Welcome to our guide on how to calculate VAT (Value Added Tax) in South Africa. VAT is a tax added to the price of most goods and services sold in South Africa. Currently, the VAT rate in South Africa is set at 15%.
When do I need to calculate VAT?
If you run a business or are self-employed, you must calculate VAT when you sell goods or services that are subject to VAT. This means that if you are registered for VAT, you will need to add 15% VAT to your selling price and then pay this VAT over to SARS (South African Revenue Service).
How to calculate VAT
The calculation of VAT is relatively simple. To calculate VAT, you need to know the selling price of the goods or services you are selling.
Example:
If you sell goods for R500, you need to work out the VAT payable on this amount. To do this, multiply the selling price by the VAT rate.
Selling Price: R500
VAT Rate: 15%
VAT Payable: R75 (500 x 15%)
Total Amount Payable: R575 (R500 + R75 VAT)
Zero-rated goods and services
Some goods and services are considered to be zero-rated for VAT purposes in South Africa. This means that VAT is not charged on the sale of these goods or services, but you can still claim input VAT on your purchases.
Exempt goods and services
Exempt goods and services are not subject to VAT. Unlike zero-rated goods and services, you cannot claim input VAT on exempt goods or services.
How to register for VAT
If you run a business or are self-employed, and your VATable turnover exceeds R1 million per year, you are required to register for VAT with SARS. If your VATable turnover is less than R1 million per year, you can choose to register voluntarily for VAT.
To register for VAT, you need to complete the VAT101 form and submit it to SARS.
Conclusion
Calculating VAT is an essential part of any business that sells goods or services in South Africa. Understanding how to calculate VAT correctly can help you to avoid any penalties or fines from SARS. Remember, if you are unsure about how to calculate VAT or whether you need to register for VAT, seek professional advice.
