And this means you must adhere to your Vat duties.
Here are the Vat responsibilities of a farmer…
According to the Practical Vat Loose Leaf Service, if your enterprise is farming and your gross income in a 12-month period is more than R1 million, you're legally liable to register for Vat as a vendor.
The Loose Leaf adds that if standard-rated supplies (for example, wheat) and zero-rated sales (for example, vegetables) amount to more than R1 million, you must register as a vendor.
If you're starting or have started with a farming activity where you're continuously or are regularly carrying on the activity, but, because of a long development phase, will only receive income after a period of time, you can still apply for registration as a Vat vendor.
Here's an example: James begins cultivating peach orchards. He has tremendous start up and maintenance costs and he'll only receive income from the peach trees when they mature and bear fruit several years down the line.
James can still register for Vat from day one, as he'll eventually receive income. He'll also be entitled to claim all his input tax from the first day and will only show his output tax when he actually sells the peaches.
What happens after you've registered for Vat as a farmer?
Be warned: If your annual farming income in a 12-month period goes above R1.5 million, you must notify SARS and request that your tax period be changed to a two-monthly one.
The onus is on you to do this. Don't wait for SARS to make this change.
If SARS makes the change, it'll do so back-dated to the point where you exceeded R1.5 million (they check this on your financial statements). And this means SARS will raise penalties and interest at 10%.
What about zero-rated supplies?
The sale of many farming supplies is zero-rated. These include:
Some of the inputs you can claim, but may not be aware of, include: