VAT is an indirect tax charged on most goods and services in South Africa at the standard rate of 14%. VAT applies to taxable supplies which include goods and services but exclude things like labor services or occasional private sales. There are three types of supplies for VAT - standard rated at 14%, zero rated at 0%, and exempt not subject to VAT. Standard rated applies to most items while zero rated includes basic necessities. Exempt items include financial services and residential rentals. [/SUMMARY]

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2. Definition of VAT
How does VAT work?
Taxable Supplies
 Standard rated
 Zero rated
Exempt Supplies
Summary
References.
Table of Content
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3.  VAT is an indirect tax on consumption of goods and services in the economy.
 VAT is only charged on taxable supplies made by a vendor. Taxable supplies include goods
and services for which VAT is charged at either standard rate or zero rate.
 Taxable supplies exclude:
• Labour services
• Hobbies or any private recreational pursuits (not conducted in the form of the business)
• Occasional private sale of personal or domestic items
• Exempt supplies.
Definition of VAT
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4.  The SA VAT system is destination based, which means that only consumption of
goods and services in South Africa is taxed.
 VAT is therefore paid on the supply of goods and services in South Africa as well as
importation of goods into the republic; destination based.
 VAT is currently levied at 14% on most supplies and importations.
 When goods are purchased, input VAT should be calculated and claimed
 When goods or services are supplied, output VAT should be paid over to SARS.
How VAT works.
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5. Taxable supplies are goods and services which are offered for sale at a
consideration and are offered in the furtherance of the business.
Theses goods and services are levied at the standard rate of 14% or at zero
rate 0%.
Occasional sale of personal items and hobbies does not meet the definition
of taxable supplies and cannot therefore be taxed for VAT purposes.
Taxable Supplies
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6. Standard Rated supply
 Standard rated:
 A standard-rated supply is a supply of goods or
services which is subject to VAT at the rate of
14%.
 As a general rule, the supply of all goods and
services are taxable at the standard rate, unless
it is specifically zero-rated or exempt.
 Any zero rated food item (basic food) prepared
for immediate consumption.
• List of standard rated goods and services:
 Zero rated item supplied together with a standard
rated item, e.g. vegetables seasoned with herb
including a stick of butter.
 Eggs other than those laid by hens
 Professional service, i.e. accounting or auditing
services
 Clothes and second hand goods.
 Egg sandwich and a glass of milk at a restaurant.
These items are prepared for immediate consumption
 Business Insurance
 Commercial accommodation.
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7. Zero rated supply
Zero rated supplies are taxable supplies on which VAT is levied at a rate of 0%.
The zero rated application should be supported by documentary proof
acceptable to the Commissioner of Revenue.
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8. Certain basic foodstuff are zero rated, provided:
 they are not for immediate consumption, i.e. as a meal at a restaurant
 added to a standard rated supply.
The general rule is that all basic foodstuff are zero rated.
Zero rated supply…..continued.
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9.  Listed below are examples of zero rated items:
 List of zero rated items:
 Brown bread
 Brown bread flour (excl wheaten bran)
 Hens’ eggs (not from ostriches and ducks)
 Dried beans, maize meal, mealie rice, rice and samp
 Pilchards and tins or cans
 Milk, cultured milk, powder milk and dairy powder blend
 Peanuts
 Lentils
 Vegetables and fresh fruit
 Peas and beans
 Vegetable oil (excluding olive oil)
 Diesel (excluding biodiesel)
 Crude oil (excluding oil for the engine)
 Paraffin (if it’s intended to be used as fuel for heating)
 International transport services
 Farming inputs.
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10. Exempt supplies
Exempt supplies are supplies
of goods or services where
VAT is not chargeable at
either standard rate or zero
rate.
 List of exempt items:
 Non-fee related financial services ( loans, interest, life
insurance)
 Educational services provided by an approved educational
institution
 Residential rental accommodation
 Public road and rail transport
 Airport shuttle passenger transport
 Residential Accommodation
 Donations to registered Public Benefit Organizations (PBO’s)
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 Points to remember when dealing with VAT:
 VAT can only be calculated if transactions are made with registered VAT vendors
 VAT is destination based, therefore only consumption of goods or services made in the republic can be claimed or payed over to
SARS; exports are not subject to VAT.
 Goods coming INto the business = INput VAT
 Goods going OUT of the business = OUTput VAT
 VAT is charged at either standard rate of 14% or zero rate 0%.
 Basic food items are zero rated unless they are prepared for immediate consumption.
 Financial services are exempt from VAT
Summary

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http://www.sars.gov.za/Pages/Find-a-Publ.aspx?k=VAT
Student’s approach to Income Tax: Business Activities 2015
http://www.acts.co.za/value-added-tax-act-1991/
Value-Added Tax Act, 1991 (Act No. 89 of 1991).
References