Tax can be a complicated subject with many exceptions to many rules. This article is a general guide to give you an introduction on how it works for most (but NOT all) companies. Please refer to the VAT act at www.sars.gov.za for details.
VAT stands for Value Added Tax and is a tax that most companies need to collect on behalf of the South African Revenue Service (SARS). Lets start with some definitions:
Output VAT: This is the VAT that you charge all of your customers in any month. If you add up all the VAT amounts on all your invoices for the month you will get your total Output VAT.
Input VAT: This is the VAT that all your suppliers charge you in any month. If you add up all the VAT amounts on all the invoices that your suppliers have given you, that will give you your total Input VAT
VAT payable: This is output VAT less input VAT and is the amount that need to be paid to SARS.
When and how to pay
Normally every two months, you will need to get the total Output VAT for the two months and from that subtract the two month total of Input VAT. This amount is what you need to pay over to SARS by the 25th of the following month. Don't delay payments, the penalties and hassles are just not worth it. In any event, you are simply collecting the tax on the governments behalf, the money was never yours. If you had been including it in you sales or your costing, you've been making some accounting errors.
SARS have gone the extra mile with their "efiling" program. This means that you can fill out the VAT form and transfer the funds from your PC via the internet. There are no queues or long distances to travel. You are also able to pay a few days later than the manual submission process allows. Take a look at the SARS website for more information.
Who must register
You only have to register for VAT if you turnover exceeds or is likely to exceed R300'000 in any one year. However you can voluntarily register as long as your turnover has already exceeded R20'000 in the current year. You cannot charge VAT unless you are registered to do so with SARS. You can register by completing some forms at your local SARS office or you can find the forms and procedure on their website.
Some new issues
Early in 2005 it became mandatory for all VAT invoices to show both the customer's and supplier's VAT number on the tax invoice if the amount on the invoice is greater than R1000.
The SARS VAT newsletter recently highlighted that perks supplied to staff should be generating output VAT. This is one of the more intricate aspects of VAT legislation and we suggest you view the SARS website for more details.
You should now have the basics, so VAT is not as terrifying as before and you at least know the minimum requirements.
For more information
The SARS website has vast amounts of information.
Contact us at firstname.lastname@example.org if you would like to receive free copies of detailed VAT guides provided by SARS.