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If you thought Vat doesn't apply to non-profit companies (NPCs) you're wrong!

by , 21 January 2015
There's a common myth that non-profit companies (NPCs) are exempt from Vat. You see, most people think since NPCs are exempt from income tax, they're automatically exempt from Vat as well.


The truth is, if your NPC meets certain criteria, you must register for Vat.

If you don't register for Vat when you're supposed to, you're committing a criminal offence. And will be liable to SARS penalties, fines and even jail time!

But there are different categories of NPCs and they don't follow the same rules for Vat registration as other organisations. I've simplified them for you below, so you can register your NPC for Vat correctly.

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Can all NPCs register for Vat?

The answer is both yes and no! Let me explain…

For Vat purposes, NPC's are split up into two categories - associations not for gain and welfare organisations

To know which rules apply to you, you first need to know which type of NPC you run.

Take this quick quiz to see what type of NPC you run

1. Is your organisation a PBO as approved by SARS for Income Tax exemption?
2. Does your NPC carry on activities under any of the following headings:
  • Welfare and humanitarian;
  • Health care;
  • Land and housing;
  • Education and development; and/or
  • Conservation, environment and animal welfare?

If you answered yes to question 1, but not question 2, you run an association not for gain. To register your assiciation not for  gain for Vat, you must have a trading turnover (not donations) of R50 000 in any 12-month period before you can apply. 

If you answered yes to both questions, you run a welfare organisation. You can register for Vat even if you have no trading turnover!

But if your turnover (not donations) reaches more than R1 million in any 12-month period, it's compulsory to register for Vat regardless of the type of NPC you're running!

Now that you know when you can register for Vat, read on to see why I think it's a good idea to register as soon as you meet the criteria.

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You could be losing out on massive input tax savings...

Just like any other vendor, business or person, your NPC has to pay Vat on your purchases and overheads. And if you're not Vat registered, you have no way of recovering the Vat. You could be losing out on massive input tax savings!

But if you register for Vat, you can claim back the Vat you pay as input tax. Much needed cash in your bank!

Here's how you can register with ease!

Four quick steps to register your NPC for Vat

1.    Determine if your NPC is an association not for gain or a welfare organisation.
2.    Fill in the VAT101 application form and go to SARS. Remember to take the supporting documentation they ask for.  
3.    Once SARS approves your registration, it will allocate you a Vat number starting with a 4.
4.    SARS will send you a letter stating the period when you need to submit your Vat returns.

Now you know how Vat applies to your NPC, you can stay on the tax man's good side. Keep looking out for more of my Vat tips.

P.S. Don't take up to six months to register for Vat! Here's how to do it the same day

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If you thought Vat doesn't apply to non-profit companies (NPCs) you're wrong!
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