VAT

Value added tax, or VAT, is a tax levied on most goods and services provided in South Africa. VAT is paid on the supply of goods or services, or the importation of goods and services.

The current standard rate of VAT is 14%.

Any person making taxable supplies in excess of R1 000 000.00 in any 12 month consecutive period must register as a VAT vendor. Any person may choose to register voluntarily provided that the minimum threshold of R50 000.00 annual turnover (increase in threshold effective from 1st March 2010) has been exceeded over the past 12 months.

Voluntary VAT registration

Any supplier making taxable supplies in excess of R50 000 per annum, provable over the past 12 months, may apply for a Voluntary VAT Registration

Compulsory VAT registration

Any supplier will be liable to register for VAT if the income earned from selling goods or fees earned from services supplied is more than R1 million in any consecutive period of 12 months, or is reasonably expected to exceed that amount.

The value of taxable supplies (turnover) is calculated on an ongoing basis. When closing off your books for the month, you need to keep a running total of your turnover for the past 12 months. If this total has exceeded R1 million in any particular month, you must register from the first day of the next month. You also need to consider the next 12 months, because if it is likely that you will exceed the limit, you must register immediately or at least within 21 days of becoming aware that you will be liable to register.

Zero rated supplies

Zero rated supplies include the following:

Certain basic foodstuffs

Certain basic foodstuffs are zero-rated, provided it is not supplied for immediate consumption (that is, as a meal or refreshment) or added to a standard-rated supply.

Examples include:

• brown bread • dried mealies and mealie rice • brown bread flour (excluding wheaten bran) • samp • hens eggs (that is, not from ostriches, ducks etc) • fresh fruit and vegetables • dried beans • lentils • maize meal • rice • pilchards in tins or cans • vegetable cooking oil (excluding olive oil) • milk, cultured milk, milk powder and dairy powder blend • edible legumes and pulses of leguminous plants (that is, peas, beans, peanuts etc)

Fuel levy goods

Examples include fuels used in motor cars, trucks, buses, ships, fishing boats, railway locomotives, farming and production machinery. Petroleum oils and crude oil which are refined for the production of fuel levy goods are also zero-rated; however, aviation kerosene, motor oil and oil lubricants are subject to the standard rate.

Going concern

The sale of a business or part of a business which is capable of separate operation as a going concern qualifies for the zero rate if all of the following requirements are met at the time of entering into the agreement: • Both parties must be VAT vendors (if not yet registered at the time of concluding the contract, the purchaser can backdate the registration liability date to the date of the contract). • It must be clearly evident, and stated in the wording of the written agreement that –  the enterprise is sold as a going concern14  the business is, or will be an income-earning activity on the date of transfer; ;  the whole business or a part of it which is capable of separate operation is disposed of to the purchaser, including all the assets necessary for carrying on the enterprise or part thereof; and  the consideration includes VAT at the rate of 0%.

Where any of the above requirements are not met, the supply of the enterprise will be subject to VAT at the standard rate of 14%.

Some examples of where an income-activity is not disposed of are: • The sale of a bakery business without the ovens. • The sale and leaseback of a commercial building. • The transfer of the bare dominium of an asset. • The disposal of a business yet to commence. • The disposal of a dormant business.

Farming goods

The supply of certain goods acquired and used for agricultural, pastoral or farming purposes may be zero-rated in certain circumstances. Some examples are animal feed, animal remedies, fertilizer, pesticide and plants and seeds in a form used for cultivation.

Exports and services physically performed outside the Republic

The direct export of goods may be zero-rated. In certain instances, the indirect export of goods may also qualify for the zero rate.

The supply of services physically rendered or performed outside the RSA qualifies for the zero rate.

Municipal property rates

With effect from 1 July 2006, any municipal property rates charged by a municipality are subject to the zero rate. However, the municipal rates charge must be separate and distinct from other charges levied for goods or services by that municipality. Therefore, where a municipality charges a “flat rate” which includes a charge for municipal rates, plus other charges for water, electricity, refuse removal, or other standard-rated goods or services supplied, the entire charge is subject to the standard rate.

Additional information

More information can be found in the SARS VAT Vendor Guide, VAT–404.