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Did you know: These two supplies form the core of your company's taxable supplies?

by , 02 May 2014
SARS often slaps newly registered Vat vendors with penalties for getting Vat wrong. And the biggest reason these vendors get it wrong is they don't fully understand what taxable supplies are. Don't make the same mistake. Continue reading to find out about the two supplies that form the core of taxable supplies so you can avoid SARS penalties.


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What is a taxable supply?

Before we get to the two supplies that form the core of taxable supplies, let's check out what a taxable supply is.

The Practical Vat Loose Leaf Service says 'a taxable supply is any supply of goods or services you make in the furtherance of your enterprise, business or service'.

A taxable supply has Vat charged at either:

  • The standard rate (14%); or
  • The zero rate (0%).

And that's where the two supplies that form the core of taxable supplies come in.

Standard-rated and zero-rated supplies are the core of taxable supplies

Let's a closer look at both of them…


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What you need to know about standard-rated supplies so you can get them right

The following supplies are standard-rated and have Vat imposed at 14%:

  • All supplies of goods or services made in South Africa, unless they are specifically zero-rated or exempt; and
  • Imports of certain goods and services.

Here's a practical example of how you would treat standard-rated supplies:

Mr K imports beds from Germany. The beds arrive in Durban harbour and Mr K now has to enter those goods for consumption in South Africa. To do this, he first goes to Customs and in addition to customs duties being payable, Vat at 14% will be levied on the value of the import.

Now let's take a look at the second important part of taxable supplies: Zero-rated supplies.

Here's what you need to know about zero-rated supplies

Experts at FSP Business say zero-rated supplies are supplies that output tax is charged on at 0%.

Here's an example of how you must handle zero-rated supplies:

'The Jewellery Shop', a Vat-registered shop in Centurion, receives an order from Dubai for 50 gold bracelets. Due to the high value of these items, Mr B, owner of 'The Jewellery Shop', will take the goods to Dubai himself.

When 'The Jewellery Shop' bought these bracelets for its stock, it paid Vat thereon and claimed the input tax. Now 'The Jewellery Shop' will charge Vat at the zero rate on the sale of these bracelets to Dubai as they will be exported.

There are a variety of supplies that fall under this category. To get a list of all zero-rated supplies, checkout the Practical Vat Loose Leaf Service.

The bottom line: These two supplies – standard-rated and zero-rated – form the core of taxable supplies. Knowing this important fact moves you a step closer to getting Vat right and avoiding SARS penalties.

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