VAT was introduced in South Africa with effect from 30 September 1991, by way of the Value-Added Tax Act 89 of 1991, to replace sales tax. The VAT system is administered by the South African Revenue Service (SARS). The Head of SARS is the Commissioner.
Rates and scope
The standard VAT rate of 14% applies to all supplies of goods or services not qualifying for an exemption, the importation of goods by any person and the importation of services. There is no higher VAT rate, nor any reduced VAT rate (except for the zero rate).
VAT is levied on ‘taxable supplies’, being supplies of goods or services made by a ‘vendor’ (a person registered or required to be registered as a vendor with SARS) in the course or furtherance of an enterprise carried on by the vendor, wholly or partly in South Africa.
The concept ‘goods’ includes all corporeal movable goods, as well as immovable (fixed) property. The concept ‘services’ includes anything done or to be done, the granting, assignment, cession or surrender of any right or the making available of any facility or advantage. Money and tax stamps are neither goods nor services.
A ‘supply’ includes performance in terms of a sale, rental agreement, instalment credit agreement and all other forms of supply, whether voluntary, compulsory or by operation of law.
The registration threshold is ZAR1 million. If a person’s total annual value of taxable supplies has exceeded this threshold during the past 12 months, or there are reasonable grounds to expect that the threshold will be exceeded during the following 12 months, the person must apply for registration. (Prior to 1 March 2009 the threshold was ZAR300 000.) A ‘person’ includes natural persons, legal persons
g. companies), bodies of persons
g. partnerships and joint ventures),
public authorities, municipalities, estates, trust funds and foreign donor- funded projects.
Registration is not required where the threshold will be exceeded solely as a consequence of:
the cessation of, or substantial and permanent reduction in, the size or scale of, an enterprise;
the replacement of capital assets; or
abnormal circumstances of a temporary nature.
The following persons may apply for voluntary registration:
a person whose taxable supplies have exceeded ZAR20,000 in a preceding 12-month period;
a person who carries on an enterprise that, due to the nature of the activity, can be expected to result in taxable supplies in excess of ZAR20,000 during a 12-month period;
a person who buys a business as a going concern, if the previous owner of the business made taxable supplies in excess of ZAR20,000 in a 12-month period; and
welfare organisations, share block companies, foreign donor-funded projects and municipalities, even if the ZAR20,000 requirement has not been met.
(With effect from 1 March 2010, the ZAR20,000 threshold will be increased to ZAR50,000.)
Group and branch registration
Different companies in the same group cannot be registered as a group under one VAT registration number.
Separate enterprises carried on by a vendor, or branches or divisions of an enterprise carried on by a vendor, may be registered separately.
For a nonresident to register in South Africa, he must furnish SARS with the particulars of:
his fiscal representative, who is a natural person and South African resident; and
his bank account in South Africa.
Application for registration
To register for VAT purposes in South Africa, a person must complete form VAT 101 and submit it to the local office of SARS. The application for registration must be accompanied by (inter alia) the following documents:
copy of the identity document
(ID) of the individual or of the two most senior partners or directors, shareholders, members or trustees;
copy of certificate of incorporation or constitution;
letter of authority, if application is submitted by a registered tax practitioner;