With the growth of digital products and the globalization of trade, it has become easier for businesses with VAT to set up shop in South Africa. The VAT, which plays a vital role in South Africa’s economy, is always at the center of this discussion. A common question is: Is VAT charged on delivery in South Africa? This crucial question deserves an answer, so let’s find out.
VAT For Business
VAT (value-added tax) is collected by all sellers at every stage of the supply chain. Suppliers, producers, distributors, and retailers all charge VAT on taxable sales. Similarly, all pay VAT on their purchases.
Businesses must track and document the VAT they pay on purchases to claim a credit on their tax returns. In a VAT regime, tax jurisdictions collect tax income along the whole supply chain, not simply at the moment of sale to the final consumer.
Does VAT Apply To Delivery Fees?
The answer, like many things in tax, is “it depends.” Here’s the breakdown:
When Delivery is Part of the Purchase
If the seller delivers the goods themselves as part of their service (think furniture store delivery), VAT usually applies to the entire price, including delivery. The seller charges VAT on the combined amount (goods + delivery) in one go.
When Delivery is a Separate Service
If you choose a separate delivery service (like Uber Eats or a courier), VAT applies only to the delivery fee itself. The seller charges VAT on the goods separately, and the delivery service charges VAT on their fee.
Exceptions and Special Cases:
Zero-rated supplies: Some goods and services are exempt from VAT, like basic foodstuffs and educational services. If the delivered goods are zero-rated, the delivery fee might also be zero-rated.
Exports: If you’re exporting goods, delivery charges related to the export are generally zero-rated.
International deliveries: When ordering from international sellers, you might encounter import duties and VAT on top of the delivery fee.
What ecommerce businesses need to know about shipping to South Africa
South Africa is the 37th largest ecommerce market in the world. You will need to research this market and familiarize yourself with the country’s e-commerce environment to tap into it.
Below are some tips to help you build a better footprint in South Africa for your retail business:
- In South Africa, nearly half of all e-commerce transactions take place on mobile devices. It is therefore essential to have a mobile-friendly retail presence to ensure that your South African customers have an effortless and intuitive shopping experience.
- There is a strong demand for online purchases among rural residents. The country has a mature consumer culture and even rural residents prefer to shop online. To reach the more remote areas of South Africa in the shortest time possible, your fulfillment network must be strong enough.
- A successful ecommerce portal should accept a variety of payment methods, including cards, e-wallets, bank transfers, and cash on delivery.
Is VAT Applied to Export Goods outside of South Africa?
Exports undertaken by vendors who sell or consign goods to customers outside South Africa are classified as ‘direct exports’. Providing all documentary and procedural requirements are met, the vendor may zero-rate the sale.
The export is considered indirect when the recipient from outside South Africa removes or arranges for the removal of goods purchased in South Africa. In general, suppliers must charge 15% VAT, but they may choose to zero-rate the supply (subject to certain conditions) if they agree to ensure that the goods are delivered to a designated commercial port from which they will be exported by the buyer.
Impact Of VAT on Consumers and Businesses
For savvy shopper
Picture this: if you find a cool device in cyberspace, click “buy” and then …blam! A delivery fee appears, and the item turns out to be more costly than you anticipated. This is because VAT often includes delivery charges, which in effect increases the total cost of your purchase. It may even affect your purchase decisions making you choose free delivery options or completely reconsider buying something.
Consider now, that you are selling that cool gadget. If VAT is added to delivery fees, paperwork and administrative burden increases. This means that you will have to calculate and report the tax, making your job more complicated. Additionally, determining the appropriate delivery price is a challenge. You have to add VAT while at the same time being competitive and attracting customers. It is quite a juggling act that may sometimes feel like a price-guessing game.
How are sales tax and value-added tax (VAT) different?
It is important to note that both sales tax and VAT are indirect taxes – i.e. they are taxes collected by the seller and then paid by the seller on behalf of the buyer to the government at the time of purchase. The difference between sales tax and value-added tax is one of the most common causes of confusion within the corporate tax community.
Is it necessary for an overseas company to appoint a fiscal representative?
In the case of a non-resident company that is required to register for VAT purposes, a VAT representative needs to be appointed. A VAT representative, who is a natural person, must be a resident of South Africa and is responsible for the company’s duties and obligations under the VAT Act.
Is there a penalty for not registering or registering late for VAT?
It is an offense to fail to register for VAT on time, and the offender may be liable to a fine or imprisonment if he or she is found guilty. A person who registers late may also be required to pay additional tax, penalties, and interest.
If my customers owe me VAT, how do I collect it?
Adding a duty and tax calculator to your checkout is required if you collect VAT from your customers via your e-commerce website. Using this method, you will be able to calculate VAT due and add it to your total invoice.
VAT and duties will be paid upfront at the point of checkout, so the customer won’t receive any unpleasant surprises when they receive their order.
The value-added tax plays a critical role in the South African economy. Generally, VAT is taxed on deliveries, so businesses must include the value in their total cost. In most cases, VAT is charged at 15% on taxable goods and services, unless there are exemptions or zero-rated products.
There is a great need for a consumer to be aware of VAT implications when it comes to different purchases and this is particularly true in this era when online deliveries are being done regularly.