VAT Registration Requirements in South Africa Simple Guide

This guide will explain the who and when as well as the method the VAT process works within South Africa, helping you remain on the right track and avoid expensive penalties.

Key Takeaways

• Registration for VAT is compulsory is required if your tax-deductible revenue exceeds the amount of R1million in any 12-month time frame.
• VAT registration on a voluntary basis is feasible if the taxable amounts are greater than R50,000 within 12 months.
• Electronic service providers that are not resident are also required to register when they reach their R1 million mark.
• VAT registration is possible on the internet via E-Filing or by reserving the appointment through SARS.
• You are able to retroactively update the VAT number at least six months in the event that it is it is applicable.

Who Must Register for VAT?

Compulsory Registration

If your company has produced tax-deductible supplies that exceed R1 million during any rolling 12-month duration, it is required to register your VAT through SARS (South Africa Revenue Service). You must apply within 21 days after you’ve reached the threshold.

Voluntary Registration

If you’ve received greater than R50,000 in tax-deductible sales over the past twelve month (but under R1 million) You can apply for the tax voluntarily.

This is usually a wise option if:

• You’re looking to claim VAT on input in business costs.
• You’re dealing through VAT-registered companies.
• You’re planning for growth and you’d like to establish your credibility.

VAT Registration Thresholds

Additional rules apply to:

• Municipalities
• Social welfare organizations
• Companies that acquire an ongoing concern
• Service providers that provide electronic services to non-residents

How to Register for VAT

You can sign up in two ways:

1. Online via eFiling

• Join SARS’s E-Filing platform.
• Upload all the required documents (see the following list).
• Verify that you meet the obligatory or optional criteria.

2. Via Appointment (eBooking)

• Schedule an appointment with the SARS branch.
• Make sure you have all the necessary documents ready for your trip.

Required Supporting Documents

Be sure to collect your information and then submit it documents:

• A valid ID or passport issued by the director or owner of the business
• Address proof of business
• Letter of confirmation from the bank (for refunds)
• Documents for registration of the company (if relevant)
• Documentation of the turnover (e.g. invoices, receipts contracts, invoices)
• Number of tax reference (if you are already registered)

Tip: Missing documents may delay your application for weeks or even months.

Backdating VAT Registration

If you have exceeded the threshold of R1 million however you waited to register, SARS allows you to backdate up to 6 months–as as long as you can provide the proper evidence (e.g. financial statements and contracts, etc.).

But, voluntary registrations generally can’t be retroactively dated unless extraordinary circumstances are present.

VAT Liability Date

The date is when:

• You should begin taxing VAT on your products or services.
• Your invoices should include you VAT registration number..
• It is mandatory to submit VAT tax returns in order to be liable for VAT to SARS.

Failure to sign up once you’re legally liable could lead to:

• 10% penalties
• Interest charges
• Legal action or audits could be in the offing.

Benefits of Voluntary VAT Registration

Even if your business isn’t legally required to register an optional VAT registration, it could aid your business in:

Request VAT refunds for purchases and services. Enhance your image as a professional and increase trustworthiness. Increase cash flow by claiming input VAT. Ensure that you are in compliance in advance of growth. Avoid disputes or disallowances tax-deductible expenses

Common Mistakes to Avoid

Inadequately long time between achieving the R1 million mark in turnover
Not having the proper documents
Inadvertently including VAT on invoices following deadline for liability
Not submitting VAT returns by the deadlines
Incorrectly reporting income to keep from registration

What Happens If You Don’t Pay VAT?

In the absence of VAT compliance, it could seriously harm your company.

Consequences of Non-Compliance:

• 10% penalty on late payments
• monthly interest rates
• Tax compliance suspension
• SARS Audits and legal actions from SARS

Making sure you register on time and submitting VAT returns on time will keep you in the good books of SARS and helps keep your business running efficiently.

Conclusion

If your tax-deductible revenue is greater than 1 million Rand, you’re legally required to be registered with VAT South Africa. If you’re less than that threshold however, you’re over the threshold of R50,000, voluntary registration could help you claim the VAT you owe on your business expenditures, and also build credibility.

Don’t just wait until SARS arrives, take action now. If you’re registering via electronic filing or in the location of the SARS the process is easy if you’re prepared.

Need assistance with your VAT registration or not sure whether you are eligible? Speak with a tax professional or schedule an appointment with SARS eBooking for personalised advice.