Summary TAX3761 VAT_Notes.pdf

TAX3761 VAT_N Tax (inclusive) on the consumption of goods or services in SA (14%) 1. The Basics 1.1 Introduction: Each time consumer purchases goods or services (G or S) from vendor in SA, pays price that includes VAT.  Indirect tax (consumer pays, entity collects + gives to SARS) & direct cost to final consumer (can’t claim back from SARS)  Charged on usage  Registered vendors may claim VAT as Input Tax in certain circumstances  Based on subtractive or credit input method :. OUTPUT (tax collected) less INPUT (tax incurred) 1.2 VAT Calculation: Step 1:Calculate OUTPUT TAX Step 2:Calculate INPUT TAX Step 3: Determine VAT ADJUSTMENTS (if any) & take into account Step 4: Input Output = Refund Output Input = Payable OUTPUT TAX less INPUT TAX add/less ADJUSTMENTS = VAT PAYABLE / REFUNDABLE Step 5: Complete VAT 201 form 2 1.3 Accounting Basis INVOICE BASIS (most vendors work on this basis): VAT accounted for on earlier of  invoice issued or  any payment received o Can create cash flow problems o Once operating under invoice basis, remain on this basis o If vendor changes from invoice to payments basis, must calculate amount payable or refundable PAYMENTS BASIS: VAT accounted for when  payment made (purchases) and payment received (sales) o Helps with cash flow o Can use Payments Basis if applied to Commissioner in writing and vendor is: Any supply of R100 000 (incl VAT) or more (excluding fixed property) accounted for on Invoice Basis! 1.4 Tax Periods  Every vendor registered for a specific tax period  Majority fall into category A & B (every 2 months) Focus on Category A, B & C Invoice Basis Payments Basis  Public authority / municipality / municipal entity that supplies electricity, gas, water etc.  Association not for gain (welfare)  Water board  Electricity distributor  Foreign Electronic Service Provider  Person voluntarily registered & value of taxable supplies R50 000 (until reach R50k then INVOICE)  Natural person AND  Total value of taxable supplies = R2.5 million (excl. VAT) in 12 month period