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Keep THIS document to substantiate your decision to zero-rate foodstuffs

by , 18 June 2014
A zero-rated supply is a supply of goods or services that the Vat Act allows you to make with Vat at 0%.

When it comes to foodstuffs, SARS requires you to keep certain documents to support your decision to apply the zero-rate.

If you don't have the right documents, SARS will see the zero-rated invoice as a standard-rated one and will deem the amount to include Vat at 14%. What's more...It'll charge you additional penalties and interest.

Don't let this happen to your business.

Make sure you keep the following document to substantiate your decision to zero-rate foodstuffs.

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To avoid penalties, back up your decision to zero-rate foodstuffs with THIS document

The best way to outline the document you must keep when you zero-rate foodstuff is to provide an example.

So let's say, Cheapest Supermarket (a Vat vendor) sells the following zero-rated foods:

  • Brown bread (according to certain specs);
     

  • Brown bread flour – but not bran;
     

  • Dried beans;
     

  • Dried mealies;
     

  • Edible legumes and pulses;
     

  • Eggs;
     

  • Fresh or frozen fruit and vegetables;
     

  • Lentils;
     

  • Maize meal;
     

  • Milk, cultured milk, milk powder and dairy milk blend;
     

  • Rice;
     

  • Samp;
     

  • Tinned or canned pilchards;
     

  • Vegetable oil – excluding olive oil.

Cheapest Supermarket then decides to programme its cash registers to identify these foodstuffs and not levy Vat at 14% on these. It indicates this by a '∞' next to the amount on the till slip.

At the end of the tax period, the supermarket finds that its zero-rated sales amount to R200 000.

What must happen now?

Cheapest Supermarket must keep the following document to back up its decision to apply the zero-rate on foodstuffs:

  • A supplier's copy of the zero-rated tax invoice – Cheapest Supermarket's till slips qualify as tax invoices and they issue a till slip to every customer. This will be easy for them since their system is programmed to retain copies of all till slips issued.

So how do you deal with the zero-rate of foodstuffs on your Vat return?

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If you apply the zero-rate on foodstuffs, deal with it as follows on your Vat return

If you use the above example, Cheapest Supermarket will have to write the amount of R200 000 in block 2 of the Vat return.

There you have it. Knowing the type of document you must keep to substantiate your decision to zero-rate foodstuffs will save you from SARS penalties.

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