by Ronel Jooste
What is VAT? VAT is an abbreviation for the term Value-Added Tax. It is an indirect tax on the consumption of goods and services in the economy. It is a tax on the end consumer, but it is collected by businesses on behalf of the government.
The amount of VAT paid by a business is the difference between the VAT it has charged on its sales (referred to as ‘output VAT’) and the VAT it has paid on its purchases (referred to as ‘input VAT’). VAT rates vary depending on the country and type of goods or services being sold. Some goods and service may be exempt from VAT or subject to reduced rates, while others are subject to higher rates.
VAT is an important source of revenue for government and plays a vital role in funding public services and infrastructure. It can also have an impact on businesses, especially small and medium sized enterprises, which may struggle to comply with VAT regulations and manage their VAT payments effectively.
WHO SHOULD REGISTER FOR VAT IN SOUTH AFRICA?
A person may register for VAT if they are carrying on an enterprise in or partly in the Republic of South Africa where goods or services are supplied for consideration.
A business must register for VAT if the total value of taxable goods and services (turnover) is more than R1 million in a 12-month period or is expected to exceed this amount.
A business may also register voluntarily if the income earned in the past 12-month period exceeded R50 000.
HOW TO REGISTER FOR VAT?
The VAT Registration application must be made through one of the following channels.
E-Filling website
Make a virtual appointment via SARS eBooking system by selecting the following options:
Appointment channel: Telephonic engagement or Video
Reason category: Other
Reason for appointment: VAT registration
Submit the registration form to your local SARS branch within 21 days from date of exceeding R1 million.
Consequences for business that do not comply with VAT regulations.
If a business fails to register for VAT or does not submit accurate returns, it may face penalties, fines, and interest charges on the unpaid taxes. If a business deliberately evades VAT, it may face criminal prosecution and potentially imprisonment.
It is important for business to take their VAT obligations seriously and ensure they are complying with the relevant regulations. Seeking professional advice and assistance from a qualified accountant or tax adviser can be very helpful in managing VAT compliance and obligations effectively.
Common mistakes that business make when it comes to VAT compliance.
Failing to register for VAT when they exceed the registration threshold.
Not charging the correct rate of VAT on their goods and services.
Failing to keep accurate records of sales and purchases.
Claiming VAT on non-business expenses or failing to provide evidence to support claiming.
Ignoring VAT rules for international trade and transactions.
Tips that businesses can uses to ensure they comply with VAT compliance.
Register for VAT as soon as they exceed the registration threshold.
Keep accurate records of all sales and purchases.
Charge the correct rate of VAT on goods and services.
Submit VAT returns on time and ensure they are accurate.
Seek professional advice and assistance from an accountant or tax advisor.
Stay up to date with relevant VAT regulations and rules.
By following these steps, businesses can manage their VAT obligations effectively and avoid potential penalties and consequences.
Ronel Jooste adds tremendous value to individuals, entrepreneurs and businesses with more than a decade of experience in the corporate financial services industry and running her own businesses. She is well experienced in the areas of finances, entrepreneurship, leadership, women empowerment, fitness and wellness. By offering consulting services, training and employee wellness programmes she helps people and businesses to reach their full potential and equip them with the financial and business knowledge to realize their dreams.
Ronel is the author of the award-winning book ‘Financially Fit and Wealthy’ that aims to help readers secure a financial future for themselves. A heart after uplifting and empowering the community, the Ronel Jooste Dream Foundation was launched to equip communities, schools, universities and businesses with financial and entrepreneurship knowledge.
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