Tag Archives: SARS

VAT: The difference between standard-rated, zero-rated and exempt supplies

A2There are three categories of supplies that can be made by a VAT vendor: standard-rated, zero-rated and exempt supplies. Output tax must be levied on all supplies except exempt supplies. The VAT Act gives specific guidelines for zero-rated and exempt supplies but these fall outside the scope of this article. Please contact your tax practitioner for more information.

The following simplified formula is used to calculate the amount of VAT that a registered VAT vendor have to pay to SARS or can claim as a refund from SARS:

Output VAT levied on standard-rated and zero-rated supplies* – Input VAT claimed on qualifying expenses = Net VAT due to/(refundable by) SARS

* A supply is defined as the provision of a product or service by a VAT vendor in return for payment in cash or otherwise.

Standard-rated supplies

Standard-rated supplies are supplies of goods and services on which output VAT is levied at a rate of 14%. The input VAT incurred on purchases of goods and services to generate standard-rated supplies can be deducted from output VAT payable to SARS.

Example 1:

  1. XYZ Manufacturers manufactured inventories at a cost of R7 000 (VAT included).
  2. The inventories were sold for R10 000 (VAT included).
  3. All inventory sales qualify as standard-rated supplies.

Net VAT due to/(refundable by) SARS will be calculated as follows:

Output VAT levied on standard-rated supplies (R10 000 x 14/114) R1 228
Less: Input VAT on purchases to make standard-rated supplies (R7 000 x 14/114) (R    860)
Net VAT due to/(refundable by) SARS R   368

Zero-rated supplies

Zero-rated supplies are supplies of goods and services on which output VAT is levied at a rate of 0%. The input VAT incurred on the purchase of goods and services to generate zero-rated supplies can be claimed against output VAT payable to SARS.

Example 2:

  1. XYZ Manufacturers manufactured inventories at a cost of R7 000 (VAT included).
  2. The inventories were sold for R10 000 (VAT included).
  3. All inventory sales qualify as zero-rated supplies.

Net VAT due to/(refundable by) SARS will be calculated as follows:

Output VAT levied on zero-rated supplies (R10 000 x 0/114) R     nil
Less: Input VAT on purchases to make zero-rated supplies (R7 000 x 14/114) (R   860)
Net VAT due to/(refundable by) SARS (R   860)

Exempt supplies

Exempt supplies are not subject to VAT. No output VAT, either at 14% or at 0%, is levied on exempt supplies. Input VAT incurred on expenses to make exempt supplies cannot be claimed against output VAT due to SARS.

Example 3:

  1. XYZ Manufacturers manufactured inventories at a cost of R7 000 (VAT included).
  2. The inventories were sold for R10 000.
  3. All inventory sales are exempt supplies for VAT purposes.

Net VAT due to/(refundable by) SARS will be calculated as follows:

Output VAT levied on exempt supplies R nil
Less: Input VAT on expenses incurred to make exempt supplies (R nil)
Net VAT due to/(refundable by) SARS R nil

Combination of standard-rated, zero-rated and exempt supplies

Where a VAT vendor makes standard-rated supplies and/or zero-rated supplies and/or exempt supplies, input VAT must be apportioned in the same ratio as the three different types of supplies stand to each other.

Example 4:

  1. ABC Distributors made the following supplies for VAT purposes (VAT included where applicable):
Standard-rated supplies R  60 000   60%
Zero-rated supplies R  10 000   10%
Exempt supplies R  30 000   30%
Total supplies R100 000 100%
  1. Expenses incurred in the making of total supplies amounted to R85 000 (VAT included).

Net VAT due to/(refundable by) SARS will be calculated as follows:

Prorata Output VAT levied on standard-rated and zero-rated supplies[(60 000 x 14/114) + (R10 000 x 0/114)]

Output VAT on exempt supplies

  R7 368 

R      nil

Less: Apportioned input VAT on expenses to make standard-rated andzero-rated supplies [(R85 000 x 60% x 14/114) + (R85 000 x 10% x 14/114)]

Less: Apportioned Input VAT on exempt supplies

(R7 307) 

R      nil

Net VAT due to/(refundable by) SARS  R       61

Accounting software can be set up so that VAT is automatically recorded correctly for standard transactions. However, a computer programme will not be able to classify unique transactions for VAT purposes. Therefore it is still important that accounting staff is trained to handle VAT correctly, especially where grey areas exist.

If you would like more information about this topic, feel free to contact us for professional assistance and advice. 

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. 

Reference List:

  • VAT 404 – SARS Guide for Vendors

Provisional tax: Did you know?

A1Provisional tax payments is not a separate tax but pre-payments of income tax for a specific tax year. These pre-payments ensure that the tax load is spread over the tax year and can avoid a nasty surprise when SARS calculates (assesses) the final income tax liability for that specific tax year.

