If you’re doing business in South Africa, you need to know about VAT tax. Value-Added Tax (VAT) is a consumption tax charged on most goods and services sold for domestic consumption. The standard VAT rate is 14%, with a reduced rate of 9% for certain essential goods and services. Zero-rated items include exports, fresh food, basic groceries and prescription medicine.
In order to account for VAT, you must raise your selling price by 15% if you are registered for VAT. For instance, if you sell a product for R100, you must add R15 (10015%) to the price, making the final amount your customers must pay R115.
The VAT that is added to earnings or sales is known as output VAT.
You can also ask SARS for a refund of all the VAT you have already paid on your purchases. So, if you paid R115 for a product, including VAT, you can receive an R15 refund from SARS.
VAT on purchases is often referred to as input VAT.
To establish how much VAT you must pay to SARS or claim back, you can deduct input VAT from output VAT:
