Exempt supplies are completely excluded from the VAT scope. This means you don't pay or claim VAT on these items.
But unfortunately it's not as simple as it sounds!
I know most VAT vendors get easily confused by the complexity of exempt supplies when it comes to VAT.
That's why I'm writing to you today. Here are six very important lesser-known facts you may not be aware of when it comes to exempt supplies...
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60% of VAT vendors get their VAT on exempt supplies wrong!
SARS knows the main problems many VAT vendors have with exempt supplies. These include:
· Not knowing what goods/services are exempt;
· Not understanding the difference between zero-rated goods and exempt supplies; and
· Not knowing how to levy VAT correctly on mixed supplies.
Don't be a statistic!
Tackle the problems of exempt supplies by turning to your Practical VAT Loose Leaf
. We've just updated it with the new 14 exempt supplies and detailed explanations on how to deal with the VAT on each.
Get your copy here
Six things you need to know about VAT exempt supplies
As a VAT vendor, you need to know what exempt supplies are and how to treat them correctly for VAT. If you don't, SARS will fine you 10% and up to 200% additional tax penalties for trying to claim input tax when you shouldn't.
#1: They're similar to supplies made by non -VAT
vendors, which aren't taxable.
#2: If you make an exempt supply, you can't claim an input tax
deduction on related expenses of goods or services.
Read on for the next four items you need to know about…
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Six things you need to know about VAT exempt supplies cont…
#3: Exempt supplies don't form part of your taxable turnover.
#4: If you only make exempt supplies, you can't apply for registration as a vendor as you don't qualify as one.
#5: An exempt supply doesn't need special documentary proof as you won't make any tax
#6: There are now 14 exempt supplies. It may seem easy enough, but De Beers got it wrong and paid over R29 million to SARS for this mistake.
To get a full list of the 14 VAT exempt supplies and how to treat them correctly for VAT click here
Always remember this golden rule when it comes to exempt supplies: There's no output tax
, no input tax
and no tax
invoices. Tax doesn't apply at all in this case. Unless, you make both exempt and taxable supplies. Then the rules change. Here's what you need to do.
Don't get caught out treating your exempt supplies incorrectly for VAT. I have a simple guide
with step-by-step details you can use to keep SARS off your radar. Get your hands on it here.