South Africa VAT Rates & Registration

Value-added tax is one of the most popular forms of government taxes in the world. South Africa VAT is something similar.

Apart from the several types of corporate and small business taxes that South African businesses have to pay, South Africa VAT is common to all. This commonality includes paying customers as well, as South Africa VAT is paid by the end users as well.

This entire South Africa VAT regime will be explained in this article. We will discuss what South Africa VAT is, what are its rates, and the step-by-step South Africa VAT registration process.

So let’s get right into it!

 

What Is Value Added Tax or VAT?

 

Value Added Tax (VAT) is a type of consumption tax that’s applied to the value added at each stage of the production and distribution of goods and services.

It’s like a chain reaction of taxes, where businesses collect tax on their sales and get a refund for the tax they paid on their purchases. The difference between the tax collected and the tax paid is what’s owed to the government.

 

Here’s a simple example: Imagine a T-shirt manufacturer. They buy raw materials (fabric, thread, buttons) and pay VAT on those purchases. Then, they make T-shirts and sell them to a clothing store, charging VAT on the sale.

The clothing store collects this VAT and, in turn, sells the T-shirts to customers, charging VAT again.

The government receives VAT at each stage – from raw materials to the final sale – but only on the value added by each business. This ensures that the ultimate tax burden falls on the end consumer, who pays the cumulative VAT.

 

Who Should Register For South Africa VAT?

 

You can only sign up for VAT if you’re running a business. The term “person” in the VAT Act covers various entities like individuals, companies, partnerships, trust funds, and even municipalities.

Now, when we talk about an “enterprise” as per the VAT Act, it means any ongoing or regular activity that happens in South Africa (either wholly or partly) where you’re providing goods or services to someone in exchange for money, regardless of whether you’re making a profit.

Plus, even the actions you take to kickstart or wrap up a business also fall under the category of running an enterprise for VAT purposes.

 

In the realm of VAT, an “enterprise” includes activities or supplies by specific individuals or entities, as follows:

 

• Public authorities, as designated by the Commissioner.
• Welfare organizations.
• Share block companies, provided certain conditions are met.
• Implementing agencies involved in foreign donor-funded projects.
• Intermediaries and non-resident providers of electronic services.

 

Conversely, there are situations where you are not considered to be engaged in an “enterprise.” These include:

 

• Engaging in exempt supplies, such as financial services, residential accommodation, or public transport. For detailed information, consult the VAT 404 Guide for Vendors.
• They are earning a salary or wage as an employee, except for independent contractors. Note that non-executive directors of companies fall into the independent contractor category.
• Pursuing hobbies or personal recreational activities that aren’t conducted as businesses.
• Handling private occasional transactions, like selling personal household items, personal effects, or a private car.
• Offering “commercial accommodation” when the total value of such supplies doesn’t exceed R120,000 over any consecutive 12-month period.

It’s mandatory to register for VAT when the value of taxable supplies made or expected to be made exceeds R1 million in a consecutive 12-month period. Voluntary registration is also a possibility in specific cases.

 

South Africa VAT: Compulsory vs Voluntary Registration

If you’re running a business in South Africa, either entirely or partly, and providing goods or services in exchange for payment, you can sign up for VAT.

There are two scenarios where registering for VAT is a must:

1. When the total value of the things you sell that are subject to VAT reaches or is expected to reach more than R1 million in any 12 months.
2. If you have a written contract that says you’ll be making taxable sales exceeding R1 million in 12 months, you must register for VAT.

Now let’s check out the details for a compulsory and voluntary South Africa VAT registration.

 

Compulsory Registration For South Africa VAT

If your taxable sales reach or are expected to reach R1 million, you need to apply for VAT registration within 21 business days from that point.

Non-resident suppliers of specific electronic services also have to register for VAT once their total taxable supplies cross the R1 million mark, typically at the end of the month.

Additionally, an intermediary can handle VAT registration and reporting for supplies made by non-resident electronic service providers.

