VAT Returns Simplified: A Step-by-Step Guide for South Africa

VAT Returns Simplified: A Step-by-Step Guide for South Africa


April 11, 2024

Navigating the world of Value Added Tax (VAT) can often feel like traversing a labyrinth of rules, regulations, and paperwork. From understanding registration requirements to calculating and submitting VAT returns, the process can seem daunting. However, fear not, as we’ve crafted this comprehensive guide to simplify the VAT journey for you. 

In this article, we’ll break down the intricacies of VAT returns step-by-step, providing clear explanations, practical tips, and expert advice tailored specifically to the South African context. 

What is VAT?

Value Added Tax (VAT) in South Africa is an indirect tax levied on the majority of goods and services. Essentially, it’s a consumption tax applied at various stages of production and distribution, with the ultimate burden falling on the end consumer. 

At present, the standard rate stands at 15%. This means that for most purchases, consumers pay an additional 15% of the product or service’s value as VAT, which is then collected by the South African Revenue Service (SARS). 

VAT plays a crucial role in generating revenue for the government and is a significant component of the country’s tax system.

How Does VAT Return Work?

VAT returns in South Africa involve regular reporting to SARS of the VAT collected on sales and paid on purchases by a business. Businesses with an annual turnover surpassing R1 million are required to register for VAT, while those below this threshold but exceeding R50,000 can opt for voluntary registration. 

The registration process can conveniently be completed online through the SARS eFiling system or in person at a SARS branch. 

Accurate record-keeping is paramount for VAT compliance. Businesses must retain invoices, receipts, and other documentation for at least five years, detailing both the VAT charged to customers (output VAT) and paid on acquisitions (input VAT). 

How Often Do You Submit VAT Returns?

In South Africa, VAT returns are typically submitted on a bi-monthly basis. This means that businesses are required to report their VAT transactions and liabilities every two months. 

However, the frequency of VAT submissions may vary based on the specific circumstances of a business. It’s crucial for businesses to stay aware of their VAT obligations and adhere to the deadlines set by the South African Revenue Service to avoid penalties or legal issues. Failure to submit VAT returns on time can result in fines and potential disruptions to business operations.

How to Calculate VAT Returns

Calculating VAT returns involves understanding both output VAT (the VAT collected on sales) and input VAT (the VAT paid on purchases). 

Begin by totaling the VAT charged to customers on sales, known as output VAT. Deduct any VAT paid on purchases, known as input VAT, from this amount. If your input VAT exceeds your output VAT, you’re entitled to a refund from SARS. 

Conversely, if your output VAT exceeds input VAT, you’re liable to pay the difference to SARS. 

The standard VAT rate in South Africa is 15%, but some goods and services may be taxed at lower rates or exempted altogether, such as basic food items. It’s essential to accurately track and record both input and output VAT to ensure compliance and maximise potential refunds.

How Submit VAT Returns

Navigating the process of submitting VAT returns to the South African Revenue Service (SARS) can be a daunting task for businesses. However, with the right guidance and understanding of the procedures involved, it can become a seamless operation. Here are the basic steps to submitting VAT returns. 

  1. Gather necessary documents: ensure you have all sales invoices, purchase invoices, and customs documentation.
  2. Calculate VAT: determine your output VAT and input VAT. Subtract the input VAT from the output VAT to find the VAT amount payable or refundable.
  3. Access SARS eFiling: log in to the SARS eFiling website. If you haven’t registered for eFiling, you’ll need to do so.
  4. Complete the VAT201 form: fill in all required information on the VAT201 form. Ensure accuracy to avoid penalties.
  5. Submit and pay: submit the VAT201 form. If you owe VAT, ensure you make the payment before the due date.

Common Mistakes to Avoid

Understanding the common pitfalls and knowing how to steer clear of them is paramount to maintaining compliance and financial integrity. Here are some critical mistakes to avoid when submitting VAT returns to SARS.

Incorrectly Classifying Goods or Services for VAT

Misclassifying goods or services for VAT can lead to underreporting or overreporting of VAT liabilities. It’s essential to accurately determine the VAT treatment for each transaction based on South African tax laws. Failure to do so can result in penalties or tax audits.

Missing the Deadline for VAT Return Submissions

Submitting VAT returns after the deadline can incur penalties and interest charges. It’s crucial to stay informed about the submission deadlines set by SARS and ensure timely filing of VAT returns. Utilising reminders or setting up automated systems can help prevent missing deadlines.

Failing to Keep Adequate Records

Maintaining detailed and accurate records of VAT transactions is imperative for compliance. Failure to keep proper records of invoices, receipts, and other relevant documents can hinder the reconciliation process and lead to discrepancies in VAT returns. Businesses should establish robust record-keeping systems and diligently organise their financial documentation to avoid potential issues during VAT submissions.

Deadlines and Penalties

VAT returns and payments are typically due by the 25th day after the end of the VAT period. Failure to submit returns or make payments on time can lead to penalties and interest charges imposed by the SARS. These penalties and charges can accumulate over time, increasing the financial burden on businesses. It’s crucial to adhere to the submission deadlines to avoid such consequences and ensure compliance with VAT regulations.

Making Use of Professional VAT Return Services

Navigating the intricacies of VAT returns can be a challenging and time-consuming task for businesses. From accurately calculating input and output VAT to ensuring compliance with constantly evolving regulations, there’s a lot to consider. 

Given the potential for errors and the importance of precise reporting, enlisting professional VAT return services can be a wise investment. Professionals bring expertise and experience to the table, helping businesses streamline the process and minimise the risk of costly mistakes. 

For expert assistance in registering your business for VAT or managing VAT returns, consider reaching out to The Express here. Our specialised knowledge can provide invaluable support, allowing you to focus on your core business activities with confidence.

Related Articles