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Don't know how to levy Vat on imported services? We'll show you how

by , 09 July 2014
The definition of imported services, which is in Section 1 the Vat Act is quite complex. So the simplest way to describe what an imported service is to say:

It's a service supplied by a non-resident (i.e. not a SA resident) to a South African resident who won't use these services for making taxable supplies - for example, exempt supplies or for private use.

If you deal with imported services, you must levy Vat correctly, because failure to do so, results in hefty SARS penalties.

Since that's a risk you can't afford to take, continue reading to find out how to correctly levy Vat on imported services.

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Levy Vat when it comes to imported services as follows

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

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

Sound confusing?

Here's an example of how you must levy Vat when it comes to imported services:

Let's say Big Bucks Bank, a South African bank, contracts an IT expert from the UK to attend to the programming for their loans division. The expert charges the bank R50 000 for his service.

Since Big Bucks Bank is using the services in their Vat exempt division, they have to calculate Vat at 14% on the R50 000 and pay the corresponding amount to SARS on a Vat 215 form.

It's that simple.

Knowing how to correctly levy Vat on imported services will help you avoid harsh SARS penalties.

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