I recently wrote to you about when you must register for Vat or face back-dated penalties from SARS.
But did you know you don't always have to register for Vat?
Since reading my article, many business owners have told me they don't actually want to register for Vat!
So if you're like them, I've got some good news for you. Not everyone becomes liable to register. Read on to find out if you meet one of the five criteria where you're excluded from registering for Vat...
Even if you reach R1 million in turnover in any twelve month period, your supplies won't be seen to meet the Vat registration threshold if it's because:
1. You're ceasing to operate
Let's say you're a non-Vat vendor and decide to shut down your business.
In closing down, you sell off stock on hand at half price, pushing your turnover above the R1 million threshold. But, as you're ceasing to operate, you don't have to register for Vat.
2. You're substantially reducing the scale of your enterprise
The markets change all the time and where there's no demand, you won't need to make any supplies in that area. So let's say you no longer supply a certain mechanical part as the industry has moved onto a new technology. You sell off the parts because you no longer need them.
Although the selling price pushes the value of your supplies to over the R1 million threshold, you don't have to register for Vat because you're downscaling your operations.
3. You're replacing plant or other capital assets in the enterprise
This is when you decide to sell your old assets so you can replace them. Don't count whatever you earn on the sale of your old assets towards your taxable supplies, because you intend to replace your assets.
Vat registration has never been this easy!
Do you know:
When you're eligible to apply for Vat;
How to correctly fill in your VAT101 form;
What supporting documents you need to apply; and
Your Vat responsibilities while waiting for your Vat number?
We'll give you answers to all this and more. Click here…
4. There are abnormal circumstances of a temporary nature
Don't take into account activities you carry on as a hobby.
For example, a great friend of mine makes the most exquisite goodies for old Kawasaki's. As he does this as a hobby - a temporary circumstance, the Vat Act doesn't see this as the carrying on of an enterprise.
Be careful. This instance applies only if the SARS Commissioner is satisfied with your explanation of the circumstance!
5. You're making exempt supplies
If you're making supplies like providing education or public transport, these aren't regarded as taxable supplies. So don't take this into account when calculating your Vat threshold.
But, there are three important rules to remember about exempt supplies. And there are different processes to follow to levy Vat correctly. Simply consult your Practical Vat Loose Leaf
now for everything you need to know to deal with your Vat affairs correctly.
There you have it. Now you know if the Vat law expects you to register for Vat or not.
But I must warn you, if you charge Vat when you shouldn't, you could be prosecuted as a criminal! So make sure you know the A – Z of Vat Registrations
, so you're never on the wrong side of the law.