Value Added Tax Overview

Value-added tax (VAT) is the tax which affects you the most in your daily operations. VAT is levied on most of your sales and is deductable from most of your expenses. The following is not a comprehensive guide on VAT and for more detailed information, consult the South African Revenue Service's website or contact your local SARS office.

Tax Eligible

Not all companies are eligible for VAT. Whether you need to be registered for VAT depends on the type and the size of your business. In South Africa, the general rule is that you have to have R300,000 in annual sales, before you can register for VAT. If you are not registered for VAT, you cannot claim any input tax on your purchases and you will not add VAT to your sales. The South African Revenue Service should be consulted to determine if you are required to register for VAT.

What Is VAT

VAT consists of two types of tax. Firstly, there is VAT output tax, which you levy on your sales. Secondly, there is VAT input tax, which you pay your suppliers. You can claim back your VAT input tax from SARS. If your output tax is higher than your input tax, the net VAT is what you will pay to SARS. If your input tax is higher than your output tax, the net VAT is what you will be refunded from SARS.

VAT Return

You report your VAT on a VAT return. For most companies, a VAT period is two months and the VAT return needs to be submitted by the 25th of the month following this period. Whether you submit your VAT return on even or odd months, depends on your VAT category. This is determined by SARS.

How VAT is tracked

VAT is tracked by using VAT codes. There are different VAT codes for different types of transactions. One set of VAT codes applies to output tax, while another set of VAT codes applies to input tax.

VAT Output Tax

The VAT output tax, or VAT payable, is what you charge your customers. Go here to read more about how VAT output tax is used.

VAT Input Tax

The VAT input tax, or VAT deductable, is what you pay to your suppliers. Go here to read more about how VAT input tax is used.