Registering your company for VAT

Registering your company for VAT

WHY DO I NEED TO REGISTER MY BUSINESS FOR VAT?

Businesses, whether large or small, have a vital role to play as taxpayers in our economy. Any business (whether a CC, a company, a partnership or a sole proprietor) has various tax obligations it must meet. If certain conditions are met, it is required to register and pay value added tax (VAT) to SARS, which is the amount that is levied on the value of most goods and services, whether supplied by sale, rental agreement, instalment credit agreement or any other form of supply. The standard VAT rate is currently 14%.

Your business must register as a VAT vendor if its income earned in any consecutive 12-month period exceeds the prescribed threshold. If your income earned is less than the threshold, it may still be beneficial for your business to register on a voluntary basis – although this will add to your administration, you can then claim VAT back on your expenses (which is then deducted from the VAT you owe SARS).

WHEN DO I REGISTER MY BUSINESS FOR VAT?

Compulsory registration: It is mandatory for a business to register for VAT if the total value of the taxable supplies made in any consecutive 12-month period exceeded or is likely to exceed R1 000 000.

Voluntary registration: A business may also choose to register voluntarily for VAT if the value of the taxable supplies made or to be made is less than R1 000 000, but exceeded R50 000 in the past 12-month period.

VAT registration when the value of your taxable supplies is less than R50 000: Per the new VAT Registration Regulations, an enterprise which has not made R50 000 in taxable supplies in the past 12 months may still register for VAT if it can satisfy SARS that, as at the date of the application, the following circumstances exist:

  • where you have made taxable supplies for more than two months (but not exceeding 11 months), you must prove that the average value of taxable supplies in the preceding months prior to the date of application for registration exceeded R4 200 per month;
  • where you have made taxable supplies for only one month preceding the date of application for registration, you must prove that the value of the taxable supplies made for that month exceeded R4 200;
  • where you have not made taxable supplies yet, you must have a written contract, in terms of which you are required to make taxable supplies exceeding R50 000 in the 12 months following the date of registration;
  • in any other case, you have entered into a finance agreement with a bank, specified credit provider, designated entity, public authority, non-SA resident or any other person who continuously or regularly provides finance, wherein finance has been provided to fund the expenditure incurred or to be incurred in furtherance of the enterprise, and the total repayments in the 12 months following the date of registration will exceed R50 000; or
  • in any other case, you have proof of expenditure incurred or to be incurred in connection with the furtherance of the enterprise as set out in a written agreement or proof of capital goods acquired in connection with the commencement of the enterprise and proof of payment or an extended payment agreement evidencing payment has either exceeded R50 000 at the date of application for registration; or that it will in any consecutive period of 12 months beginning before and ending after the date of application, exceed R50 000; or will in the 12 months following the date of application for registration exceed R50 000.

HOW DO I REGISTER MY BUSINESS FOR VAT?

You can either elect to register your business for VAT yourself or you can make use of the services of a registered tax practitioner to handle the whole process for you. In both instances, the VAT 101 application form must be submitted to the SARS branch nearest to the place where your business is situated, together with the following supporting documentation:

  • if your business is operated through a company, certified copies of your company registration documents (i.e. CoR 14.1 Notice of Incorporation, CoR 14.1A Notice of Incorporation – Initial Directors, CoR 14.3 Registration Certificate, CoR 15.1A Standard Short Form MOI or custom-drafted MOI (as the case may be);
  • certified copies of the identity documents of all the directors / members / partners;
  • originally signed and stamped letter from the bank confirming the business account’s banking details;
  • latest original copy of the business municipal account;
  • if the business’ property is leased, a certified copy of the signed lease agreement;
  • latest three months’ bank statements; and
  • latest three months’ invoices to confirm income.

THINGS TO NOTE WHEN REGISTERING / PAYING VAT

  • For any sale of more than R50, you must issue a tax invoice (with the words “tax invoice” printed on it). This is the most important document in the VAT system so make sure you get it right.
  • The frequency with which you have to pay VAT to SARS depends on your “taxable period”. For businesses who file their returns and make payments electronically, VAT is due by the 25th day of the first month commencing after the end of the taxable period, while for businesses that file via eFiling, the due date is the last business day of the month after the end of the taxable period.
  • Failure to submit a VAT return at the end of each VAT cycle can lead to a business facing heavy penalties and interest on late submission.
  • You must keep your records for a period of five years from the date of the last entry in any book, as SARS can ask to see these records at any time within this timeframe.