VAT ACT :
- Where VAT is applicable in a test: Assume prices include VAT, unless
otherwise indicated in the question
INPUT VAT:
Input VAT is the tax that is levied by a supplier in respect of goods or services delivered to the
vendor. This input tax can be claimed back from SARS by the vendor.
Dt: Inventory (SFP) 100
Dt: Input VAT (SFP) 15
Cr: Creditors/Bank (SFP) 115
= Buyer can claim input VAT because goods or services is bought, BUT they can only claim VAT if the
seller is registered for VAT
OUTPUT VAT:
Output VAT is the tax that the vendor collects on behalf of SARS on the delivery of goods or
services in the execution of an operation. This output VAT must be paid over to SARS by the
vendor.
Dt: Debtors/Bank (SFP) 115
Cr: Sales (P/L) 100
Cr: Output VAT (SFP) 15
= Vendor must be registered for VAT in order to levy VAT
= Statement references is important
VAT: Mechanics
- Output tax on sales [verkoop of ontvang]
- Input tax on purchases [betaal of koop]
, Differences between output and input VAT:
1. Output tax is the tax that the vendor collects on behalf of SARS on the delivery of goods or
services in the execution of an operation. The output tax must be paid over to SARS by the
vendor – Handelaar is die middelman
2. Input tax is the tax charged by the supplier in respect of goods or services delivered to the
vendor. This input tax can be claimed back from SARS by the vendor
Enterprise is defined in the VAT Act as: Any equity or operation carried on continuously or
regularly in the Republic of South Africa or partially in the Republic operated by a person in the
course or furtherance of which goods or services are supplied at consideration whether or not
for profit
- VAT is/can be levied on date when bought, not when paid
EXAMPLE 1:
1.Clay retailer (VAT vendor) sells clay to the Potter (VAT vendor)
Dt: Debtors (SFP) 115
Cr: Sales (P/L) 100
Cr: Output VAT (SPF) 15
2.1.Potter buys the clay from the Clay retailer and makes vases/flowerpots
Dt: Inventory (SPF) 115
Cr: Sales (P/L) 100
Cr: Output VAT (SPF) 15
2.2.Potter sells pots to a Wholesaler (not a VAT vendor)
Dt: Debtors (SPF) 230
Cr: Sales (P/L) 200
Cr: Output VAT (SPF) 30
3.1.Wholesaler buys the vases/flowerpots from a VAT vendor
- Where VAT is applicable in a test: Assume prices include VAT, unless
otherwise indicated in the question
INPUT VAT:
Input VAT is the tax that is levied by a supplier in respect of goods or services delivered to the
vendor. This input tax can be claimed back from SARS by the vendor.
Dt: Inventory (SFP) 100
Dt: Input VAT (SFP) 15
Cr: Creditors/Bank (SFP) 115
= Buyer can claim input VAT because goods or services is bought, BUT they can only claim VAT if the
seller is registered for VAT
OUTPUT VAT:
Output VAT is the tax that the vendor collects on behalf of SARS on the delivery of goods or
services in the execution of an operation. This output VAT must be paid over to SARS by the
vendor.
Dt: Debtors/Bank (SFP) 115
Cr: Sales (P/L) 100
Cr: Output VAT (SFP) 15
= Vendor must be registered for VAT in order to levy VAT
= Statement references is important
VAT: Mechanics
- Output tax on sales [verkoop of ontvang]
- Input tax on purchases [betaal of koop]
, Differences between output and input VAT:
1. Output tax is the tax that the vendor collects on behalf of SARS on the delivery of goods or
services in the execution of an operation. The output tax must be paid over to SARS by the
vendor – Handelaar is die middelman
2. Input tax is the tax charged by the supplier in respect of goods or services delivered to the
vendor. This input tax can be claimed back from SARS by the vendor
Enterprise is defined in the VAT Act as: Any equity or operation carried on continuously or
regularly in the Republic of South Africa or partially in the Republic operated by a person in the
course or furtherance of which goods or services are supplied at consideration whether or not
for profit
- VAT is/can be levied on date when bought, not when paid
EXAMPLE 1:
1.Clay retailer (VAT vendor) sells clay to the Potter (VAT vendor)
Dt: Debtors (SFP) 115
Cr: Sales (P/L) 100
Cr: Output VAT (SPF) 15
2.1.Potter buys the clay from the Clay retailer and makes vases/flowerpots
Dt: Inventory (SPF) 115
Cr: Sales (P/L) 100
Cr: Output VAT (SPF) 15
2.2.Potter sells pots to a Wholesaler (not a VAT vendor)
Dt: Debtors (SPF) 230
Cr: Sales (P/L) 200
Cr: Output VAT (SPF) 30
3.1.Wholesaler buys the vases/flowerpots from a VAT vendor
