[Question] VAT and Tax calculations

[LouiseG]

Hi there,

I'm getting stuck on how to calculate the input and output VAT and the income tax bill

the company makes around R3m annually...
deductions are R2.4m...

How much of their turnover figure is output VAT, and how much should be regarded as revenue for the company?
Assuming that all of their deductions carry VAT, how much of their deductions figure is input VAT, and what proportion should be regarded as expenses for the company?
At the standard company rate, how big is their income tax bill?

[Justloadit]

To get the VAT amount from a figure which includes VAT is (Value x 14) / 114

So R114.00 VAT included amount is 114 x 14 = 1596
now 1596 / 114 = 14.00, so the VAT portion of the R114.00 is R14.00.

so R 3,000,000.00 x 14/ 114 = R368,421.06 as the VAT portion of the R3million invoiced.

[LouiseG]

If the income tax is charged at a standard rate of 28% would it be 28/128?

im totally lost here

[Justloadit]

yep

[LouiseG]

R 3,000,000.00 x 14/ 114 = R368,421.06 output VAT

R 3,000,000.00 - R368,421.06 = R 2,631,578.94 Revenue for the company?

and

deductions: R2,400,000.00 x 14/114 = R 2, 105,263.16

R2,400,000.00 - R 2, 105,263.16 = R294,736.84 input VAT charged?

[Dave A]

VAT calculation.

Gross turnover (including VAT) = R3 million.
Output VAT = R3 million *14/114 = R368 421.05

Expenses (including VAT) = R2 400 000.00
Input VAT = R2 400 000 *14/114 = R294 736.84

Nett VAT payable = R73 684.21

Income tax calculation.
(Note: for this we use figures excluding VAT).

Income (revenue) = R3 million - R368 421.05 = R2 631 578.95
Expenses (deductible) = R2 4000 000 - R294 736.84 = R2 105 263.16

Profit before tax = R2 631 578.95 - R2 105 263.16 = R526 315.79
Income tax (company) = R526 315.79 * 28% = R147 368.42

Just for the fun of it.
Profit after tax = R526 315.79 - R147 368.42 = R378 947.37
Profit margin = R378 947.37 / R2 631 578.95 * 100 = 14.4%

My concern with those numbers is if this is an exercise of understanding (rather than the use of a calculator), it would make more sense if the question was framed around revenue (excluding VAT) of R3 million and expenses (excluding VAT) of R2 400 000.00, but life is seldom that tidy, and the understanding of the principle relationships are demonstrated.

[Justloadit]

R 3,000,000.00 x 14/ 114 = R368,421.06 output VAT

R 3,000,000.00 - R368,421.06 = R 2,631,578.94 Revenue for the company?

and

deductions: R2,400,000.00 x 14/114 = R 2, 105,263.16

R2,400,000.00 - R 2, 105,263.16 = R294,736.84 input VAT charged?

If deductions is referring to cost of sales, then be very careful, not all suppliers are VAT registered, not all costs has VAT included, such as Wages, Salaries, Petrol, motor vehicles, staff emoluments and other expenses on which you may not claim VAT.

These entries should be set up, so that when they are placed in the books, your final figure of cost is the value with out VAT.

[LouiseG]

Thank you so much Dave

just wanna make sure I got this one right as well:

This is being calculated if they qualify for the SBC (Small Business Corporation)
For the 2012/2013 tax year, whereas a normal company would pay tax at a flat rate of 28% on profits an SBC pays a 0% tax on its first R63,556.00 profit for the year, then 7% tax up R350,000.00 profit and only then jumps up to the standard 28% rate for any profits over and above that.


R526,315.79– R63,556.00 (0%) = R487,444.00
R 462,759.79 – R350,000.00 = R112,759.79

R350,000.00 x 7/107 = R22,897.20 (7%) R350,000.00 x 100/107 = R327,102.80

R112,759.79 x 28/128 = R24,720.20 (28%) R112,759.79 x 100/128 = R88,039.59
(R88039.585 rounded off to .59)

R22897.20 (7%) + R24,720.20 (28%) = R47,617.40 Total income tax