VAT will be levied at the standard rate of 15% on the supply of goods and services by registered vendors post the April 2018 (The tax rate was 14% until 31 March 2018).
A vendor making taxable supplies of more than R1 million per annum must register for VAT. A vendor making taxable supplies of more than R50 000 but not more than R1 million per annum may apply for voluntary registration. Certain supplies are subject to a zero rate or are exempt from VAT.
The following are important considerations for the change of VAT rate:
Transaction Date – the VAT rate to apply depends on the time of supply rules. In simple terms, this is the date on which the transaction is deemed to occur according to the VAT Act. The general time of supply rule is the earlier of when:
an invoice is issued; or
payment is received.
For most transactions the general time of supply rule will apply. However, some transactions have special time of supply rules. Some examples include supplies between connected persons, fixed property transactions and supplies made under instalment credit agreements. In addition, some rate specific rules could apply when there is a change in the VAT rate. Most transactions which occur on or after 1 April 2018 will be subject to VAT at the new rate of 15% unless a special time of supply rule or a rate specific rule applies.
Prices Quoted or Advertised
All prices advertised or quoted by vendors for taxable supplies must include VAT at the standard rate (unless the supply is zero-rated). Post 1/4/2018 advertised prices must show 15% VAT although the Commissioner for SARS has granted permission under proviso (iii) in section 65 of the VAT Act for a vendor to display a notice that the price does not include VAT at the new rate of 15% and prices will be adjusted at the point of payment.
Check agreements you have with suppliers/customers to see whether the agreements contain clauses restricting any change in VAT or impacting the timing of supply of goods and/or services.
Sales and Billing, Debit and Credit Notes
You need to make sure any invoices, receipts, bills reflect VAT at the correct rate of 15% after the 1/4/18 to avoid any disputes with customers or suppliers. Similarly debit/credit notes issues should reflect the VAT rate of the underlying sale or purchase.
Importation of Goods
Registered importers or clearing agents must take care that the customs declarations reflect the new VAT rate of 15% in respect of goods entered for home consumption on or after 1 April 2018.
Care must be taken to make sure the correct rate of VAT is reflected for each period of the VAT201 return which straddles the 1/4/2018.
Rate Specific Rules
There are some specific rules for supplies straddling the 1/4/2018. For example:
Supplies starting before and ending on or after 1 April 2018:
Where goods are delivered or services are performed during a period commencing before 1 April 2018 and ending on or after 1 April 2018, the VAT-exclusive price of the supply must be apportioned on a fair and reasonable basis and allocated to the respective periods. The VAT rate is then applied accordingly. That is, the rate of 14% is applied to the value of supplies before 1 April 2018 and the rate of 15% is applied to the value of supplies from 1 April 2018 onwards. This rule does not apply if the time of supply is triggered before 1 April 2018.
This rate specific rule applies to:
- goods supplied under rental agreements
- goods supplied progressively or periodically
- goods or services supplied in construction activities; and
- services rendered over the period concerned,
but does not apply to supplies of fixed property (including residential fixed property).
Goods delivered or services actually performed on or after 1 April 2018 where the time of supply is triggered between 21 February 2018 and 31 March 2018:
Rate specific rules also apply where the time of supply occurs between 21 February and 31 March 2018 (that is, on or after the date of the announcement of the increased VAT rate, but before the effective date of the increased rate). Under this rule, when goods are delivered on or after 23 April 2018, or services are performed on or after 1 April 2018, but the time of supply is triggered between 21 February and 31 March 2018 as a result of any invoicing or payment in relation to the supply, then VAT at the rate of 15% applies. However, if the goods are delivered before 23 April 2018 (that is, within 21 days after 1 April 2018), or the services are rendered before 1 April 2018, then the supplies concerned will be subject to VAT at 14%.
Further information is available here.