VAT Calculations Made Simple: A Guide for South African Businesses

Understanding VAT in South Africa

Value-Added Tax (VAT) is a consumption tax charged on most goods and services in South Africa. Currently set at 15%, it's crucial for business owners to understand how to calculate and apply it correctly.

When to Register for VAT

You must register for VAT if your taxable turnover exceeds R1 million in any 12-month period. You can also voluntarily register if your turnover exceeds R50,000.

How to Calculate VAT

VAT calculation is straightforward:

• VAT Inclusive to Exclusive: Divide by 1.15
• VAT Exclusive to Inclusive: Multiply by 1.15
• Just the VAT amount: Multiply exclusive amount by 0.15

Examples:

Example 1: Adding VAT to a price

• Exclusive price: R1,000
• VAT (15%): R1,000 × 0.15 = R150
• Inclusive price: R1,000 + R150 = R1,150

Example 2: Extracting VAT from inclusive price

• Inclusive price: R1,150
• Exclusive price: R1,150 ÷ 1.15 = R1,000
• VAT amount: R1,150 - R1,000 = R150

Standard-Rated vs Zero-Rated

Standard-rated (15%): Most goods and services

Zero-rated (0%):

• 19 basic food items (brown bread, maize meal, samp, etc.)
• Paraffin
• Goods for export
• International transport

Input vs Output VAT

Output VAT: VAT you charge customers (what you owe SARS)

Input VAT: VAT you pay on business expenses (what you can claim back)

Net VAT: Output VAT - Input VAT = Amount to pay/refund

VAT Invoices vs Tax Invoices

Tax invoices (over R5,000) require full details. For amounts under R5,000, an abridged tax invoice is acceptable with fewer details.

Common VAT Mistakes

1. Using the old 14% rate (it's been 15% since April 2018)
2. Not separating VAT on invoices
3. Claiming input VAT without valid tax invoices
4. Missing VAT201 submission deadlines

ZinithX Pro Automatic VAT Calculation

Our software handles all VAT calculations automatically:

• Correct 15% rate applied
• Separate VAT line items
• Clear VAT breakdowns
• VAT reports ready for SARS submissions