You can find more information in the VAT-Reg-02-G02 Guide on Foreign Suppliers of Electronic Services and the South Africa VAT Frequently Asked Questions for Electronic Service Supplies.

 

Voluntary Registration For South Africa VAT

A person can also choose to register for VAT voluntarily, even if the total value of their taxable supplies is less than R1 million but has, in some situations, exceeded R50,000 in the past 12 months.

You can apply for voluntary registration in the following cases, even if you haven’t reached the minimum threshold of R50,000 yet:

1. Municipalities
2. Welfare organizations
3. When you acquire an existing business as a going concern
4. If you meet the requirements and conditions outlined in General Notice R447, as published in Government Gazette No. 38836 dated 29 May 2015 (known as the Voluntary Registration Regulation)
5. When your business engages in specific types of activities mentioned in General Notice R446, as published in Government Gazette No. 38836 dated 29 May 2015 (referred to as the Nature of Activity Regulation).

The Nature of Activity Regulation includes a variety of activities. These activities cover a broad spectrum, such as Agriculture, Farming, Forestry, and Fisheries, which entail work related to farming, forestry, and fishing.

 

Requirements under Voluntary Registration Regulation for South Africa VAT:

 

1. If you’ve been engaged in taxable supplies for just one month before applying, ensure the value for that month exceeds R4,200.
2. If you’ve been making taxable supplies for two months or more leading up to your application:
   – The average value for those months should have exceeded R4,200 per month.
   – Calculate this average using at least 2 months and up to 11 months before your application date.
3. If you have written contracts and expect taxable supplies exceeding R50,000 in the 12 months following registration.
4. When you have expenses related to starting or continuing a business, or you’ve acquired capital goods for your enterprise. Payment or extended payment agreements should meet the following criteria:
   a) At the time of registration application, payment has exceeded R50,000.
   b) In any consecutive 12-month period commencing before and ending after the registration application date, payment will exceed R50,000.
   c) In the 12 months following registration application, payment will exceed R50,000.
5. If you have a financial agreement with:
   – A registered bank.
   – A credit provider as per the National Credit Act.
   – A designated entity, public authority, or another party who continuously or regularly provides finance.
   – The total repayment in the 12 months following your registration application must exceed R50,000.

 

In addition, other general requirements for voluntary VAT registration must also be met. Refer to the VAT 404 Guide for Vendors for more details.

 

South Africa VAT Rates

The regular VAT rate is 15%. Some things, like exports, specific food items, and certain supplies, are taxed at a 0% rate, while some supplies are exempt from VAT. These exempt supplies are typically related to specific financial services, residential accommodation, and public transportation.

 

South Africa VAT Rates

Rate	VAT Type	Goods & Services Type
0%	Exemption	Exports; agricultural supplies; residential lettings; road and rail transport; financial services; money lending; retirement and medical benefits; international transport.
15%	Standard	All other goods and services

 

What Are The Exemptions In South Africa VAT?

The standard VAT rate is 15 percent, while the reduced VAT rate is 0 percent.

 

Exemptions from VAT encompass the following supplies of goods or services:

• Certain financial services (note: financial services supplied for a fee, commission, or a similar charge are subject to VAT at the standard rate).
• Educational services offered by recognized tax-exempt educational institutions.
• Residential rentals and accommodation provided by employers to their employees.
• Passenger transport within South Africa by road or rail, unless the transport qualifies for zero rating.
• Certain supplies are made by trade unions.
• Donated goods or services sold by non-profit organizations (e.g., religious and welfare organizations).

 

Presently, the VAT Act does not specify “place of supply” rules.

Services procured by a vendor from foreign service providers are categorized as imported services, on which VAT may be applicable. For a service to be considered a taxable imported service, it must be:

• Supplied by a non-resident provider.
• Utilized or consumed within South Africa.
• Acquired for purposes other than making taxable supplies.

 

In alignment with the destination-based principles of the VAT Act, services provided to non-residents may be eligible for a 0 percent VAT rate.

