Value Added Tax Flashcards
When was VAT introduced to South Africa?
1991
What is a VAT-registered entity called?
A VAT vendor.
When is VAT registration compulsory?
Whe annual turnover of taxable supplies is over R1 million.
When is VAT registration voluntary?
When annual turnover of taxable supply is between R50k and R1 million.
What is a VAT return?
A summary of all VAT transactions that took place during the VAT period.
What key figures do VAT returns show?
Input VAT paid
Output VAT received
The difference
Who administers VAT?
The South African Revenue Services
(SARS)
What is VAT category A?
VAT period of 2 months, ending on the last day of every odd month.
What is VAT category B?
VAT period of 2 months, ending on the last day of every even month.
What is VAT category C?
VAT period of 1 month, ending on the last day of every month.
What is VAT category D?
VAT period of 6 months, ending on the last days of February and August.
What is VAT category E?
VAT period of 12 months, ending on the last day of the year of assessment of the vendor.
What are the 2 main reasons for zero-rating goods?
To alleviate poverty
To boost exports by keeping their prices lower
What is the difference between zero-rated and exempt supply?
Zero-rated vendors may still register for VAT
Exempt vendors may not register for VAT
What is non-allowable supply?
Goods or services that output VAT is charged on but that the acquirer may not claim input VAT on
Why are some supplies non-allowable?
Because they are not necessary to the functioning of the business.
What VAT supply is trading inventory?
Standard-rated
What VAT supply is petrol?
Zero-rated
What VAT supply is life assurance?
Exempt
What VAT supply is white bread for staff lunches?
Non-allowable
What VAT supply is brown bread purchased to make saleable sandwiches?
Zero-rated
What VAT supply is white bread purchased for the purpose of making saleable burgers?
Standard-rated
What VAT supply is diesel for use in a delivery vehicle?
Zero-rated
What VAT supply is illuminating paraffin for a business’s factory usage?
Zero-rated
What VAT supply is water and electricity bill?
Standard-rated
What VAT supply is telephone bill?
Standard-rated
What VAT supply is telephone bill?
Standard-rated
What VAT supply is a doctor’s subscription to the Medical Council?
Standard-rated
What VAT supply is a business’s subscription to the local golf club?
Non-allowable
What VAT supply is stationery?
Standard-rated
What VAT supply is equipment for the office?
Standard-rated
What VAT supply is a kettle for use in the staff kitchen?
Non-allowable
What VAT supply is a kettle purchased for primary business activities?
Standard-rated
What VAT supply is staff lunch?
Non-allowable
What VAT supply is interest on a bank overdraft?
Exempt
What VAT supply is a short-term insurance premium?
Standard-rated
What VAT supply is advertising?
Standard-rated
What VAT supply is sale of a business as a going concern?
Zero-rated
What VAT supply is a double-cab vehicle?
Non-allowable
What VAT supply is a delivery vehicle that does not fit the description of a passenger vehicle?
Standard-rated
What VAT supply is electricity portion of rates and taxes bill?
Standard-rated
What VAT supply is rates portion of rates and taxes bill?
Standard-rated
What are the 3 important amounts that need to be recorded on a VAT transactions?
VAT exclusive amount
VAT amount
VAT inclusive amount
What is the mark-up?
The amount added to the cost price to arrive at selling price, expressed as a percentage of cost price
What is the gross margin?
The amount added to the cost price to arrive at selling price, expressed as a percentage of selling price
What information must be included on a tax invoice?
●’tax invoice’
●Name address and VAT registration number of the supplier
●Name address and VAT registration number of the recipient (if a vendor) (unless the invoice is for less than R5000)
●Individual serialised number
●Date the invoice was issued
●Description of goods or services supplied
●Quantity or volume of goods and services supplied
●Either the value of the supply, plus the tax, and the consideration; or the total consideration and a statement that this includes tax charged and the rate that it was charged
What information must be included on credit notes and debit notes?
●’credit note’ or ‘debit note’
●Name, address and registration number of the vendor
●Name, address and registration number of the vendor (unless original supply was for less than R5000)
●Date issued
●Amount of credit / debit and the VAT and the inclusive price, or the inclusive price and that rate of VAT included
●Brief explanation of circumstances
●Reference to original transaction
What are the 2 bases provided for in the VAT Act 89 of 1991?
Payments basis
Invoice basis
How must a change in basis be applied for?
On a VAT117 form, in writing to the Commissioner
What is a VAT118 form?
The form SARS will use to inform of a basis change from payments ot invoice
What are the requirements of the payments basis?
Vendor must be a natural person or unincorporated body of natural persons.
Annual taxable supply must not exceed R2.5 million.
Vendor must be a public authority, public water board, public regional electricity distributor, municipality or an association not for gain.
What are the supplies that must be accounted for at a specific time, regardless of basis?
Supply for consideration of more than R100 000.
Instalment credit agreement.
Fixed property.
When must VAT be accounted for a supply for consideration of more than R100 000?
Invoice basis
When must VAT be accounted for an instalment credit agreement?
Earlier of delivery of goods acquired or payment of 1st instalment.
When must VAT be accounted for fixed property?
Where purchased from VAT vendor, as and when payment is made or received
What is invoice basis?
Supply must be accounted for on the date that supply takes place or is deemed to take place (invoice)
What is payments basis?
Supply must be accounted for when he receives payment for a supply made by him or when he pays a supplier for acquisition.
When is VAT payment due if a manual VAT return is submitted?
The 25th of the month following the VAT period
When are payment and return due if submitted via eFiling?
The last business day of the month following the end of the VAT period.
What is the penalty fee when VAT is paid after the due date?
10% of the outstanding VAT and interest is charged for the period it is outstanding.
How can a reduction in penalty fees be made?
If the vendor applies for a reduction and SARS is of the view that the vendor had no intention to evade or postpone VAT. SARS may reduce interest when the State did not make a financial loss or when the vendor did not benefit financially by paying tax late.
When is interest payable by the Commissioner?
When VAT is refundable and SARS does not pay this refund within 21 business days.
What penalties can a person convicted if an offence under the VAT Act face?
A fine or imprisonment for up to 5 years and SARS can levy additional tax of 200% of the evaded VAT and interest levied on this additional tax. SARS can also publish the names of VAT offenders and report professional misconduct to professional bodies.
What is a VAT201 form?
VAT return
What are the 2 types of discounts a vendor can grant?
Cash/trade and settlement
How are trade discounts recorded?
Only the full price net of the discount is recorded.
How is a settlement discount recorded?
The entity must make an empirical, reliable estimate of the settlement discount it expects its customers to take advantage of and record revenue arising from these transactions net of the estimated discount. The same applies to settlement discounts acquired.
If a customer unexpectedly settles their account early, the entity will have to adjust the revenue or cost of goods acquired by the amount of the discount.
