Cost Price
Mark-up Selling
Price
Profit
Farmer R5 R5 R10 R5
Manufacturer R10 R5 R15 R5
Wholesaler R15 R5 R20 R5
Retailer R20 R5 R25 R5
Consumer R25
Cost Price
VATInput
Mark-up
Selling
Price
VAT Out put
Pay to
SARS
Profit
Farmer R5.70 R0.70 R5 R11.40
R1.40 R0.70 R5
Manufacturer R11.40 R1.40 R5 R17.10
R2.10 R0.70 R5
Wholesaler R17.10 R2.10 R5 R22.80
R2.80 R0.70 R5
Retailer R22.80 R2.80 R5 R28.50
R3.50 R0.70 R5
Consumer R28.50
VAT Indirect tax Charged on the supply of:
Goods or Services
2 types of VAT Input VAT - purchases Output VAT - sales
VATInput VAT ( into the business)
When we buy goods from a supplier
Output VAT (out of the business)When we sell goods to customers
VAT – standard-rated Standard-Rated Supplies
All goods and services are standard rated unless specifically Exempt Zero-rated
Standard-rated supplies are taxed at a rate of 14%
VAT - exempt supplies Exempt Supplies
No VAT is paid or chargedNo VAT is or can be claimed back
VAT is not charged on these goods or services
No VAT, not at standard rate (14%) zero-rate (0%)
VAT - exempt supplies
No VAT is charged on the following Financial services – interest received & interest paid
medical aids, provident, pension or retirement funds Life assurance Donated goods or services sold by non-profit bodies Rent – for use as a private home (not holiday homes) Passenger transport in South Africa – bus, taxi or train Educational services – schools, universities
Vat - zero-rated supplies
Taxable supplies where 0% can be claimed back 0% charged to customers
Fuel – petrol, diesel and illuminating paraffin Services provided to foreign residents
(certified by customs) Direct exports – supply to a customer in
another country Sale of a going concern Any service rendered by a welfare society
VAT – zero rated supplies Brown bread Brown flour Eggs Dried beans Maize meal Pilchards in cans Milk or milk
powder Mielie rice
Dried mielies Samp Fresh/frozen fruit &
vegetables Lentils Rice Oil – only vegetable
Non-allowable items
Does the item paid for
constitute an essential input to our business to
create outputs on which VAT output will be charged?
Non-allowable items
A business cannot run properly without water & electricity, telephone, advertising and equipment.
SARS will therefore allow a business to claim VAT input on such items.
Non-allowable itemsA business can operate without gym membership, refreshments and entertainment. SARS will therefore not allow any VAT claims on these items.
Denied Input Tax Entertainment – goods or services
obtained for entertainment purposes
Any fees – sporting, social or recreational
Buying a motor car
Goods or services acquired by Medical schemes or
Denied Input Tax Entertainment
Refreshments, Christmas parties, customer entertainment & equipment to provide staff refreshments
Allowable entertainment While away on business Seminars Entertainment is what the business does Welfare organisations events for fund-
raising
Denied Input Tax Motor cars
The Act specifies what a motor car is Cannot claim VAT even if the vehicle is
strictly being used by the business Motor cars as per the Act includes:
Double cab bakkies Sedan type passenger vehicles Station wagons Minibuses Sport utility vehicles
Denied Input Tax(allowed vehicles – per the ACT) Goods transportation trucks. Single cab delivery vehicles. Motor cycles. Caravans. Ambulances, game viewing vehicles and hearses. Vehicles capable of accommodating more than
16 persons (for example, a bus). Vehicles with an unladen mass of 3500 kg or
more. Special purpose vehicles constructed for
purposes other than the carrying of passengers. Equipment such as bulldozers, graders, hysters,
harvesters and tractors.
VAT - deemed suppliesRequired to pay output tax
Goods or services taken for own use Certain fringe benefits to staff Assets retained when deregistering as a
vendor Insurance claims Subsidies or grants received from state Goods acquired under an instalment credit
agreement that’s been repossessed from you
VAT - Notional VAT A VAT vendor can claim input tax when
purchasing second-hand goods Even if no VAT was paid E.g if you buy a second-hand car If you paid R20 000 then you can claim
the input tax. Can claim R20 000/1.14 x 14% = R 2
456 Calculate the VAT assuming the
purchase price includes VAT
VAT vendorsTurnover = > R1000 000
compulsory to register for VAT
Pay VAT over to SARS every 2 months Group A - Jan, Mar, May, July, Sep,
Nov Group B - Feb, Apr, June, Aug, Oct,
Dec
VATVAT is not charged on:
Money received from or paid to the owner
Salaries and wages
Interest income
Payment vs Invoice Basis Payment Basis
Only record VAT input once cash is paid Only record VAT output once cash is
received
Invoice Basis Record VAT input once the sale is made,
invoice is created. Record VAT output once a purchase is
made, invoice is received.
Payments Basis Vendor only accounts for VAT on actual
payments made and actual payments received
A vendor must apply in writing to SARS to apply the payments basis.
VAT – Tax InvoicesTax Invoices must contain the following information The words “Tax Invoice” Name, address and registration number
of the supplier Name and address of the customer The VAT registration number of the
customer An individual unique number for each
tax invoice
VAT – Tax Invoices The date on which the invoice was
issued Total amount of the
tax charged and the rate of tax Amount excluding the tax Amount including the tax, OR
Total amount of the goods/ services and it must be stated ‘includes Tax and the rate that was charged’
A description of the goods or services supplied