The South African Revenue Service (SARS) has confirmed that it is ready to implement the increase in Value-Added Tax (VAT) announced in the February 2018 budget.
With the VAT rate set to increase from 14% to 15% from 1 April 2018, the tax service said it has implemented a number of measures to ensure that the transition happens as smoothly as possible.
“SARS teams have been working on changes to the systems which are used to receive VAT declarations made by vendors and calculate any VAT refunds or VAT due to SARS. Changes to the VAT201 form have been made to reflect the increase in the VAT rate,” it said in a statement on Tuesday.
SARS added that any vendors who use its eFiling platform to submit their VAT return, and have saved returns that span periods before and after 1 April 2018, will notice that those saved returns have been removed as they contain incorrect VAT rates.
These Vendors must request a new VAT201 on eFiling, it said.
“SARS would also like to urge vendors to update their systems to align to the new VAT rate in preparation for 1 April 2018.
“This will minimise confusion for the customer and make it easier for vendors to remain tax compliant and make the correct declarations to SARS.”
SARS has set up a dedicated VAT-rate email address to which vendors can direct their questions and queries.
Its legal counsel has also outlined some of the most frequent questions and answers it had received ahead of the VAT increase. In addition SARS has released a pocket guide, breaking down important issues.
You can find some of the most important issues outlined below.
Who must register?
- A vendor making taxable supplies of more than R1 million per annum must register for VAT.
- A vendor making taxable supplies of more than R50,000 but not more than R1 million per annum may apply for voluntary registration.
- Certain supplies are subject to a zero rate or are exempt from VAT.
How will the increase affect me if I am a VAT vendor?
- Generally, the change should be fairly neutral if you only make taxable supplies as the increased rate of VAT will be charged to your customer and your additional VAT expenses can generally be claimed as input tax.
- However, if you also make exempt or other non-taxable supplies, the increased VAT may become a cost to your business if it cannot be claimed as input tax or the VAT charged is specifically denied as input tax.
How do I know which date to use as the transaction date for purposes of determining the VAT rate to be charged?
The VAT rate to apply depends on the time of supply rules.
In simple terms, this is the date on which the transaction is deemed to occur according to the VAT Act. The general time of supply rule is the earlier of when:
- An invoice is issued; or
- Payment is received.
For most transactions the general time of supply rule will apply. However, some transactions have special time of supply rules. Some examples include supplies between connected persons, fixed property transactions and supplies made under installment credit agreements.
- Vendors may generally recover the price increase as a result of the increase in VAT rate from their customers.
- However, the increase cannot be recovered if there is a specific agreement with the customer in writing that the price cannot be increased as a result of a VAT increase.
- Vendors must therefore review existing agreements and those relating to offers accepted before 1 April 2018. Customers and potential customers should be informed of the increase in the total contract price as a result of the increase in the VAT rate (where applicable).
- All prices advertised or quoted by vendors for taxable supplies must include VAT at the standard rate (unless the supply is zero-rated).
- Vendors must state that the price includes VAT in any advertisement or quotation, or the different elements of the total price must be stated. That is, the total amount of VAT, the price excluding VAT and the price inclusive of VAT.
- Vendors must therefore check that all price tickets, labels, quotations, advertisements, etc., reflect the new VAT rate of 15% from 1 April 2018.
- As a practical arrangement, the Commissioner for SARS has granted permission under proviso (iii) in section 65 of the VAT Act for a vendor to display a notice that the price does not include VAT at the new rate of 15% and prices will be adjusted at the point of payment.
Receipt of quotes, tax invoices, register slips, and debit & credit notes
- Check that any quote received on or after 1 April 2018 correctly reflects the new VAT rate of 15%, and that the total price (including VAT) is correctly calculated before accepting the quote.
- Remember that an input tax claim must be supported by documentary evidence, so you should check that the amounts on cash register slips and tax invoices received on or after 1 April 2018 have been correctly calculated based on the VAT rate of 15% (subject to certain exceptions) before claiming the VAT on your VAT201 return.
- In cases where tax invoices issued on or after the rate change show VAT charged at 14%, you can only claim input tax at that rate. You therefore need to contact the supplier if an incorrect VAT rate is reflected on a document, or the amount is incorrectly calculated.