However, this rate cannot be applied if the non-resident or any other recipient of the services is present in South Africa during the service provision.

 

Import VAT is payable when tangible goods are imported into South Africa by the importer. The importer can claim this import VAT as a deduction if they are registered for VAT and acquire the goods to make taxable supplies. It’s important to note that the importer must also be the owner of the imported goods, as required by the local tax authority (SARS).

In cases where the importer is a non-resident and not VAT registered, they cannot claim the import VAT, which may result in an additional cost for the purchaser.

 

How To Register For South Africa VAT?

If you want to get your VAT Registration sorted, you’ve got a couple of options:

1. Use eFiling, easy peasy.
2. Book a virtual appointment through SARS’ eBooking system. Choose either a phone call or a video chat. When you’re setting it up, select ‘Other’ for the reason category and ‘VAT registration’ as the reason for the appointment.

Don’t forget, to make sure you attach all the right documents with your VAT registration application. If you miss something, it’ll slow things down. You can submit the necessary papers through eFiling, the SARS website online query system, or if you prefer face-to-face, by walking in (but book an appointment first).

 

 

Need more info? Check out the VAT-Reg-02-G01-Guide for Completion of the VAT Application.

Good news – if everything looks good and there are no red flags, you’ll get your new VAT registration number right away!

 

Step-by-step procedure to file South Africa VAT using the e-filing system

Ready to get registered for South Africa VAT on eFiling? Follow these simple steps:

 

Step 1: Create a new eFiling profile or log in if you already have one.

 

Step 2: Find your way to the SARS Registered Details section:
– For individual accounts, go to Home and find it on the left menu.
– If you’re using the Tax Practitioner or Organisations eFiling, check under the Organisations menu tab.

 

Step 3: Click on ‘Maintain SARS Registered Details’ in the left menu.

 

Step 4: You’ll see the Maintain SARS Registered Details screen. Confirm your authorization by selecting ‘I Agree.’

 

Step 5: Go to ‘My tax products > Revenue’ on the left menu, and click on ‘VAT.’

 

Step 6: Choose ‘Add new product registration’ to register a new or additional South Africa VAT branch.

 

Step 7: Fill in the VAT details:

• Registered particulars (if not filled in already)
• Trading As name (if applicable)
• Liability Date
• Select Business Activity Code (codes available in the VAT 403 Vendors and Employers Trade Classification Guide)
• Choose Farming Activity Code if it applies

 

Note: If you’ve already received containers for Diesel concession, changing the business activity code may cause an error.

 

• Choose the relevant registration option
• Enter the value of taxable supplies
• Select your accounting basis
• Set your tax period
• Fill in your contact details, physical address, postal address, and banking details if they’re not pre-populated.

 

South Africa VAT vendors can also request a VAT Notice of Registration on eFiling. There are two ways:

• The shortcut: Login, then click on the Notice of Registration icon on the top right-hand side of the home screen.
• Follow these steps: Log in, click on SARS Registered Details on the side menu, select Notice of Registration, and choose VAT.

Conclusion

We hope you’ve learned all you needed to know about the South Africa VAT regime. We covered everything related to the subject that is pertinent to business owners in South Africa to comply with South Africa VAT.

We’ve discussed what South Africa’s VAT is, and all business-related technical and legal information on it, and most importantly, we’ve laid down the step-by-step procedure to file your South Africa VAT online.

We’d always recommend referring to the official SARS website for more accurate information and to keep yourself updated with the latest updates in South Africa VAT.

 

Similarly, we also recommend using robust accounting software to manage and track your South Africa VAT or any other taxes that you need to be compliant with. The best example of such a system would be ProfitBooks.

With ProfitBooks, you can manage your taxes, and seamlessly track all your expenditures, income, invoices, and much more with perfect bank reconciliation. The best part? It is 100% FREE to use!

Get your FREE account now!

 

Also Read:

Small Business Taxes In South Africa

Sole Proprietorship Registration Process In South Africa