VAT 101  – Some of the Requirements – Part 1 

By Nikki Viljoen – Viljoen Consulting (Pty) Ltd 

Please note that this pertains to South Africa VAT (Value Added Tax) and Best Practice requirements.

“Who here loves the VAT man?”  That is a question that I ask on a regular basis.  Sadly though, more often than not, mine is the only hand that goes up.  It is definitely a mindset that needs to be changed if we are to make the best use of the concessions that SARS (South African Revenue Services) gives us.

That said, here are a few tips in terms of what must be done regarding the VAT requirements.  

Obviously – number one on the list is that you have to be a registered VAT vendor in order for any of this to apply to you and if your turnover is a million or more per annum, then being a VAT vendor is compulsory.  You can, however, apply to become a ‘voluntary’ VAT vendor.

VAT has to be charged at the current rate which is 15% and of course, you have to make use of a valid ‘Tax Invoice’ and this has to be kept in terms of the correct retention period as promulgated by law.  That means that your documents must be archived and retained.

VAT must be charged for all services or products supplied by the vendor.  These services or products must be wholly or partly used for consumption in the course of making supplies or supplying a service that is taxable.  That means of course that if you buy a potato (as a basic foodstuff this does not attract VAT which means you cannot offset it), to make chips or mash or even a roast potato dish for your restaurant, you used the potato (but changed it in the cooking process) into your product and your product does now attracts VAT.

Going out for a meal with clients is called ‘entertainment’ and as such, you can claim it as a business expense, but you cannot claim the VAT on it, unless . . . 

If you or one of your staff are going out for a meal with a client and you (they) are out of town for longer than one night, you can claim the VAT back on this.  In fact, any meals taken by you and your staff, including alcohol, whilst you are out of town on business for a period longer than one night can have the VAT claimed for.

Normally, you cannot claim VAT for ‘office refreshments’, however, if you purchase refreshments for the delegates that you are training, then you can claim VAT on those refreshments.

As usual, it is about what you know and how you use it that will allow you to make the most of your relationship with SARS.  Next week we will have a look at a few more expenses that you can, in fact, claim the VAT back on.

Nikki is an Internal Auditor and Business Administration Specialist who can be contacted on 083 702 8849 or nikki@viljoenconsulting.co.za or http://www.viljoenconsulting.co.za