Here’s what VAT registered businesses should know:
- If you have a VAT number, you are now a VAT vendor. This means you are a middleman for SARS and you MUST charge and collect VAT from the customers with whom you do business.
- The VAT you collect must be paid to SARS every second month.
- The good news is that you can offset the VAT your suppliers charge you against the VAT you collect, and you only pay over the difference to SARS.
- Being a VAT vendor does not mean that you pay your profits to SARS. VAT must be charged to customers over and above your company mark-up.
- Some payments cannot be offset against the VAT you pay to SARS. These are:
- Salaries and wages
- Entertainment expenses for staff or clients
- Purchases of motor vehicles (includes station wagons, sport wagons, minibuses, kombis and double cabs)
- If you as a VAT vendor buy second hand goods from private individuals for resale, you can claim VAT from SARS on the amount you paid for the goods. This is Notional VAT on second hand goods. Keep copies of the ID documents of the individuals from whom you buy the second hand goods as part of your records for SARS.
- VAT is levied at 15%. Prior to 1 April 2018, VAT was levied at 14%.
If you are considering whether to register with SARS as a VAT vendor, here are some useful points:
- It is compulsory to register when your turnover exceeds R1 million over a 12-month period (average R84 000 per month).
- You can volunteer to register as a VAT vendor with SARS when your turnover as per the above is under R1 million but over R50 000.
Why volunteer to register?
- Some businesses only want to do business with VAT vendors. Those businesses would claim the VAT you charge them against their own VAT payable to SARS.
- You hold a lot of stock and paid VAT on the stock purchased. In this instance, you can get refunds from SARS where the VAT paid exceeds the VAT charged to customers.
Industries that should probably not consider doing a voluntary registration:
- Service companies whose largest expense is a staff cost.
- Companies that sell goods to customers who are not VAT vendors, such as ordinary individuals. Being a VAT vendor will increase your prices by 15% and may force your pricing to go over the market related price. This may affect your sales, as customers are finding cheaper prices elsewhere.
If you are struggling to reconcile your VAT or need assistance with VAT submissions, reach out to us today!