Take this quick quiz and answer Yes/No.
• Charging 14% VAT on your direct exports? Yes/No
• Claiming 14% VAT on international air travel? Yes/No
• Not charging VAT on services you supply in another country? Yes/No
• Charging VAT at 0% on your financial services fees? Yes/No
• Not charging VAT on commercial accommodation? Yes/No
• Not declaring VAT on fringe benefits like a company car your employee drives? Yes/No
If you answered yes to any of these questions, you're making one of the biggest mistakes in VAT!
These are just six of the most common mistakes VAT vendors in South Africa are making. They don't know which supplies to charge VAT on and which not to. And once SARS catches you out, they won't hesitate to slap you with a 10% fine and issue harsh penalties of up to 200% in additional tax.
I don't want this to happen to you. So read on for three steps you must take to work out if you should charge VAT on a supply or not, and at what rate.
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What do you do when you realise you've made a mistake on a past VAT return?
The way I see it you have 2 options:
1. Keep quiet and hope SARS never finds out – but if they do, you'll face prosecution for breaking the tax laws; or
2. Follow our legal advice to correct it – and work together with SARS to get into their good books.
I think the choice is clear. Here's what we advise?
Three steps to work out if you need to charge VAT
Always look at your VAT status as a seller or supplier. If you registered for VAT, your sale or service is a taxable supply and you must charge VAT on the transaction.
Ask yourself if your supply is an exempt supply.
Exempt supplies have no VAT charged on them. They're completely excluded from the VAT scope. This means you don't pay or claim VAT on these items.
Exempt supplies are listed in Section 12 of the VAT Act
. They include supplies like crèche fees and staff transport costs. You can find the updated list and detailed explanation of all 14 exempt supplies in the Practical VAT Loose Leaf Service.
If your supply is exempt from VAT, don't charge VAT. If your supply isn't listed as an exempt supply, read on for the next two steps.
Read on for the final two steps…
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Finally! Avoid the SARS VAT traps that cost businesses millions
Did you know that putting a zero on your VAT return could trigger an unnecessary VAT audit?
It's true! And that's not all! There are seven other things you could be doing that trigger these audits. SARS has set up its computers to immediately flag you when you do it.
Don't get caught out. Find out about all the SARS VAT traps you should avoid from an ex-SARS auditor.
Only at the VAT Masterclass.
Three steps to work out if you need to charge VAT continued…
Work out if your supply is a zero-rated supply.
Zero-rated supplies are goods and services like certain books, furniture and domestic air travel. There are 46 supplies that can be zero-rated.
If your supply is zero-rated, you need to apply VAT at 0%, and show this on your invoice.
Work out if your supply is standard-rated.
The general rule is that all goods or services will be standard-rated unless they're specifically zero-rated or exempt from VAT
For a standard-rated supply, you need to charge VAT at 14%.
Now that you know when to charge VAT, you need to make sure:
You issue tax invoices that meet all eight of SARS' requirements for a valid tax invoice;
Submit your VAT return correctly so you can avoid a VAT audit; and
Claim every single input tax deduction available to you and boost your cash flow.
We give you a detailed guide, practical tips, steps and examples to follow, to do all this correctly in the latest edition of the Practical VAT Loose Leaf Service.
At this year's VAT Masterclass
workshop, ex-SARS auditor Dee Bezuidenhout will give you the inside scoop of 7 other common VAT mistakes vendors make that will trigger your next VAT audit. Book your seat now and make sure you never make another VAT mistake again.