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Do you have to register your retirement home for Vat?

by , 20 August 2013
If you run a retirement home, then you need to continue reading this. The Vat act requires you to get the Vat treatment of your retirement home right. One wrong move could result in harsh penalties. Read on to find out when you have to register your retirement home for Vat so you can comply.

It's crucial that you comply with the Vat Act by registering your retirement home for Vat.

Find out when you must register your retirement home for Vat

If your retirement home's turnover for any period of 12 months exceeds R1 million, you must register as a vendor, says the Practical Vat Loose Leaf Service.

And if you carry on more than one retirement home, or a retirement home and another business, the R1 million threshold applies to you and all your businesses.

Keep in mind that if you don't know what your turnover will come to, you don't have to register as a vendor until it exceeds R1 million in a period of 12 months. This refers to any period of 12 months, not necessarily a calendar year or tax year.

Remember, if your retirement home consists of rooms occupied by elderly persons and a frail care unit, the all-inclusive charge for occupation and other services is subject to Vat at 14% on only 60% of the total amount.

For example, if the total amount charged is R6 000 per month, the Vat chargeable will be 14% on 60% of R6 000 (R3 600) = R504. Remember, you still claim input tax on the full amount.

What happens if you don't register your retirement home for Vat?

If you should registered, but haven't, you'll have to pay over the Vat you didn't charge, out of your own pocket.

For example, if your turnover was R2 million for the last 12 months and you didn't charge Vat because you weren't registered, you'll have to pay nearly R250 000 plus penalties.

You could also be liable for the following:

  • Additional tax of up to 200% of the Vat evaded;
  • A penalty of 10% interest on 1% of the Vat not paid each month; and
  • Additional fines and possible imprisonment.

Knowing when you must register your retirement home for Vat will ensure you comply with the Vat Act.

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