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What is a zero-rated supply?

by , 27 August 2015
One of our members on the AccountingandTaxClub.co.za clubsite recently asked us this question. And it's interesting to note how many people weren't actually sure of the answer.

It's important for you to know what a zero-rated supply is. Because, if you declare a zero-rated supply, when it isn't one, SARS will make you fork out 14% Vat. And good luck trying to get that Vat from your client!

So to avoid this, I'm going to tell you what a zero-rated supply is, and the consequences of getting it wrong.

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60% of Vat vendors get their zero rating wrong!
 
SARS knows the main problems many Vat vendors have with zero rating. These include:
  • Not knowing what goods/services are at the zero rate;
  • Not knowing how to levy Vat correctly on zero-rated goods;
  • Not understanding the difference between zero-rated goods and exempt supplies;
  • Not having the correct documentation to prove the zero rating to SARS; and
  • Not knowing the one mistake you can make to lose your zero rating when exporting goods.
Don't be a statistic!
 
Tackle the problems of zero-rated Vat today with this one tool!
 
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The definition of a zero-rated supply
 
This is a supply of goods or services the Vat Act allows you to make with Vat at 0% (Section 11 of the Vat Act).
 
Where usually, you'd add on 14% Vat to your price, some supplies, are at the zero rate. So with zero-rated supplies, you don't add an additional amount to the purchase price. So, technically Vat is nil.
 
And there are 46 supplies you charge Vat on at the zero rate. These consist of 24 goods and 22 services.
 
SARS has a specific list which shows just what items it allows you to charge or buy at the zero rate! Click here to find out how to get your hands on the full list of zero-rated supplies and all the documents you need to substantiate this.
 
Now, let's look at the documents you need to prove your zero-rating.
 
 
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Declaring zero-rated supplies on your Vat return is an immediate trigger for a SARS Vat audit
 
If you deal with:
  • Direct exports;
  • Petroleum, diesel or illuminating paraffin
  • Agriculture;
  • Mining;
  • Goods temporarily admitted into South Africa; and
  • Foreign goods or services…
Zero-rated Vat affects you and you 'will' trigger a Vat audit!
 
But you don't have to worry. Here's how to prove your zero rating is correct…
 
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What are the penalties for getting zero rating wrong?
 
When you charge Vat at the zero rate, you must prove to SARS you were entitled to do so! Do this by having all your documentary proof 100% correct.
 
If you don't have all your documents, or if SARS finds you took a taxable supply as a zero-rated one, it will see the zero-rated invoice as a standard-rated one. It will deem the amount to include Vat at 14%. Plus, it will charge you additional penalties and interest.
 
So you'll end up losing money, as you're out of pocket by the 14% Vat, penalties and interest you must now pay extra.
 
Don't let this happen to you. Here's a comprehensive guide to zero-rated Vat.

P.S. Our Vat Guru Dee Bezuidenhout, is discussing the 2015 changes to zero-rated Vat at the Vat Masterclass in October. Make sure you know what they are so you can comply with the updated regulations. Book your seat here.


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