VAT SIMPLIFIED - HOW TO GET A VAT REFUND

What is VAT?

 

VAT is an indirect tax on the consumption of goods and services in the economy. Revenue is raised for the government by requiring certain businesses to register and charge VAT on the taxable supplies of goods and services. These businesses become vendors that act as an agent for the government in collecting the VAT.

 

Companies registered as a VAT vendor must levy a VAT amount (currently 15% for standard-rated supplies) on services rendered or goods sold.

 

Input and Output VAT

 

These are two aspects of VAT that is to be clarified when dealing with your VAT Liability to SARS on your vat returns.

 

Output VAT – is the VAT amount levied on goods or services provided to your clients, example; if you charge the client R200 for services or goods, you now charge the client R230 (R100 + 15%), the output VAT charge is R30.

 

Input VAT - is the VAT amount levied on goods or services that the company purchased as part of business operations, example; if your company buys stock from a supplier in order for you to resell, and for instance the supplier charges you VAT on the sale of goods supplied, you purchased the goods at R115 and R15 (15%) is the VAT amount charged to you, the input VAT is R15.

Calculating your VAT liability,

 

Using the figures mentioned above, the VAT liability will be calculated as follows:

 

Output VAT:              R30 (from sales to pay SARS)

Less Input VAT:        R15 (for purchases to claim from SARS)

 

Tax Liability:             R15 (R30 – R15)

 

The output VAT is greater than the input VAT resulting in R15 VAT payable to SARS.

 

 

VAT payable amounts are only paid once VAT returns (VAT 201) are filed once a month, once in 2 months, once in 6 months, or once a year, depending on the nature of business, the period you are selected for will show on your notice of VAT registration.

It’s important to understand, that when you charge a client VAT on a sale, the VAT charge remains in your company’s bank account until the VAT201 is filed and then becomes payable. While the VAT amounts remain in the bank account, the VAT system allows you to reduce the VAT payable by deducting input VAT, on purchases (business related) that you are charged VAT on, and then paying over the difference as shown in the calculation example above.

If input VAT exceeds output VAT, SARS then refunds the difference to the business.

 

 

VAT Exempt and Zero-rated Supplies

 

Some goods are either Zero Rated or Exempted from VAT.

 

Example of Zero-Rated goods are, Brown Bread, Samp, Mail Meal, Milk and other basic foodstuffs such as Fruit and vegetables. (See VAT guide – VAT 404)

 

Example of exempted supplies are financial services, public transport. residential accommodation, educational services, and others. (See VAT guide – VAT 404)

 

Note that zero rated supplies have 0% VAT but still form part of the VAT calculation, however if you company only makes exempt suppliers, you are unable to register for VAT as it would make no difference. however, if your business supplies both Exempt supplies and zero rated (or with standard rated goods or services), then you may register for VAT.