New CC vat registration

[Faan]

I am not in a position to comment on the pros and cons of paying VAT, but if I remember correctly the limit has been raised to R1m per year by Trevor Manual in his budget speach.
I have the situation that most of my expences, about 60 - 70% does not carry vat. For this reason I would like to stay out of it as long as I can

[Dave A]

Dave, I am not nearly as experienced as you are on the topic,

Somehow I don't believe you - it's like when someone starts "with all due respect" - you just know they mean "you deserve no respect"

It's a maths thing and bear in mind the comment is very dependent on whether the bulk of your clients are VAT registered or not.

... if I remember correctly the limit has been raised to R1m per year by Trevor Manual in his budget speech.

Absolutely correct. Now all we need is an implementation date. Apparently the change in threshold has not been implemented yet.

[Chatmaster]

Somehow I don't believe you - it's like when someone starts "with all due respect" - you just know they mean "you deserve no respect"

I assure you that I have tons of respect for you, I also had no other intentions with that wizenut sentence of mine.

[Dave A]

Let's just stick to whether/when it is better to be registered for VAT and when not, before we get all teary eyed
I suspect we've both been through the business mill long enough to have collected the scars

I think one way to understanding when to register for VAT voluntarily (obviously there is a point where the decision is out of your hands) is to look at the VAT collection chain.

Basically Revenue Services is starting to collect VAT from as early as possible in the Value Add chain. Every time you add value, you need to pay VAT to SARS on the price you sell your product or service, less the VAT that has been collected by SARS so far.

At the end of this chain, you ultimately end up with someone who can't claim the VAT that has been collected so far. This is not a problem if this person is at the end of the chain, but you lose efficiency when there is someone breaking the sequence somewhere in the middle. The sequence of deducting all the VAT that has been collected up to that point is broken, and effectively the VAT collection chain starts all over again at the level of the point where the chain was broken!

Ultimately, the winner is SARS - which was probably part of the whole idea behind changing from GST to VAT.

Of course the other big factor in that change was that by only collecting at the end point, the tax collection chain was leaking like a sieve

[duncan drennan]

Avoid registering for VAT until your turnover requires you to do so, imo you can not benefit financially from being VAT registered.

I think that it is important to look at a few different cases. Let's say that all the suppliers are VAT vendors, and then look at the case where the end customer is and isn't registered for VAT. Let's assume that we are selling seats at a training conference. Seats cost us R100/seat (ex VAT) and we want to make a profit of R50/seat.

Case 1: Suppliers and you are VAT registered
Case 2: Suppliers are VAT registered


Hopefully that makes it clear that the cost to the client depends on whether they are able to claim the input VAT.

If you are training business clients to implement SEO in their VAT registered companies, then it is better for them if you are VAT registered. You are able to earn the required profit and are not "penalised" because you can't claim the input VAT.

If you are training private clients then they are "penalised" if you are VAT registered as they have to pay the VAT which they cannot claim back.

To phrase that all differently: if your clients are VAT registered and can claim your supplies/service as input VAT then it is beneficial for them if you are VAT registered.

[Sebzon]

One other comment on the original question - With a new business that hasn't started trading yet, you are going to have to satisfy SARS that you will be doing the kind of turnovers that qualify for registration as a VAT vendor. Just what that might entail really depends on the nature of the business.

Does this mean that if you are applying to SARS you have to show a proof that you are going to make a profit around R1m or you have exceeded a threshold of R20000?

[Marq]

show a proof that you are going to make a profit around R1m

No its not profit - its related to your turnover.

I dont know what proof they want of your future turnover figure, but most should be able to supply either a history or future contracts and budgets.