  • Output VAT at rate of 15/115 on lesser of cost market value
• Vendor receives indemnity payment from insurer:

  • Payment deemed to be made for services rendered by insured to insurer
  • No output VAT charged for a total reinstatement if input tax deduction was denied and such goods stolen or damaged beyond repair (total re-instatement)
• Insured will claim input VAT of R65.22 (R500 x 15/115)
• VAT must be paid on import of goods whether importer is a vendor or not

  • Value on which VAT must be paid: 15% x (purchase price + customs duty + 10% of customs value)
  • 10% is not added where the goods are imported from BLSN
• Gert Smit Construction (Pty) Ltd imported marble from Zimbabwe with a cost price and customs value of R120,000, with import surcharges of R5,600. The amount of VAT levied on importation is R20,640