VAT registration is an important step for businesses operating in South Africa.
It is a valuable tool for collecting and remitting taxes and therefore, it is important to understand the registration process and requirements.
This blog article will provide an overview of VAT registration in South Africa and discuss the requirements, process, benefits, and tips for filing VAT returns.
Introduction to VAT Registration
Value Added Tax (VAT) is a type of indirect tax system under which a certain percentage of tax is charged on the sale of goods and services.
The tax is collected by the government from the businesses and individuals that are registered for VAT.
In South Africa, the VAT rate is currently set at 15% and every registered VAT vendor needs to indicate the rate and VAT number on each tax invoice.
The VAT registration process is regulated by the South African Revenue Service (SARS).
All businesses in South Africa that meet certain criteria are required to be VAT registered.
It is important to understand the requirements and process for registering for VAT.
This will ensure that businesses are compliant with the law and can benefit from the advantages that VAT registration offers.
Benefits of VAT Registration
VAT registration offers many benefits to businesses operating in South Africa.
Firstly, businesses that are registered for VAT can claim VAT back which was paid on their purchases.
This is known as Input VAT and can be claimed back from SARS.
Secondly, VAT registration allows businesses to charge their customers VAT on the goods and services they provide.
This is known as Output VAT and must be paid over to SARS.
In addition to these financial benefits, businesses that are registered for VAT are seen as more reliable and trustworthy in the eyes of their customers.
This is because the registration process is regulated by SARS and businesses must adhere to certain standards.
Who is required to register for VAT in South Africa?
To register for VAT, you must be engaged in an enterprise.
In other words, you must supply goods or services for a fee to another person, whether or not the activity is for profit.
Compulsory VAT Registration
An enterprise proponent who carries on business, including a small business, is required to be registered for VAT if in any consecutive 12 months (or in the next 12 months), the value of all of their taxable supplies (taxable turnover) reached R1 million, or if that amount was written into a contract.
The R1 million mandatory VAT registration threshold applies to the total value of all of a business’s taxable supplies and not its net income (profit).
An application for VAT compulsory registration must be made within 21 days of when the threshold is crossed (or the contract is signed) if this happens.
These include businesses that import goods into South Africa, businesses that supply certain taxable goods and services, and businesses that provide electronic services to customers outside of South Africa.
Voluntary VAT Registration
A person who makes less than R1 million of taxable supplies each year can register voluntarily to the Commissioner for a license if certain conditions are satisfied.
To qualify for voluntary registration and voluntarily register, any of the following criteria need to be met:
- a person must operate an enterprise and have made at least R50,000 in taxable supplies during the previous 12 months;
- commercial accommodation is supplied by a person if the threshold of R120,000 has been met, or
- the person has an enterprise but has not made enough taxable supplies to reach the R50,000 minimum threshold. However, registration, in this case, will be determined by Regulations.
The VAT Registration Process in South Africa
The VAT registration application in South Africa is relatively straightforward.
The first step is to complete the VAT101 form, which is available from the VAT registration documents on the SARS website.
This form must be completed in full and submitted to SARS. SARS will then review the application and may request additional information from the applicant.
Once the application has been approved, the applicant will be issued a VAT registration number.
This number must be used on all invoices, tax returns, and other official documents.
The applicant must also submit a VAT return to SARS in line with the VAT period that was allocated to the company to report the VAT collected and paid.
Usually for small businesses VAT returns will need to be submitted every two months.
Once the business has reached R30 million in annual revenue it will then need to submit monthly VAT returns.
Refer to the table below for the different VAT periods that will affect the number of VAT returns to be submitted during the financial year.
Keeping Records for VAT Registration in South Africa
Businesses need to maintain accurate records for their VAT registration.
This includes keeping records of all invoices, receipts, business bank account statements, and other documents related to the business’s sales and purchases.
These records must be kept for at least five years and must be accessible in case of an audit by SARS.
It is also important to keep track of any changes to the business’s ownership, contact details, and other information.
These changes must be reported to SARS as soon as possible.
How to Calculate and Pay VAT in South Africa
Calculating and paying VAT in South Africa is relatively straightforward.
Businesses must calculate the amount of VAT due each month by subtracting the Input VAT from the Output VAT.
To illustrate this, see the table below.
Thus, if output VAT > input VAT, then there would be a VAT payment.
If output VAT < input VAT, then there would be a VAT refund.
The amount due must then be paid to SARS by the due date.
This amount must be paid in full, as partial payments are not permitted.
For businesses that are registered for VAT, SARS will issue a VAT return every VAT period to which they apply.
This return must be completed and submitted by the due date, the 25th of each month after the VAT period, along with the payment of the amount due.
Use our VAT Calculator to calculate VAT on individual sale and purchase transactions, irrespective of whether the amounts are inclusive or exclusive of VAT
Tips for Filing VAT Returns in South Africa
When filing VAT returns in South Africa, it is important to ensure that all required information is included.
This includes the company’s contact details, bank account information, and details of any transactions made during the reporting period.
It is also important to keep track of any changes to the company’s ownership or contact details.
These must be reported to SARS as soon as possible.
In addition, businesses must keep accurate records of all sales and purchases for at least five years in case of an audit.
Common Mistakes to Avoid in VAT Registration in South Africa
When registering for VAT in South Africa, it is important to avoid making common mistakes.
Firstly, businesses must ensure that they meet all of the requirements for registration.
This includes having valid company registration documents including a South African business address, a valid Tax Clearance Certificate, and a valid South African bank account.
In addition, VAT-registered companies must ensure that they submit their VAT returns on time and pay any amounts due to SARS.
Late payments or incomplete returns can lead to penalties and additional costs.
Finally, businesses must ensure that they keep accurate records and report any changes to the company’s ownership or contact details to SARS.
Conclusion
VAT registration is an important step for businesses operating in South Africa.
It is a valuable tool for collecting and remitting taxes and therefore, it is important to understand the registration process and requirements.
This blog article has provided an overview of VAT registration in South Africa and discussed the requirements, process, benefits, and tips for filing VAT returns.
VAT registration is an important process for businesses operating in South Africa and understanding the requirements and process is essential.
With the right knowledge and support, businesses can benefit from the advantages of VAT registration and ensure that they are compliant with the law.
Don’t forget to make use of our VAT Calculator to help you calculate VAT on an individual sale or purchase transaction, irrespective of whether it is inclusive or exclusive of VAT.
If you need any assistance relating to VAT, including registrations and calculations, and submissions of VAT returns, or should you have any questions relating to VAT, then please do not hesitate to reach out to us.
Our team, including tax practitioners, will be happy to assist you with any help that you might need.
Recent Comments