  • There are three provisional tax deadlines:
    –  Submission of the first provisional tax return (IRP6) is compulsory for provisional taxpayers even if no provisional tax is payable. Submission of the first IRP6 and payment of provisional tax (if applicable) is due within 6 months of the start of the tax year.
    –  Submission of the second provisional tax return (IRP6) is also compulsory for provisional taxpayers even if no provisional tax is due. Submission of the second IRP6 and payment of provisional tax (if applicable) is due within 12 months after the start of the tax year.
    –  Submission and payment (if applicable) for the third provisional tax return (IRP6) is voluntary. The due date for the third IRP6 depends on the date on which the tax year ends.
  • SARS provides guidelines to assist taxpayers in estimating the amount of provisional tax due.
  • If provisional tax was overpaid, the excess amount will be refunded to the taxpayer with interest. However, SARS will do the refund only after the final income tax liability for that tax year has been calculated (assessed) by SARS and the amount of the final income tax liability is less than the sum of the provisional tax payments for the relevant tax year.
  • Underpayment of provisional tax will result in the imposition of (avoidable) penalties and interest by SARS.

If you need professional assistance with the calculations, submission or payment of any of the above returns or would like more information on the penalties and interest that can be imposed if you miss one or more of the above deadlines, please do not hesitate to contact any SARS office.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. 

References:

SARS: Procedure to change banking details for Personal Income Tax (Individuals)

A1SARS is responsible for protecting taxpayers against unauthorised changes to their personal details. Taxpayers wishing to register or change their banking details must visit a SARS branch in person and present the documentation required for verification before SARS will process any changes to their banking details. 

Requirements for different types of bank accounts

  • Own bank account:
    –  The account holder must visit a SARS branch in person with the documentation set out in point 1, 2 and 3 below.
  • Joint bank account:
    –  Both account holders must visit a SARS branch and each of them must take with them the documentation set out in point 1, 2 and 3 below.
    –  SARS will verify both account holders’ details before registering or changing banking details.
  • Third party bank account:
    –  The main account holder must visit a SARS branch in person and take with him/her the documentation set out in point 1, 2 and 3 below.
    –  If a refund is due to the taxpayer who is the third party, he/she will have to open their own bank account. SARS will not pay the refund into the account of the main account holder.

Can I send someone else to  the SARS branch on my behalf if I give them power of attorney?

No. The taxpayer must still visit a SARS branch in person to register or verify his/her banking details except for certain exceptional circumstances set out in the following paragraph.

The exceptional circumstances where SARS will allow registration and verification of banking details by someone else than the taxpayer, provided that the other person has power of attorney, are when the taxpayer is:

  • An estate due to death or sequestration
  • Incapacitated or terminally ill
  • A non-resident (emigrant/expatriate/foreigner/temporarily outside South Africa)
  • In jail
  • Under 18 years of age 

Documentation required for verification of banking details

  1. Proof of identity:

Original and valid ID document/Passport/Driver’s Licence/Asylum Seeker’s Permit plus one certified copy thereof

  1. Proof of banking details:

2.1  Copy of bank statement with original bank stamp or ABSA eStamped statement

  • Not more than three months old
  • Must confirm account holder’s details:
    –  Legal name of account holder
    –  Account number
    –  Account type
    –  Branch code

or

2.2  Taxpayer opened a new bank account but have not received a bank statement yet

  • Original letter stamped by bank on bank’s letterhead confirming:
    – Legal name of account holder
    – Account number
    – Account type
    – Branch code
    – Date on which bank account was opened
  1. Proof of residential address:

Copy of any one of the documents listed below.

3.1  Document not older than three months:

  • Municipal account
  • Student fee account
  • Co-op statement (farmers)
  • Medical aid statement
  • Telephone account
  • Court order
  • Subpoena
  • Traffic fine
  • Documents relating to UIF or pension payout

3.2  Document not older than six months:

  • Mortgage statement from mortgage lender

3.3  Document not older than 12 months:

  • Motor vehicle licence documents
  • Life assurance document
  • Short-term insurance document
  • Health insurance document
  • Funeral policy document
  • Statement from share, portfolio or unit trust investment
  • Current and valid lease/franchise agreement

3.4  If none of the above documentation is applicable/available, the taxpayer must complete and submit Form CRA01.

  • If proof of residence is in the name of a third party, the taxpayer must submit together with CRA01 a certified copy of the ID document/temporary ID/passport/driver’s licence of the third party. 

Tips

  • Make sure you have all the required documentation when you go to SARS otherwise SARS will not update your banking details. You will need to get all the documentation together and go to a  SARS branch again.
  • Make sure that the following stamps appear on all certified copies of documents:
    –  “True Copy”
    –  Commissioner of Oaths
  • Ensure that copies are certified by a person authorised to do so, for example SAPS/SAPO/attorneys.
  • SARS does not permit credit card/mortgage/foreign bank accounts for refund purposes.

SARS is taking their responsibility to protect taxpayers’ banking details seriously. Despite the inconvenience, it is to the taxpayer’s benefit to confirm their banking details with SARS to ensure that the taxpayer entitled to the refund will actually be the person to receive the refund. 

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or ommissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. 

References:

  • IT-ACM-06-G01 – Change of Banking Details for Personal Income Tax – External Guide
  • GEN-BR002 – Changing Your Banking Details – External Brochure