Government legislation ensures that an equal playing field is maintained in the competitive South African market, requiring business owners of companies big and small to adhere to certain regulations as stipulated by law. Whether you are running your own business or are hoping to start a new business venture, you will have likely come across the term VAT. From VAT on grocery slips to VAT accrued through dealings with South African service providers, this form of taxation forms a major part of the South African Revenue Service’s (SARS) responsibility in supporting the country’s economy. 

Registered businesses in South Africa may, at some point, be required to register for Value-Added Tax (VAT) to reap the advantages of doing so as well as avoid the consequences of failing to register for VAT. As a result, it is paramount that business owners clue themselves up on VAT and understand when they are eligible or required to register for it.

In this article, we will dive into the definition of VAT, elaborate on its role in the marketplace, determine when one should register for it, and outline the process of registering for VAT through the SARS eFiling system in line with government legislation. Read on or consult with one of MBS’ expert representatives for further information on VAT, and ensure that your business complies with tax legislation.

What is VAT?

Value-Added Tax, commonly known as VAT, is a form of indirect tax that is applied to goods and services supplied within the South African economy. Through the implementation of tax on groceries, services, and other business operations, the government can generate revenue by enforcing certain businesses operate as tax-raising agents responsible for collecting government VAT. 

At each stage in a businesses production and distribution, VAT is applied and the amount of VAT depends entirely on the price of a businesses products or services. VAT levies are subject to increases, and these figures are determined according to the supply of goods and services as well as the importation of goods from external countries. In some cases, goods and services are subject to VAT at a zero rate or are completely exempt from VAT. This typically applies to goods and services that are deemed essential to the wellbeing of the South African people. 

With a better understanding of what VAT is, let’s now take a look at which businesses are required to or when a business is responsible for registering with VAT.

When Should a Business Register for VAT?

Any business owner running a registered South African company may voluntarily register for VAT and benefit from this registration provided that their company earns an income of over R50 000 between a 12 month period. Furthermore, businesses that have micro-business status as registered under the Sixth Schedule of the Income Tax Act are also eligible for registration and are subject to returns and payment submissions every four months.

That said, it is not necessary that every business meeting the above criteria register for tax. According to legislation, companies that are expected to or have exceeded R1 million in income over a period of 12 months are required to register for VAT. The official term given to these companies or persons registering for VAT is a vendor.

The VAT Registration Process

If your business meets the above criteria and you are either required or voluntarily wish to register for VAT, then you may do so through SARS eFiling system. The process can be cumbersome and you will be required to submit several documents to successfully complete the application. To make matters easier for business owners, trusted third-party companies such as MBS are available to assist with a company’s VAT registration. Working alongside such a company alleviates time and pressure on business owners, freeing them up to focus their attention on other areas of business. 

With a better understanding of what VAT is, its role in the South African economy, when a company is required or may voluntarily register for VAT, and how to go about registration through SARS eFiling systems or with the help of reliable third-party enterprises such as MBS, you can rest assured that you are in the know and clued up on the latest pertinent VAT information relevant to government legislation.