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Deal with imported services? Here's how to levy the Vat

by , 04 September 2013
The Vat Act says that you must charge Vat on the imported services. Get this wrong and you can be sure SARS will pick it up and slap you with penalties. Don't be found wanting. Here's how you must charge Vat on imported services.

An imported service is a service that's supplied by a non-resident (not a South African resident), to a South African resident who will then use these services for exempt or non taxable supplies.

It's important to note that the services are imported services only to the extent that they're acquired for exempt or private use. Thus, the value of imported services is the value of the portion of the services which are acquired for non-taxable purposes, explains the Practical Vat Loose Leaf Service.

There are Vat consequences that come with imported services.

Discover how to levy Vat on imported services

According to the Practical Vat Loose Leaf Service, the South African resident/business/enterprise that acquires the services of a non-resident and uses those services for exempt or non taxable supplies levies the Vat.

He/she must then calculate Vat at 14% on the value of the services and pay it over to SARS on a Vat 215 form.

 Confused? Here's how this works: Let's say Big Bucks Bank in SA, contracts an IT expert from the UK to do to the programming for their loans division.

He charges the bank R50 000 for his service. Since Big Bucks Bank is using the services in their Vat exempt division, they now have to calculate Vat at 14% on the R50 000 it paid the expert. And then it has to pay the corresponding amount to SARS on a Vat 215 form.

Why does the law make provision for this?

The aim of subjecting imported services to Vat is to ensure the Vat consequences are the same whether services are acquired from a South African vendor under a taxable supply, or from a foreign supplier.

Knowing how to levy Vat on imported services will ensure you comply with the Vat Act.

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