How does Business TAX & Vat work in South Africa

What is VAT?

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VAT is a tax charged on most goods and services sold in South Africa.

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The standard rate is 15%, which means every R100 sale includes R15 VAT.

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When Do You Need to Register for VAT?

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Mandatory registration: If your business sells more than R1 million worth of taxable goods or services in 12 months.

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Voluntary registration: You can register if your sales exceed R50,000 in the past year.

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Types of VAT Rates:

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Standard-rated supplies: Most goods and services; VAT is 15%.

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Zero-rated supplies: Essential items like basic food, certain health and educational products; VAT charged at 0%.

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Exempt supplies: Some items, like financial services and certain residential property sales, do not require VAT. Businesses selling only exempt items do not need to register.

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How VAT Works:

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Output tax: VAT you charge your customers when selling products or services.

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Input tax: VAT you pay on goods and services your business buys.

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VAT payable: The difference between output tax and input tax is what you pay to SARS.

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Example of VAT Calculation:

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Your business sells goods worth R100,000 (excluding VAT).

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You charge 15% VAT → R100,000 × 15% = R15,000 (output tax).

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You bought materials for R50,000 (excluding VAT).

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VAT paid on purchases → R50,000 × 15% = R7,500 (input tax).

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VAT to pay to SARS → R15,000 − R7,500 = R7,500.

 

When to File VAT:

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VAT-registered businesses must submit returns monthly or every two months, depending on their registration type.

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Returns report: total sales, VAT collected, purchases, and VAT paid.

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How to Pay:

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Payment is made to SARS through online banking, debit order, or eFiling.

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Example:

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If your business collected R30,000 VAT from sales and paid R12,000 VAT on purchases:

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VAT payable = R30,000 − R12,000 = R18,000 to be paid to SARS.