Small Business Vat Registration In South Africa

Almost every country in the world imposes a value-added tax. South Africa has a similar VAT system. The South African VAT is a common tax that has to be paid by all businesses, besides several types of corporate taxes. In South Africa, VAT is also paid by the end users, so this commonality also applies to paying customers.

The tax process for small businesses is the same as for medium and large businesses, but small businesses may experience more stress due to their lack of formalization. Many small businesses find tax returns to be quite burdensome and complex due to their strict nature.

This article explains Small Business Vat Registration in South Africa, VAT fundamentals, how it may apply to your small business, and when you should register for VAT.

What are the 3 types of VAT?

The standard-rated VAT rate is 15% and applies to most goods and services.

The exempt VAT applies to certain goods and services that are not subject to VAT, such as services in the financial sector or certain educational services.

A zero-rated VAT is applied to certain essential items and services at a 0% rate, such as basic food items and medical services.

Read our informational blog Is Fuel Vat Exempt or Zero Rated in South Africa

Who Should Register For VAT?

According to Sars regulations, your business must register for VAT if the value of taxable supplies made or to be made exceeds R1 million in any consecutive 12-month period, or if the value of taxable supplies made in a year exceeds R1 million under the terms of a written contract.

A business can also register for VAT voluntarily if the value of taxable supplies made or to be made is less than R1 million but has surpassed R50,000 in the previous 12 months, under certain conditions.

What Documents Small Business Need To Register For VAT?

The following documents are required to register for VAT as a small business:

Copy of your original ID
Proof of your business address
Copy of your trust deed and authority letter
3 months bank statements
Copy of your business’s certificate of incorporation
Your latest month’s invoices to be used as proof of trading
An original stamped statement from the bank

How To Do Small Business VAT Registration

After you have prepared all the necessary documents, you can proceed to VAT registration:

Log in to your account at www.sarsefiling.co.za to use the South African Revenue Service’s eFiling portal. Create an account if you don’t already have one by following the instructions.
The “Manage Tax Types” section contains “VAT Registration.” Click this to get started.
Provide accurate information about your business, turnover, and bank account on the VAT101 form.
The VAT registration application should be reviewed carefully once it has been filled out and submitted to SARS by clicking on “Submit”.
Your application will be reviewed by SARS and additional information may be requested if necessary. Your VAT registration number and certificate will be sent to you once you have been approved.

What Are The Benefits Of Registering For VAT In South Africa?

In the event that you purchase goods from another company that charges this tax, SARS will refund this tax to you.
A company with a verifiable VAT number is preferred in the sending of quotes and invoices by large companies.
When a business has a VAT number, it is eligible to apply for tenders and contracts, especially from the government.
By gaining a license, your business will become more reliable and trustworthy to potential customers.

Responsibilities Of VAT-Registered Businesses

Businesses that register for VAT take on a number of duties. They must charge the proper VAT rate on their taxable supplies, provide VAT invoices to their consumers, and submit regular VAT reports to SARS.

Businesses are also required to preserve appropriate VAT records, which include invoices, receipts, and other financial documentation. SARS will analyze these records during tax audits.

VAT returns must be submitted on time, and any VAT payable to SARS must be paid right away. The due date for submitting the return and paying the remaining VAT is the 25th of the month after the end of the tax period. If the 25th falls on a weekend or public holiday, the deadline is the preceding business day.

Consequences for business that do not comply with VAT regulations

If a company fails to register for VAT or submits inaccurate returns, it may suffer penalties, fines, and interest charges on unpaid taxes. If a company knowingly evades VAT, it may face criminal charges and perhaps imprisonment.

Businesses must take their VAT obligations seriously and ensure that they are in compliance with the applicable legislation. Seeking professional counsel and support from a certified accountant or tax adviser can help you manage VAT compliance and duties more successfully.

How Does The VAT Liability Date Work?

Compulsory VAT Registrations

After the R1 million compulsory registration threshold has been exceeded, the SARS eFiling (RAV01) system only allows backdating for six months. You must visit a SARS branch with the necessary supporting documents (financial statements, signed contracts, invoices, etc.) if the backdating is more than six months from the date the compulsory registration threshold was exceeded.

Voluntary VAT Registrations

Based on the date of application, the VAT liability date will be determined. It is not possible to backdate a voluntary registration. You must provide SARS with the necessary supporting documents if you wish to backdate your voluntary registration application.

Cancel VAT Registration

If all business activities have ceased, or if the value of taxable supplies falls below the R1 million limit, you may apply to cancel your Value Added Tax (VAT) registration. VAT registrations can be canceled only if the Commissioner is satisfied that your taxable supplies do not exceed R1 million or if the business has been discontinued.

It is your responsibility to notify South African Revenue Service (SARS) of the closure of your business within 21 days. As long as your business was registered as a vendor, it will be liable for any outstanding VAT debts.

FAQs

What is the VAT system in South Africa?

Taxes on value-added goods and services are commonly referred to as “VAT”. The term should not be confused with “Income Tax”. Suppliers and vendors in the economy add value to goods and services through VAT. VAT-registered South African companies are required to charge an additional 15% on their prices.

Do I need to register for VAT if I run a small business?

When a ‘person’ (a company, individual, partnership, trust fund or municipality) makes (or is expected to make) more than R1 million with their ‘enterprise’ in a tax year, they must register for VAT. This basically applies to any business activity, regardless of whether they sell goods or provide services.

Can you tell me how long it takes to register for VAT in South Africa?

Your profile will be activated within 48 hours if you register through the SARS eFiling system. In the event that it takes longer than that, you should contact SARS as soon as possible. Otherwise, manual registration can take up to ten days.

Final Words

For your returns to be accurate, it’s crucial to have a good process and professionals on hand to assist you. If you are just registering for VAT, we recommend opening a savings account. After you have established this dedicated savings account, set up a weekly transfer of funds. As a result, you will have saved enough money to cover most of your VAT obligation. Maintain accurate records, consult with professionals, and stay up-to-date on South Africa’s VAT regulations. Moreover, you can calculate VAT with our VAT calculator in South Africa.