SARS will issue the business with a registration number, which is called a VAT invoice number. This number requires the person or business to charge 15% VAT on goods or services the business sells.

EXAMPLE

Nomawethu types letters for other people. She is registered as a vendor. She charges R50 to type one page. She must charge 15% VAT on top of that. In other words, 15% of R50 is R7.50. So she charges R50 + R7.50 = R57.50 in total.

VAT INVOICES

Vendors must give their customers a VAT invoice, to charge them for the goods or services. The invoice must have the following written on it:

• The words ‘tax invoice’
• The VAT registration number of the business
• The amount of VAT paid by the customer separately from the price of the goods or services.
• If over R5 000 the VAT number of the buyer

Remember to check that the VAT invoices you receive from other businesses have all these details on them if you are going to claim the VAT back from SARS. If an invoice does not have all these things on it, you cannot claim the VAT back.

WHAT RECORDS MUST BE KEPT FOR VAT PURPOSES?

Businesses registered for VAT must keep records that show how much VAT they have collected. Even after the business has closed, the business must keep the records for 5 years. These are examples of records that must be kept:

• Invoices from your business to customers
• Invoices from your suppliers to you
• A list of debtors (people who owe money to the business) and creditors (people that the business owes money to)
• Bank statements, deposit slips, copies of cheques (the owner of the business must have a bank account)
• Books of account, where the owner of the business writes down how much money has come into the business every month, how much money has been spent and what it was spent on

PAYING VAT TO SARS

If you are registered as a VAT vendor you will have to submit a return and pay the VAT over to the SARS either bi-monthly, or quarterly, depending on the category that the business falls into.

The owner of the business must calculate how much VAT is owed to SARS. A standard VAT return must be submitted on eFiling by the end of the month following the VAT period. The return form is VAT 201. SARS will impose penalties and interest for people who submit their returns late. Penalties are 10% of the amount that is owed and interest is charged at the standard interest rates.

Businesses have to pay VAT on goods or services if they have invoiced customers. This is called paying VAT on an invoice basis. It means that if the owner of the business invoices customers, the owner has to pay the VAT to SARS even if the customer has not yet paid. This could cause cash flow problems for the business.

The owner of the business can do three things:

• Apply to SARS in writing to pay VAT on a payments basis. This means that you only pay VAT to SARS when your customers have paid.
• Ask customers to pay their account immediately when they buy the goods or when they receive the service.
• Charge customers interest if they do not pay your invoices within 30 days.

CLAIMING INPUT CREDITS

The vendor can claim back any VAT that is paid on anything bought for the business which relates to providing a valuable service or supply. The VAT which the vendor can claim back is called an input credit.

You can only claim input credits for the amount of VAT shown on VAT invoices that you paid. Remember to file invoices to prove what you have spent money on. For example, you must keep salary slips, invoices from suppliers, slips to show how much petrol you have used if you use a car for business reasons, and so on.

EXAMPLE

John is the only member of a printing CC called Better Copy. Better Copy is registered as a vendor and charges 15% VAT on all printing jobs.

John has to give a Better Copy VAT invoice to every customer. So, if Mary wants 20 copies made Better Copy charges her R5,00 to do this. John must add  15%, which would be 75 cents. Mary pays  R5.75 and John then sends the 75c to SARS with all the other VAT paid by other customers over 4 months (because the turnover of his business is less than R1,2 million per year).

Better Copy decides to buy a new photocopy machine from IBM for R10 000. They pay R1 500 VAT on the machine which means they pay IBM R11 500. IBM gives Better Copy an invoice with IBM’s VAT registration number on it. Better Copy can now claim the  R1 500 from SARS because Better Copy is registered as a vendor. This R1 500 is called an input credit.

At the end of January, John adds up all the VAT which he has collected from his customers. The total is R5 000, which he owes to SARS. But, he has an input credit of R1 500 which is VAT he can claim back from SARS. John subtracts the R1 500 input credit from the R5 000 collected from customers. John must pay SARS R3 500.