Understanding VAT

During the month of October I posted an article about VAT refunds. My article referred to a Moneyweb article of 26 October 2018 in which it was reported that R20 billion in VAT refunds were due to VAT vendors.

But what are the rules when it comes to VAT refunds?

Well, if a vendor is entitled to a refund, SARS is required to pay that refund within 21 business days of receiving the correctly completed VAT return in respect of that refund. If the refund is not paid within 21 business days, SARS will have to pay interest, at the prescribed rate, on the amount that is refundable.

If you are a VAT vendor, this is easier said than done.

For those of you that are VAT vendors, I include the SARS website link to VAT refunds for Vendors for more information.

For those of you that are not registered as VAT vendors, let’s have a look at the requirements.

As per the February 2018 budget announcement, VAT is now levied at the standard rate of 15% on the supply of goods and services by registered vendors.

Who should register for VAT?

Any person that carries on a business may register for VAT. The term “person” is not only limited to companies but also includes, among others, individuals, partnerships, trust funds, foreign donor funded projects and municipalities.

A person that is obliged to register for VAT is referred to as a vendor.

When must you register as a VAT vendor?

SARS differentiates between compulsory and voluntary registration.

Compulsory registration

Here I refer to the “more than R1 million rule”:

  • It is mandatory for a business to register for VAT if the total value of taxable supplies (sales and services) made in any consecutive twelve-month period exceeded or is likely to exceed R1 million.
  • The business must complete a  VAT101 Application for Registration form and submit it to the local SARS branch within 21 days from date of exceeding R1 million.

Voluntary registration

Here I refer to the “less than R1 million, more than R50 000 rule”:

  • A business may also choose to register voluntarily for VAT if the value of taxable supplies made, or to be made, is less than R1 million, but has exceeded R50 000 in the past period of 12 months.

Then there is also the “less than R50 000 rule”:

  • VAT Regulations: Value of taxable supplies is less than R50 000.
  • In terms of the new VAT Registration Regulations, a person carrying on an enterprise which has not made R50 000 in taxable supplies in the past period of 12 months, is also allowed to register for VAT, subject to qualifying criteria.
  • You can read more about the qualifying criteria at the following link: VAT Regulations:  Value of taxable supplies is less than R50 000.

 

How do you register as a VAT vendor?

The first step is to download and complete the VAT101 Application for Registration.

The VAT 101 application must then be submitted in person, at the SARS branch nearest to the place where your business is situated or operates from. A registered tax practitioner may appear in person on behalf of the applicant.

It is important to note that SARS will not accept any faxed or photocopied applications for registration. Posted applications will only be processed if applicants are geographically far from the SARS branch or have any form of disability that prevents the applicant from appearing in person at the SARS branch to present the application.

To further assist you, herewith the guide to completing the form.

My advice, however, is to have your bookkeeper, accountant or a tax practitioner do this for you.

Listed below are the supporting documents required for the VAT registration of a company. I do recommend that you confirm the list of documents required with your bookkeeper or accountant or with SARS before visiting the SARS office:

  • The completed VAT101 Application for Registration
  • A letter from the bank confirming the name of the company and that the bank account is active – this letter is to be printed and stamped by the bank
  • 3 months’ company bank statements – printed and stamped by the bank
  • Certified copy of the company registration documents
  • Certified copy of proof of address for the company, for example a lease agreement
  • Certified copies of IDs and proof of residence for all directors
  • Should a representative be appointed, all relevant information for the representative

For more on the supporting documents required by SARS, you may visit: http://www.sars.gov.za/TaxTypes/PIT/Tax-Season/Pages/Supporting-Docs—Registration.aspx

You can find more VAT registration information on the SARS site: http://www.sars.gov.za/ClientSegments/Businesses/My-Bus-and-Tax/Pages/Register-and-Deregister-for-VAT.aspx

When should I submit returns and make payments?

A vendor is required to submit VAT returns and make payments (or claim a VAT refund) in accordance with the tax period allocated to the vendor. VAT returns may be applicably monthly, bi-monthly, annually or whichever other term SARS may allocate.

The VAT returns and payments are normally submitted or made on or before the 25th day after the end of the tax period.

Late payments of VAT will attract a penalty and interest.

In closing

As business owners we have more than enough on our plates. When it comes to VAT, I highly recommend that you enroll the services of a bookkeeper, accountant or tax practitioner to attend to the time consuming and technical nature of VAT.

It however remains the responsibility of the business owner to make sure that the business is registered for VAT when necessary and that the VAT returns are submitted and VAT liability paid. You cannot rely solely on the bookkeeper, accountant or tax practitioner and hope for the best. Please make sure to obtain the confirmation of VAT return submission after every VAT period.