Six points to remember about exempt and zero rated supplies
#1: You must differentiate between exempt and zero-rated supplies as you go along.
The Practical Vat Loose Leaf Service says exempt supplies are supplies that are exempt of tax. There's no output tax, no input tax and no tax invoices. Tax doesn't apply at all in this case.
Zero-rated supplies on the other hand are supplies that output tax is charged on at 0%. You can claim input tax and tax invoices issued must show Vat at the zero rate.
#2: You must show standard-rated supplies in block 1 or 1A of the Vat return, and the Vat payable in blocks 4 or 4A. You must show exempt accommodation in blocks 6 and 7.
**************Hot off the press**************
Declaring zero-rated or exempt supplies on your Vat return is an immediate trigger for a SARS Vat audit
SARS knows many Vat
vendors confuse exempt and zero-rated supplies. And if you declare an exempt supply, as a zero-rated one, SARS will think you're abusing the system!
But don't despair, we'll show you the difference between exempt and zero-rated supplies.
And you'll walk away knowing you've done everything correctly when it comes to zero-rated Vat
Get your hands on the Guide to Zero-Rated Vat
But that's not all you need to remember about exempt and zero rated supplies
#3: You must show zero-rated supplies in block 2, but no output tax is payable.
#4: Your exempt supplies must be shown in block 3 of the Vat return, but no Vat is payable
#5: Financial services which are usually Vat exempt, are zero-rated when supplied to a non-resident.
#6: Passenger transport by road or rail which is usually Vat exempt is zero-rated when it involves international travel.
There you have it. Keeping these points in mind will help ensure you deal with exempt and zero rated supplies correctly and avoid harsh penalties.
If you want to find out more about exempt and zero-rated supplies, be sure to check out this article. It contains a detailed breakdown of the differences between the two.