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?