Value-added Tax Flashcards
What is a vendor?
Any person who is, or is required to be, registered under the VAT act.
When is an entrepreneur required to register as a vendor?
If the total value of the taxable supplies exceeds R1 000 000 in a period of 12 months.
When may a person register voluntary?
If:
1. The person is conducting an enterprise; and
2. The value of the taxable supplies was more than R50 000 in the past twelve months; or
3. The taxable supplies are not yet more than R50 000 but it is expected to be more than R50 000 within 12 months of registration.
What happens once the vendor is registered?
VAT is payable when value is added to goods or services in the course of business.
What are the categories of vendors?
Category A, B, C, D, and E.
What does the categorisation of a vendor depend on?
Turnover and type of business.
What do the categories entail?
A tax period, determining how often the VAT vendor has to report to SARS on VAT.
What is category A?
Two-month periods, ending on uneven months.
What is category B?
Two-month periods, ending on even months.
What are the two types of supplies?
Taxable supplies and exempt supplies.
What are the categories of taxable supplies?
- Standard-rated supplies
- Zero-rated supplies
What are the criteria for standard-rated supplies?
- There must be a vendor
- Supplying goods or rendering services
- In the normal course of business
- Conducted by that enterprise.
What is Category C?
Monthly periods, provided that:
-The value of the taxable supplies is more than R30 million for a twelve-month period
-The vendor applied for this category; or
- SARS classified the vendor into this category, as a result of default.
What is category D?
Six-month periods, ending February and August (unless SARS indicates otherwise).
To whom does category D apply?
Vendors conducting farming activities, who do not fall in category C, and where the value of the taxable supplies is less than R1 500 000 for a twelve-month period.
What is category E?
Annual periods (ending on the last day of the year of assessment for income tax purposes) when the vendor’s enterprise consists solely of business with connected persons.
What is input tax?
The tax paid by a vendor on goods or services purchased or received from the supplier.
What is output tax?
The tax a vendor collects or levies when goods are sold and services rendered by the vendor.
What are the two accounting bases used for calculating the VAT liability?
Invoice and cash basis.
What does invoice basis mean?
That output tax is accounted for at the earliest of issuing the invoice or receipt of payment and that as soon as the invoice for purchase has been received, input tax can be accounted for, even if the payment for the purchase has not been made.
What does cash basis mean?
VAT is accounted for when payment is made or payment received.
Does cash basis recognise deposits?
No, unless the deposit was used to settle a debt.
What is output tax?
The tax levied by a vendor on goods sold or services rendered.
What are the types of tax invoices?
- A full tax invoice when consideration is more than R5 000
- An abridged tax invoice when the consideration is R5 000 or less.
What are the requirements for a full tax invoice?
- Tax invoice visible
- name, address and VAT registration number of supplier
- name, address, and VAT registration of the recipient if it’s a vendor
- Individual serialised number and date on which tax invoice is issue
- Full and proper volume of the goods/service supplied
- Value of the supply; or VAT amount
What if the tax invoice does not adhere to the requirements listed above?
SARS will not allow the deduction of the input tax.
What are zero-rated supplies?
-Taxable supplies where VAT is charged at the rate of 0%.
-Input tax may be used as deductions when calculating the vendor’s VAT liability.
What are exempt supplies?
- Supplies on which no VAT is levied.
- The value is not taken into account when determining whether a vendor is compelled to register or not.
- Vendor cannot claim input tax
How does the VAT system operate?
- Registered venders must levy on goods or services unless the supply is not a good/service ito VAT Act or where the simply is exempt from VAT.
- At end of each tax period vendor must prepare and submit a VAT return for all vatable transactions entered into to SARS
- Form must be clear on the amount of supplies rendered at 15% and those at 0% (output tax) and amount claimed for input tax, as well as exempt supplies
- Total input tax paid or due to other vendors must be shown on the VAT return
- Where input tax was paid on supplies used to make exempt supplies, the input tax must be shown separately as the vendor may not claim the amount from SARS
- Difference between output tax levied and input tax paid after adjusting for disallowed amounts, must be paid to SARS or is refundable by SARS
What is the formula for Net VAT payable or refundable?
Net VAT payable or refundable = output tax - input tax.
