If the valuable turnover (the total of all the sales, without subtracting the costs) of a business is more than R1 million per year, then the business must be registered as a vendor by completing VAT 101 and VAT127. A business will only be forced to register for VAT where the business has already had a turnover of more than R1 million, or where the business has entered into a contract which means that the business will have a turnover of more than R1 million.

If the turnover of the business is less than R1 million per year, the owner can choose to register or not. If you register, this is called voluntary registration. A business can choose to register for VAT where the business has already had a turnover of R50 000, or where the business has not yet had a turnover of more than R50 000, but expects to turnover at least R50 000 in the year after registration and this expectation is reasonable. It takes a lot of effort and work to pay VAT to SARS regularly and to keep all the records SARS wants a vendor to have. If you don’t have to register, it is only a good idea to register if the business buys lots of things from suppliers and can claim back VAT to reduce the amount of VAT you owe SARS.

Foreign suppliers of electronic services must register for VAT if their business’ turnover is more than R50 000. This has been the case from 1 April 2014.

If the business is a sole trader or a partnership, the owners must register in their own names. If the business is a CC or a company, the owners must register in the name of the business. (See: Problem 3: Is being a VAT vendor worth it?)