Ridesharing services like Uber have gained immense popularity in South Africa over the last few years. However, there is still some confusion among drivers regarding the VAT rules and regulations surrounding Uber. Can driver-partners claim input VAT on expenses related to providing services via the Uber app? Let’s find out.
Who Needs to Register for VAT in South Africa?
You must register for VAT if your taxable supplies for the past 12 months have exceeded R1 million, or are expected to exceed R1 million in the next 12 months. Voluntary registration is also allowed even if the threshold is not met.
For Uber drivers specifically, your fees and commission from providing rides via the Uber app is considered a taxable supply. So if it crosses R1 million in 12 months, you need to register.
Benefits of VAT Registration for Uber Drivers
The key benefit of VAT registration for Uber driver-partners in South Africa is that it allows you to claim input VAT credits on business-related expenses and reduces costs. This improves cash flow and financial viability.
Some examples of expenses where you can claim input VAT include:
- Fuel costs
- Vehicle repairs and maintenance
- Car wash and cleaning
- Mobile data charges used during rides
- Water, mints etc. kept in the car for customers
- Stationery like invoice books
- Bank charges on business account
- Registration, licensing and insurance costs
Therefore, while you collect 15% VAT on rides and remit it, you can also get back 15% VAT paid on legitimate business expenses.
Criteria for Claiming Input VAT on Uber Expenses
To claim input VAT as a rideshare service provider on the Uber platform, you need to fulfill certain conditions:
Have a Valid VAT Registration
Firstly, you need to be a registered VAT vendor with SARS. The registration process can be done online. Maintain valid tax compliance at all times.
Expenses Must Relate to Taxable Supplies
The input VAT you claim should have been incurred only for making taxable supplies, which in case of Uber is transportation services via the app. Personal expenditure is not eligible.
Get Valid Tax Invoices
Keep proper VAT invoices for all business-related expenses. The invoices must clearly show VAT charged in order to reclaim credits. Generic receipts can’t be used to claim VAT.
Documentation Required for Claiming VAT on Uber
To ensure your input VAT claims on Uber expenses satisfy SARS requirements, you should maintain the following documents:
- VAT registration certificate
- Logbooks detailing rides undertaken
- Tax invoices for expenses incurred
- Bank account statements
- Uber commission statements reflecting income
The documents substantiate your claims so that when SARS conducts an audit, you have all records to establish eligibility.
How Do I Claim VAT as an Uber Partner?
The process of claiming VAT input credits for eligible Uber expenses involves:
Collect Supplier Invoices: Gather GST tax invoices for all business purchases. Check they comply with VAT regulations.
Capture Data: Record expenses in ledger. Ensure descriptions, invoice numbers, VAT amounts, totals are correctly captured.
Complete VAT Forms: Fill up VAT201 return to claim input tax. Forward to SARS every 2 months. Can claim refund or offset future VAT dues.
Maintaining accurate data allows you to easily submit error-free returns and facilitate faster processing and refunds from SARS.
Common Uber VAT Claim Scenarios
Some common examples of how VAT registration can benefit rideshare drivers on the Uber platform:
- Thando purchases a newer Toyota Corolla for R250,000 (including R35,000 non-refundable VAT) to offer Uber rides exclusively. As all supplies via Uber attract 15% VAT which Thando charges to riders, she can claim R35,000 input credit to offset her twice-yearly returns. She can use trusted VAT calculator to do the calculations for her.
- Jo spends R6,000 on servicing her Nissan Almera using genuine spare parts to minimize Uber vehicle breakdowns. The dealer charges 15% VAT i.e. R900. Jo claims R900 input credit.
- Charles incurs R5,500 monthly in Uber ride commissions + R7,000 as petrol VAT expenses. Annually he paid SARS R99,000 VAT (15% * R 660,000 Uber fees). Charles claims R126,000 VAT inputs to reduce tax cash outlay.
As illustrated, by claiming VAT, Uber partners can reduce operating costs and tax liabilities. Minimized expenses result in higher earnings over the long-term as your tax burden decreases after GST set-offs.
Common Concerns around VAT Registration
Many Uber driver-partners may have certain concerns around the VAT registration process. Let’s address the main ones:
How much tax do I pay if I register for VAT?
You only need to pay output VAT collected from rides, minus any eligible input tax. So your net tax outflow reduces. Also, income tax applies on profit earned from Uber after deducting costs like fuel, car lease amounts, etc.
Does VAT registration expose my other income to SARS?
No, the VAT process only relates to taxable supplies from your Uber ridesharing business. Your other incomes like rental, investments, etc. are not exposed or impacted.
Is the VAT filing process complex?
While it involves some paperwork, VAT returns are reasonably simple if you maintain proper records. Tax consultants can also help with filing returns.
Do I need an accounting degree to claim Uber VAT correctly?
You don’t need to be an accountant. Just follow some basic guidelines around capturing expenses, checking tax invoices, preserving documents, and filling returns. Or engage an expert.
Therefore, with some guidance around documentation and procedures, you can easily claim VAT as a rideshare partner while maintaining visibility of your tax deductions for SARS.
Maximizing VAT Refunds from Uber Expenses
Here are some additional tips for Uber partners to maximize VAT refunds in South Africa:
- Check all supplier invoices comply with VAT regulations before paying
- Accurately capture all expenses in a spreadsheet, tally monthly totals
- Buy a majority of spare parts from VAT-registered dealers
- Maintain detailed servicing logs for your rideshare vehicle
- Renew annual licenses/permits before expiry to continuously claim VAT
- Consider an alternate vehicle just for Uber to simplify input VAT calculations
The more expenses you can justify as being Uber rideshare-related, the higher your input tax claims and resultant refunds.
To summarize, South African VAT legislation permits Uber driver-partners to register and claim input VAT paid on business-related expenses. By offsetting your VAT obligations on ride fees charged, you can benefit from getting back 15% tax paid on costs incurred while providing transportation services via the Uber app. Ensure you issue valid tax invoices, maintain documents for 5 years, and file accurate returns to seamlessly claim VAT refunds. Consult a tax advisor to clarify any doubts regarding maximizing legitimate VAT benefits as an Uber partner.
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What Records Should I Maintain For VAT Audits?
You should keep purchase invoices, bank statements, Uber tax invoices, income-expense ledger, logbook of rides undertaken, VAT registration certificate, and tax returns for 5 years. These records will be required during a VAT audit to prove the validity of your tax claims.
Can I Claim VAT On A Car Lease Or Rental?
Yes, if you have leased or rented a vehicle exclusively for providing rides via Uber, then the input VAT paid on the lease/rental amounts can be claimed in your tax returns.
Can I Claim VAT On Car Insurance Expenses?
Car insurance costs related to your Uber vehicle can also be claimed so long as you get a proper VAT invoice from the insurer. Personal insurance policies do not have VAT.
How Often Do I Need To File VAT Returns?
VAT registered businesses need to submit VAT 201 tax returns every 2 months. So you need to file 6 VAT returns each year using either eFiling or at a SARS branch.
What Penalties Apply For Inaccurate VAT Return Filing?
If SARS finds discrepancies or false information in your VAT returns, penalties of up to 200% of tax evaded can apply. Ensure information declared about output and input VAT is accurate.