SARS (South African Revenue Service) specifies the VAT registration requirements. This government agency collects VAT from the initial manufacturing stage to the final consumer stage. Calculating VAT to be paid back to SARS is easy, especially if yours is a small business.
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South Africa replaced its general sales tax (GST) with a consumption-type Value Added Tax (VAT) in September 1991. Since this tax is levied by the government at each point a good and service exchanges hands in the production or distribution processes, those in the business sector need to have VAT registration requirements.
What is VAT?
Value Added Tax is an indirect tax on the consumption of goods and services in the economy, and it is charged at each stage of the production and distribution process. However, some products (zero-rated products) are exempted from this indirect tax. These zero-rated products are basic food items like maize meals and vegetables.
SARS VAT registration requirements in South Africa in 2022
A business must have a VAT number if its total value of taxable goods or services exceeds R1 million in 12 months or more. A business may also register voluntarily if the income earned in the past 12-month period exceeds R50 000. Here are the requirements for VAT registration for a company that wants an SA tax number:
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- A Certificate of Incorporation to prove the business is registered with the CIPC (Companies and Intellectual Property Commission).
- Original banking statements (going back three months): The reports should be from an account specifically meant for your business transactions. In other words, the account should be free from personal transactions.
- Original letter from your banker or Original stamped statement from the bank
- Proof of trading: Use the latest month's invoices of previous transactions.
- Proof of business address: Use a recent copy of the business' municipal account or a rental agreement.
- Copy of Trust Deed And Authority Letter
- Copy of Original ID
These documents help you fill out a VAT 101 form. Bring them and the form to the nearest SARS centre to complete the VAT number registration process.
How can I register via the SARS eFiling system?
A business enjoys some benefits after submitting tax returns. Use the SARS eFiling platform. The process is as simple as explained below:
- Visit the SARS eFiling website at sarsefiling.co.za.
- Click on the Register form at the top of the menu.
- Complete the easy 6 step process:
- Read and Accept the Terms and Conditions.
- Create your User ID and secure password.
- Add in the personal information for authentication.
- Provide details on your organization as well as employer details.
- Select the VAT tax type.
- You are now registered.
You will receive a unique User ID and access code which is private and confidential. You are free to change and personalize your access code.
How do I register for a VAT number in South Africa manually?
If you cannot do this electronically using the SARS eFiling system, follow this guide:
- Download a VAT 101- Application for a Registration Form from the SARS website and fill it out.
- Bring the supporting documents and the VAT 101 form to a SARS branch near you. No hard copies are accepted via faxing or photocopying for security reasons. SARS is trying to curb fraudulent activities.
- You will receive a unique VAT vendor number after a successful registration. The number will appear in all future invoices, receipts, quotations, and correspondence you receive from SARS.
- Once registered, you can make payments through the various SARS branches, the eFiling website, debit orders or a major bank.
Who must register for VAT in South Africa?
South Africa's VAT rate has been growing since its introduction in 1991. As defined in section 1(1) of the VAT Act, any person who runs an enterprise may qualify to register for VAT. A person is defined as a company, individual, partnership, trust fund, and municipality. There are two types of registration:
1. Mandatory VAT registration
Once your company exceeds R1 million in annual sales, you are legally required to register for VAT at SARS. Businesses that fall into this category are referred to as vendors. Upon registration, you are permitted to add the extra charge to the total price of your products and services. New vendors must complete and submit the VAT 101 form- Application for registration at SARS centres, no later than 21 days after surpassing the R1 million sales mark.
2. Voluntary VAT registration
If you have a new company, you can voluntarily register for a VAT number for your business. That is, if your annual sales fall below R1 million. The minimum threshold for voluntary VAT registration was R50,000 in sales accrued over 12 months.
However, under the new changes, if you earn more than R4 200 a month (for at least 2 months), you are eligible to apply for a number. These companies are mainly micro-businesses that may include individuals, partnerships or cooperatives.
Since these micro-businesses are subject to a turnover tax, they are not mandated to register separately. It is up to you to decide to scale your business operations. The mandatory and voluntary VAT registration requirements are similar.
How long does VAT registration take in South Africa?
If you register via the SARS eFiling system, your profile will be activated within 48 hours. If it takes any longer, you are advised to contact SARS. Otherwise, via manual registration, it takes anywhere from 10 days. After successful registration, you will receive notice through:
- The eFiling system
- The email address provided upon registration
- SMS through a registered mobile phone number
Before your SA tax number is issued, you are free to continue business operations as you wait for it. Contact SARS via 0800 00 7277 or +27 11 602 2093 (international callers) in case of delays. You can also visit their nearest offices on weekdays from 08h00 - 16h30 (Wednesdays from 09h00 - 16h30). The offices close on weekends and Public Holidays.
