Understanding VAT for Small Businesses in South Africa

Value Added Tax (VAT) is one of the most important tax considerations for South African businesses. Whether you're just starting out or approaching the R1 million turnover threshold, understanding VAT is essential for compliance and financial planning.

What is VAT?

VAT is a consumption tax charged on most goods and services in South Africa. The current rate is 15%, which was increased from 14% in April 2018. As a business owner, you collect VAT from customers and pay it to SARS, minus the VAT you've paid on business expenses.

When Must You Register?

You must register for VAT if your taxable turnover exceeds or is likely to exceed R1 million in any 12-month period. However, you can voluntarily register if your turnover exceeds R50,000, which can be beneficial in certain situations.

Compulsory vs Voluntary Registration

Compulsory registration applies when:
- Your taxable supplies exceed R1 million in 12 months
- You have reasonable grounds to expect this threshold will be exceeded

Voluntary registration may benefit you if:
- Most of your customers are VAT-registered businesses
- You make significant capital purchases
- You want to appear more established to clients

VAT Invoice Requirements

A valid tax invoice must include:
- The words 'Tax Invoice'
- Your business name and VAT number
- Customer's name and VAT number (for invoices over R5,000)
- Invoice date and unique number
- Description of goods or services
- Quantity and value
- VAT amount charged

Filing and Payment

VAT returns are typically submitted every two months via SARS eFiling. Payment is due by the 25th of the month following the end of your VAT period. Late submissions attract penalties and interest.

Common Mistakes to Avoid

1. Not keeping proper records - Keep all invoices and receipts for at least 5 years
2. Claiming VAT on non-deductible items - Entertainment and private expenses generally can't be claimed
3. Missing deadlines - Set reminders for VAT submission dates
4. Incorrect invoice format - Ensure all required information is included

Need Help?

While this guide provides an overview, VAT can be complex. We recommend consulting with a registered tax practitioner for your specific situation. You can also visit the SARS website for official information and guides.

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*Disclaimer: This article is for informational purposes only and does not constitute tax advice. Please consult a qualified tax professional for advice specific to your situation.*