South Africa does not have a VAT tax on financial services, but if an explicit fee is paid while selling goods, it is liable to it.
In South Africa, can you claim VAT on bank charges?
Banks may deduct input VAT incurred in delivering taxable services, and other VAT registered individuals may deduct the VAT charged by banks on financial services, subject to the usual VAT deductibility requirements.
In general, bank charges do accrue input VAT, and your bank statement is regarded as a tax invoice.
Depending on the bank, the “Vatable” bank charges will have a hashtag before the transaction description, such as #Service Fees.
However, some charges, such as certain overseas charges, are exempt from VAT.
What is VAT-free in South Africa?
While all fee-based financial services are subject to VAT, interest is not. Residential rents, non-international passenger transit by road or rail, and educational services are also exempt.
Is it possible to claim VAT on loan charges?
Interest is never subject to VAT, regardless of whether you are a Financial Service Provider as defined. VAT is levied on the final consumer of goods and services. Interest is a penalty for late payment, not a service or good, and hence does not qualify for VAT to be levied.
What are the VAT consequences for South African financial transactions?
Financial services are excluded from VAT in South Africa; nevertheless, where an express fee is levied as consideration for a supply, it will be taxed. The VAT Act in South Africa allows for the denial of input tax on costs incurred to generate exempt supplies.
