Value Added Tax (VAT) is a consumption tax levied on the supply of goods and services in South Africa. At 15%, it is one of the country's primary revenue sources. If you run a business in South Africa, understanding your VAT obligations is essential for compliance and cash flow management.
The Current VAT Rate
South Africa's standard VAT rate is 15%, which has been in effect since 1 April 2018 (increased from 14%). This rate applies to most goods and services supplied in South Africa.
When Must You Register for VAT?
You must register for VAT if:
- Compulsory registration: Your taxable supplies exceed or are expected to exceed R1 million in any consecutive 12-month period
- Voluntary registration: Your taxable supplies exceed R50,000 in a 12-month period (you may choose to register)
Registration is done through SARS eFiling or at a SARS branch. Once registered, you must charge VAT on all taxable supplies, submit regular VAT returns, and keep records for five years.
Zero-Rated Supplies (0% VAT)
Certain essential goods and services are zero-rated, meaning VAT is charged at 0%. This benefits consumers while allowing businesses to claim input tax credits. Zero-rated items include:
- Basic foodstuffs (brown bread, maize meal, rice, vegetables, fruit, eggs, milk, pilchards, cooking oil)
- Exported goods and services
- Petrol and diesel (subject to the fuel levy instead)
- Certain agricultural inputs
- International transport services
Exempt Supplies (No VAT)
Some supplies are exempt from VAT entirely. Businesses making exempt supplies cannot claim input tax credits on their purchases. Exempt supplies include:
- Financial services (interest, insurance premiums)
- Residential rental accommodation
- Educational services provided by approved institutions
- Public transport by road or rail
- Childcare services
How VAT Returns Work
VAT-registered businesses must submit VAT returns to SARS, typically every two months (Category A — bi-monthly). Some businesses file monthly (Category B) or every six months (Category D for farming enterprises).
On your return, you report:
- Output tax: The VAT you collected from customers
- Input tax: The VAT you paid on business purchases
- Net VAT: Output tax minus input tax — this is what you pay to SARS (or claim back if input exceeds output)
Common VAT Mistakes to Avoid
First, do not charge VAT if you are not registered — this is illegal. Second, ensure your tax invoices contain all required information (your VAT number, the buyer's details for invoices over R5,000, the amount of VAT charged). Third, keep records of all VAT invoices for at least five years. Fourth, submit your returns on time — late submissions attract penalties and interest.
VAT and Cash Flow
VAT can create significant cash flow challenges. You must pay output VAT to SARS even if your customers have not yet paid you. Conversely, you can only claim input VAT if you have valid tax invoices. Many South African businesses use the invoice basis of accounting for VAT, which means VAT is payable when the invoice is issued, not when payment is received.
Use our invoice calculator to quickly calculate VAT on your invoices, or our VAT calculator to convert between VAT-inclusive and VAT-exclusive amounts.