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'My business provides partly taxable supplies as well as exempt supplies. Can I register for Vat?'

by , 09 February 2015
One Vat registration question that comes up all the time is whether or not vendors who provide taxable and exempt supplies should register for Vat.

Keep reading to find out the answer so you can avoid an R80 000 fine or two years in jail.


Wondering if you should register for Vat if you provide partly taxable and partly exempt supplies? Here's the answer
 

It's easy to understand why there's confusion when it comes to vendors who make taxable and exempt supplies.
 
After all, the Vat Act says businesses that render exempt supplies aren't enterprises and can't register for Vat. This even if their turnover is more than R1 million in a 12-month period.
 
Note: Exempt supplies are the following:
 
  • Supplying financial services (such as loans, life insurance, levying of interest);
 
  • An association not for gain which supplies donated goods;
 
  • Letting of residential accommodation, including supplying staff housing;
 
  • Activities of political parties and bargaining councils;
 
  • Supplying leasehold land for residences;
 
  • Supplying land that's outside of South Africa;
 
  • Levies paid to a body corporate of a sectional title company, a share block company, home owners association or to a retirement village;
 
  • Road and rail transport to fare paying passengers;
 
  • Supplying educational services;
 
  • Supplies by a trade union; and
 
  • Services of caring for children in a crèche or an afterschool care centre.
 
This leaves vendors wondering where they stand if they deal with taxable and exempt supplies.
 
The simple answer is, if your business renders partly taxable and partly exempt supplies, you CAN register for Vat for the taxable part.
 
Here's an example to clarify this…
 
*********** Best seller ************
 
Are you willing to wait more than 6 months for Vat registration?

SARS has confirmed that the minute you've applied for Vat registration, you must start charging Vat. Otherwise, and the amount you've charged your customers will be regarded as being inclusive of Vat. And the Vat will come out of your pocket...

You can rely on our experts and take advantage of their experience with SARS! Learn how to stand up for your rights! The A-Z of Vat Registrations e-report will give you that.
 
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Here's an example to clarify how Vat registration works when it comes to partly taxable and partly exempt supplies

 
ABC Cash Loans provides small loans to clients. In addition to the interest it charges clients, the clients have to pay an administration fee.
 
This means, the income ABC gets is partly exempt from Vat, i.e. the repayment comes with interest. Its income is also partly taxable, i.e. the admin fee. So if the total admin fees exceed R50 000 in a 12-month period, ABC can register this portion of its business for Vat. It must also register if it exceeds R1 million.
 
Now that you know you must register the taxable part of your business if you provide partly taxable and partly exempt supplies, comply with Vat law. And remember, you can't get away with avoiding or failing to register
 
Any person who is liable to register for Vat but fails to do so is guilty of an offence. You'll face an R80 000 fine or two years in jail. And you'll have to pay the Vat your company owes.
 
PS: For more on Vat registration, check out The A-Z of Vat Registrations. It contains:
 
  • 11 tips for an easy Vat registration;
  • Five golden rules for Vat registration;
  • The steps to take when you fill in your VAT101 form; and
  • So much more.
 


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