How do I cancel a VAT registration?
A vendor may apply for cancellation of a VAT registration where the value of taxable supplies is less than the compulsory registration threshold of R1 million in any consecutive period of 12 months. The Commissioner can also cancel a VAT registration if:
- The vendor's enterprise ceases all operations for the next 12 months.
- The enterprise will never commence within the next 12 months.
- The vendor no longer complies with the requirements for voluntary registration.
- The vendor has failed to furnish a return that is required for purposes of calculating the tax.
- The vendor was registered under the voluntary registration category BUT: does not keep proper accounting records; has not fixed an address for the business; has not opened a bank account for the enterprise; was previously registered under the VAT Act or Sales Tax Act and failed to perform any duty imposed under those Acts.
What is a VAT number?
It is a unique 10 digit number that starts with the number 4. The digit 4 on the SA tax identifies a person/entity as a registered VAT vendor in South Africa. For example, a 4330182355.
When your application is successful, you are issued this unique identifying number that you can search and check for on the SARS eFiling website. Once issued, this unique identifying number is expected to be indicated on all your valid tax invoices.
What are the benefits of registering for VAT in South Africa?
VAT is an additional percentage to the actual price of a product, and the burden of this tax falls upon the consumer. So, as a business or vendor, you do not have to worry that it will be deducted from your operational costs. These are some of the benefits of getting a VAT number:
- Your business will be listed as a licensed service provider, thus making it more reliable and trustworthy to potential clients.
- A VAT number makes a business eligible to apply for tenders and contracts, especially with the government.
- When sending quotes and invoices, large companies prefer to deal with businesses with a verifiable VAT number.
- You will be eligible for a tax refund from SARS whenever you buy products from another company that adds this tax.
Do I need to register for VAT?
If you have been thinking, "what qualifies you to be VAT registered?" A business must register for VAT if the total value of taxable supplies made in any consecutive twelve-month period exceeds or is likely to exceed R1 million.
How do I get a VAT number in South Africa?
Register for VAT on eFiling. Alternatively, complete a VAT 101 – Application for Registration form and submit it to the local SARS office within 21 days from the date you exceeded R1 million.
What are the requirements for VAT registration?
SARS needs these documents to give you a VAT number:
- A Certificate of Incorporation.
- An original banking statements (going back three months) from a business account.
- An original letter or stamped statement from your bank.
- Proof of trading (the latest month's invoices of previous transactions)
- Proof of business address (a recent copy of the business municipal account or a rental agreement)
- Copy of Trust Deed And Authority Letter
- Copy of Original ID
What is a VAT Cycle?
The frequency with which you pay VAT to SARS depends on your taxable period. SARS penalizes or charges interest if a business fails to pay VAT return within 25 days of the end of each VAT cycle. Moreover, keep your records for five years from the date of the last entry in case SARS asks for them within this timeframe. There are six VAT Cycles or tax periods:
A vendor submits one return for every two calendar months, ending on the last day of January, March, May, July, September and November.
A vendor submits one return for every two calendar months, ending on the last day of February, April, June, August, October and December.
A vendor submits one return for each calendar month. Your business' turnover must exceed R30 million in any consecutive 12 months for it to fall in this category. Apply in writing to be placed in this category.
This category applies to one doing farming activities and has a total turnover of less than R1.5 million for 12 months. A vendor submits one return after every 6 months, ending on the last day of February and August.
Category E is also called the annual tax period because a vendor submits one return for 12 calendar months. It must be a company or trust fund to fall within this category. Additional criteria to fall within this category are outlined in Chapter 3 of the VAT 404 guide.
The four-monthly tax period is for small businesses. The period for each year is as follows:
- March to June to be submitted in July
- July to October to be submitted in November
- November to February to be submitted in March
Filing the VAT registration form is easy and quick if you have the required documents. Seek help from a certified tax practitioner if you lack these VAT registration requirements. You need an SA tax number when filing returns. Therefore, get it before the deadline because vendors who file returns past the due date face penalties or fines.
Briefly.co.za also shared details regarding the VAT number search process. The law demands a VAT number from all South African businesses whose taxable goods and services exceed R1 million in 12 months.
If you want to stay on the law's safe side, search your VAT number to ensure you are registered. You can also search for another company's VAT number to confirm that they are legal and trustworthy.
Source: Briefly News