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Is your business VAT exempt?

Find out if you have a VAT exempt business and all you need to know about how to apply for VAT exemption in this concise guide.

When it comes to VAT registration, you’ll find there are a range of products and services that are subject to VAT exemption. If your company trades solely in these types of products and services, your business will be classed as VAT exempt.

This means you won’t be able to reclaim VAT on any costs you incur making VAT exempt sales. For example, the VAT on your accountant’s fees.

So which areas are VAT exempt?

According to the South African government guidelines (download), these are:

  • Non-fee related financial services*
  • Educational services provided by an approved educational institution
  • Residential rental accommodation
  • Public road and rail transport

*So VAT on financial services is exempt when the services provided do not include a fee

Also Read: Tax Tips for Small Businesses: A Guide

View SARS Tax Brackets & Tax Tables for 2023-2024

Partial exemption

This is where it gets a bit more complicated. If you’re VAT registered, there’ll be cases where your sales may be subject to partial VAT exemption.

For example, if your business purchases or sells supplies classed as VAT exempt, but you also sell products which are subject to full VAT or reduced VAT payments, then you could be classed as partially VAT exempt.

As a company that is registered for fully and partially taxable supplies, it’s your responsibility to keep separate ongoing records of your transactions to ensure that you pay the correct amounts of VAT on each.

Any exempt supplies should be recorded as such in your quarterly VAT return alongside your VAT taxable supplies.

What is the zero-rated VAT meaning and is there a difference between VAT exempt and zero-rated VAT?

Confused? You’re not the only one, but there is actually a difference here. There are a number of supplies that are subject to zero-rated VAT, but this is different from VAT exempt. Examples of zero-rated goods include:

  • Good which are subject to the fuel levy
  • International transport services
  • Farming inputs
  • Certain grants by government
  • Exports

If you supply zero-rated goods, you should register for VAT. This is because you can still reclaim the VAT on any costs incurred by your business. However, if your business is registered as exempt because it trades in VAT exempt supplies, you can’t reclaim VAT on your costs.

How to file for VAT exemption

Before you go down this route, make sure it’s the right one for your business. If you’re VAT registered, you can reclaim VAT on your sales costs. However, adding VAT to your sales might impact on your customers, taking your prices out of their range. So, depending on what you trade in, you might find you’re better off VAT exempt.

If you decide to file for VAT exemption, you can do so using the SARS website website.

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Managing your VAT payments

When it comes to paying your business’s VAT bills, it’s best to establish a strategy for managing payments. If you’re organized, nothing will come back to haunt you. Of course, online accounting software such as QuickBooks will help you keep on top of your records and make sure you don’t miss any deadlines.

It also makes sense to plan ahead, so you’re making claims and allowances wherever you possibly can.

Whether you decide to go down the VAT exempt route or not, using online accounting software will be a huge help. You’ll find it vastly simplifies your accounting processes so it’s easier to stay on top of your VAT liabilities and payments.

We hope you’ve found this article outlining how to apply for VAT exemption useful. QuickBooks provide solutions for many common business tax requirements, including helping you stay on top of your VAT payments in line with SARS requirements.

Discover more free Small Business Resources at the Intuit QuickBooks Resource Centre to help grow your business in South Africa today.

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