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On this page, we will show you how to register for VAT in South Africa is the fastest way possible.
We’ll also list the requirements for voluntary and mandatory VAT and we’ll answer some frequently asked questions on VAT in South Africa.
VAT registration at SARS can take between 10 days up to 2 months, depending on whether you already have a trading CIPC-registered company and how long SARS’s processing takes.
The South African revenue department (SARS) is responsible for VAT (Value-added Tax) administration. When you work directly with the SARS department, VAT registration usually takes a month. If you do not have a trading company yet, VAT Registration may take up to 2 months, because the regulation requires that you have a trading business before you can register for VAT.
Here are our Tax Practitioners who ensure your VAT services are processed as soon as possible.
If you’d like to order one of these services, Signup for a Free Consultation with our VAT Specialist now.
A (1) trading CIPC-registered company/organisation with (2) a bank account, (3) invoices or purchase orders to showcase you are trading and (4) proof of a South African address (5) SARS Registered Representative updated at SARS (we can assist).
* We can assist you even if you do not have a trading CIPC-registered company yet.
Wondering whether VAT registration is good or bad for your business’s long-term growth? Here are the 3 benefits to VAT registration.
The most significant benefit to voluntary VAT registration is your eligibility for growth opportunities. Contracts, RFQs and Tenders often request a VAT number.
Numerous Service Provider Listings also require VAT numbers. It may also simplify your invoicing, as many companies request VAT invoices or quotations.
VAT is short for Value-Added-Tax. SARS describes VAT as an indirect form of tax that is added to the price of consumable goods or services. This tax is usually added to every step of the production and trade process. Currently, the VAT in South Africa is generally 15% for most goods and services.
When a company adds 15% VAT to a product’s cost, this implies the product costs is 115% rather than 100%. The additional 15% is a form of tax that goes to SARS. With cross-border-trade, Customs may also be involved.
You can refer to this helpful VAT Legal Counsel Guide from SARS for extensive details on VAT in South Africa for Vendors (Businesses who are eligible for mandatory Tax Registration).
Here’s a general example.
When you buy a burger at a well-known South African restaurant, it’s pretty likely you’re paying 115% of the cost rather than 100%. The restaurant pays the additional 15% to SARS. The restaurant can also claim back the VAT they’ve paid on most of their business expenses.
If the amount a business owes SARS is less than the amount paid in VAT, SARS will pay you the difference.
Unfortunately, you as a South African consumer, cannot claim back VAT on goods and services in South Africa. There is an exemption that applies when you’re a tourist. Companies who aren’t registered for VAT, cannot claim back VAT either.
It’s also important to note that not all items or service have value-added-tax. Some things are exempt in South Africa and some things are taxed at 0%. Take a look at our “Do all goods and services have VAT in South Africa?” section.
Here’s another example of how VAT works (with a pricing example).
A VAT-registered company, called Buono Gelato, sells one of their ice creams for R10. R10 is 100% of the price. However, Buono Gelato is registered for VAT which means they need to add 15% VAT on top of the R10 cost to its clients.
That means the ice cream now costs R11.50 (or 115% of the original price) to any client. The additional R1.5 (or 15%) does not belong to the company; it’s a tax that’s owed to SARS.
On the flip side, when Buono Gelato uses any services or buys any goods, like ice cream cones, from VAT-registered companies, Buono Gelato can claim back the VAT paid from SARS. This means on an R1.15 cone, Buono Gelato, can claim back 15 cents (or the 15% paid additionally to the 100%). In fact, Buono Gelato can claim back the additional 15% paid on most of its business expenses from SARS.
No, certain items are taxed at 0% VAT, others are VAT exempt and then there’s also deemed supplies.
The most significant difference between VAT exempt and 0% VAT is your eligibility to register or claim VAT. VAT exemption means you cannot register or claim VAT back at all.
Deemed supplies can be quite complex to understand, but in short, there are exchanges where you do pay an output tax even if you haven’t sold or bought anything.
Here’s a list of VAT exempt items in South Africa in 2020:
These items aren’t submitted for VAT purposes and it disallows VAT registration. There are often other forms of tax added to these services.
Here’s the latest list, full-on VAT exempt items in South Africa for 2020:
Exports, international transport services, goods that are subject to petrol or diesel levies and foods that are considered a necessity like:
* It’s important to note that various production factors affect how items are classified. For e.g. any ready-made meals cannot be zero-rated, regardless of the ingredients used.
VAT registration is mandatory for any entity who earns more than R1 million over the course of 12 consecutive months. Any entity that’s required to register for VAT is referred to as a Vendor by SARS. Vendors can be individuals, trust funds, partnerships, businesses, organisations, foreign donor funds or municipalities.
You must register for VAT within 21 days of exceeding R1 million.
Your business is eligible for voluntary VAT registration when you exceed R50 000 over the same period of 12 months. Microbusinesses registered for Turnover Tax can also voluntarily register if they meet all the requirements.
If you’re unsure if you meet the requirements for voluntary registration, give our VAT specialists a call on our 100% toll-free number.
You can either register at your local SARS branch or via eFiling by completing a VAT 101 – Application for Registration form.
However, a simpler alternative would be to book a free consultation call with one of our VAT specialists. Your dedicated specialist will walk you through the registration process step-by-step.
The usual period is 2 months, however, if you earn more than R30 000 over 2 months, you’ll have to submit your VAT Returns monthly.
If you’re registered for VAT you can reclaim the VAT you’ve paid on any service or good that’s a business expense. These exclude anything that’s used for entertainment purposes like club memberships (even if it’s used for your business).
Although it’s not often, sometimes you pay more VAT in business expenses than you owe to SARS in terms of the VAT you’ve added to product/service, SARS owes you a refund.
Naturally, you cannot claim the VAT back on any VAT exemption or 0% VAT items, because essentially you did not pay any VAT on these items.
For this process, you need to submit a refund return to SARS. SARS has to pay you within 21 days starting from the day that you submit your full refund return.
If you pay your due VAT late, there’s a 10% penalty on the outstanding tax. Interest is also added to the amount you owe every month after you don’t pay your past tax period’s due payments.
There are also other administrative and non-compliance penalties which essentially ensure that businesses don’t overstate how much VAT they pay or understate how much they collect. You can read more about these VAT penalties here.
There are a few particulars that differentiate a normal invoice from a Tax invoice, Here’s a quick guide of what you need to have on your invoice in order to classify it as Tax Invoice.