1. VAT – value added tax
Chapter 6

2. Cost Price
Mark-up
Selling Price
Profit
Farmer R5
R10
Manufacturer
R15
Wholesaler
R20
Retailer
R25
Consumer

3. Cost Price
VAT
Input
Mark-up
Selling Price
VAT Out put
Pay to SARS
Profit
Farmer
R5.70
R0.70 R5
R11.40
R1.40
Manufacturer
R17.10
R2.10
Wholesaler
R22.80
R2.80
Retailer
R28.50
R3.50
Consumer

4. VAT Indirect tax Charged on the supply of: 2 types of VAT Goods or
Services
2 types of VAT
Input VAT - purchases
Output VAT - sales

5. VAT Input VAT ( into the business) Output VAT (out of the business)
When we buy goods from a supplier
Output VAT (out of the business)
When we sell goods to customers

6. Standard Rated Supplies
VAT
Standard Rated Supplies
Exempt Supplies
Zero-Rated Supplies
VAT

7. 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%

8. VAT - exempt supplies Exempt Supplies No VAT is paid or charged
No 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%)

9. 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

10. 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

11. 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

12. 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?

13. 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.

14. Non-allowable items
A business can operate without gym membership, refreshments and entertainment. SARS will therefore not allow any VAT claims on these items.

15. 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

16. Denied Input Tax Entertainment Allowable 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

17. 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

18. 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.

19. VAT - deemed supplies Required 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

20. 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 R 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

21. VAT vendors Turnover = > 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

22. VAT VAT is not charged on: Money received from or paid to the owner
Salaries and wages
Interest income

23. 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.

24. 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.

25. VAT – Tax Invoices Tax 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

26. 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

27. Approved methods for reflecting the consideration and VAT