VAT definition
Value-Added Tax, or VAT, is referred to by its abbreviation. On the economy’s consumption of goods and services, it functions as an indirect tax. Certain traders (vendors) who operate businesses are required to register for VAT in order to generate revenue for the government.
The vendor must then, subject to certain conditions, charge VAT on any supplies of goods or services it makes. Only taxable supplies are subject to VAT. Supplies that are subject to taxation are those for which VAT is assessed at either the standard rate (currently 15%) or the zero rate (0%). A small number of products and services are either VAT-exempt or subject to VAT at a zero rate.
Revenue from VAT on sales is referred to as Output.VAT.
Additionally, you can request a refund from SARS for all the VAT you have already paid on your transactions. So, if you purchased a goods for R115, including VAT, you can get a refund from SARS of R15.
Input VAT is the name for VAT on purchases.
You can subtract input VAT from output VAT to determine how much VAT you must pay to SARS or claim back:
You must pay SARS if your output VAT exceeds your input VAT. You can request a refund from SARS if your output VAT is less than your input VAT. But nothing is ever that easy. There are always exceptions, as there are for the majority of taxes. You may not always have to charge VAT to a customer, and you may not always be able to deduct VAT from an expense.
Although business owners are allowed to deduct taxes paid at earlier stages, the final customer is still responsible for paying the taxes.
Items would need to either fall under the exempt categories or deduct tax that has already been paid during earlier stages to reduce VAT costs. Unless you make taxable purchases, you won’t need to register for VAT.
You must pay SARS if your output VAT exceeds your input VAT. You can request a refund from SARS if your output VAT is less than your input VAT. But nothing is ever that easy. There are always exceptions, as there are for the majority of taxes. There are times when you don’t needs sales that are more than R1 million for 12 straight months. This implies that smaller companies could not be subject to VAT.
Who in South Africa is eligible for VAT?
If the combined value of your business’s taxable goods and services exceeds R1 million in a calendar year, or is anticipated to do so, you must register your enterprise for Value Added Tax (VAT). If a business made more than R50 000 in revenue during the previous 12 months, they may also register voluntarily.
How does VAT function for a small company?
The output tax, also known as VAT, is 15% of the price you charge for your goods and services. This implies that if you are a VAT vendor, your customers will pay more for your goods or services. But it also implies that all items and services provided by your organization are eligible for input tax claims.
If you don’t pay your VAT, can you go to jail?
Section 72(1) of the Value Added Tax Act defines the intentional evasion of VAT as a crime, with a maximum sentence of 7 years in prison and an unlimited fine for cases heard in the Crown Court.
