Value Added Tax (VAT)

blog / Registrations / V.A.T. Registration / Value Added Tax (V.A.T.) / February 21, 2018

What is VAT?

Value Added Tax (VAT) was first introduced in South Africa on 29 September 1991 at a rate of 10%. Value Added Tax is commonly known as VAT. VAT is an indirect tax on the consumption of goods and services in the economy. Revenue is raised for government by requiring certain businesses to register and to charge VAT on the taxable supplies of goods and services. These businesses become vendors that act as the agent for government in collecting the VAT.  In 1993 VAT was raised to 14%. As of 1 April 2018, the effective VAT rate will rise from 14% to 15% adding approximately R22,9 billion to the fiscus, Gigaba said in his budget speech on the national budget speech in February 2018.


When to register for VAT?

It is mandatory for a business to register for Value Added Tax if the income earned in any consecutive twelve-month period exceeded or is likely to exceed R1 million. The business must complete a VAT 101 – Application for Registration form and submit it to the local SARS branch within 21 days from the date of exceeding R1 million. A business may also choose to register voluntarily if the income earned, in the past twelve month period, exceeded R50 000.


Who should register for VAT?

Any person that carries on a business may register for VAT. You can register once for all different tax types using the client information system. The term person is not only limited to companies but also includes, amongst others, individuals, partnerships, trust funds, foreign donor funded projects and municipalities. In order to register, an application form must be completed and a specific process must be followed, both of which you can find on our page how to register for VAT.
It is mandatory for a person to register for VAT if the taxable supplies made or to be made is, in excess of R1 million in any consecutive twelve month period.
A person may also choose to register voluntarily if the taxable supplies made, in the past period of twelve months, exceeded R50 000. As from the 1st of March 2012, qualifying micro businesses that are registered for Turnover Tax may also choose to register for VAT provided that all the conditions for voluntarily registration for VAT are met.
A person who is obliged to register for VAT is referred to as a vendor.


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Nivesh Mahadeo, Managing Director of ATB Consultants (Pty) Ltd, Accounting - Taxation - Business

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