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A Simple Guide to VAT Registration

Thank goodness SARS introduced e-filing in 2003. Before then, many of you might still recall the daunting mission of having to physically go into their offices with all the required information and wait in long queues for your VAT registration to be processed.

If VAT registration is a completely new process for you and you’re still unsure as to what you should do, how you should do it and when it should be done; then trust Brendmo Incorporated to provide you with insightful and helpful information. Because we provide a variety of businesses and individuals with excellent accounting services, we’ve had many questions asked regarding VAT registration. If you’re still unsure as to how this process works then continue reading this insightful and simple guide to VAT registration in South Africa.

Should I register for VAT and if yes, when should this be done?

If the turnover of your entity is likely to exceed or has already exceeded R1 million over a consecutive 12 month period, then it is mandatory for you to register for VAT. This should be done within 21 days from the date of exceeding R1 million and submitted to SARS physically.

What Kind of Information will I require for the VAT Registration Process?

When registering for VAT you will need to provide the following information in order for your application to be processed by SARS:

  • General information such as ID number, name of entity, passport details and trading name
  • Information pertaining to the nature of the entity (whether it’s an individual, CC, partnership etc.)
  • Information pertaining to the industry classification of entity
  • Information pertaining to the trading name and registration details of entity
  • Contact details (telephone number, email address and cell phone number)
  • Physical address details (also includes postal address)
  • Banking details
  • Representative taxpayer details
  • Financial year details
  • Industry classification details
  • If the entity is not an individual, then the entity’s directors/trustees/beneficiaries/members or partners particular details are also required
Can my Tax Practitioner Register on my Behalf?

Yes, but only if they are a registered tax practitioner. Posted applications will only be processed if applications provide proof that they are geographically too far from the SARS branch or unable to physically come into the SARS branch because of a disability. Also, remember that the SARS VAT 101 application form for VAT registration must be submitted at the SARS branch which is nearest to the place of your entity’s location or operating area.

If you require more assistance regarding VAT registration or you simply would like to know more about the accounting services we offer, contact Brendmo Incorporated on 011 026 3052 or email us at info@brendmo.co.za

How will the VAT Increase affect my business?

The VAT increase of 1% is South Africa’s first since its democratic history. As of the 1st of April 2018, VAT is now levied at 15% standard rate on the supply of goods and services by registered sellers. Many raised concerns about the impact this would have on the country’s poor and vendors who may face a decline in sales. With the exemption of basic food products such as rice, milk and vegetable oils; consumers will most likely have to face price increases in all other goods and services.

Although there was some speculation regarding the decision, some predicted that the country would see a VAT increase after government announced a revenue shortfall of just over R50 billion last year. Former Finance Minister- Malusi Gigaba announced that SA’s VAT was “below compared to some of our peers…” and “increasing VAT was unavoidable if we are to maintain the integrity of our public finances.”

As a company who specialises in bookkeeping and accounting services, we thought it would be helpful to provide answers to some of the questions businesses might have regarding the VAT increase.

Q. When will the 1% VAT increase take effect?

It has already been in effect since the 1st of April 2018.

Q. How will the VAT increase affect me if I am registered for VAT?

According to SARS, the increase will not have a huge impact on vendors registered for VAT if you “make taxable supplies as the increased rate of VAT will be charged to your customer and your additional VAT expenses can generally be claimed as input tax.” In other words, if your business sells goods that are taxable, then you will most likely increase the prices so that the impact of VAT can be absorbed by your customers. “However, if you also make exempt or other non-taxable supplies, the increased VAT may become a cost to your business if it cannot be claimed as input tax or the VAT charged is specifically denied as input tax.”

Q. What effect will this have on me if I’m a general consumer or vendor not registered for VAT?

You will still be charged an additional 1% VAT on taxable goods and services which will reflect on tax invoices issued by the vendor to the consumer.

Q. What changes do I need to make if I am using the invoices or payment basis of accounting?

If you’re using the invoice basis of accounting, you will have to charge VAT at the standard rate of 15% as of the 1st of April 2018. This will have to be accounted for on the invoices issued in your VAT201 forms. You will only be able to claim input tax at 15% on any taxable supplies made to you as of the 1st of April, granted you meet the rules and requirements for claiming.

If you’re using the payment basis of accounting, the same applies as above. However, you must remember to check the VAT rate that was charged based on the original supply time when receiving or making payments. As SARS instructs, “if the time of supply for a supply you have made or received was before 1 April 2018, then you must continue to declare output tax or claim input tax based on the VAT rate of 14% that applied at the time the original supply was made.”

Q. How will the VAT increase affect lay-bys?

If the lay-by agreement and payment required for reserving the goods was made before the effective date, then the old VAT rate of 14% will apply even if goods are delivered after the 1st of April 2018.

Q. How will this impact me if I delivered goods or performed services before the 1st of April, but only invoiced and received payment after?

According to the VAT Act of South Africa, vendors registered for VAT have to charge “VAT at 14% even if the normal time of supply for those supplies (invoicing or payment) occurs after the increase in the VAT rate.”

We hope that after reading this post, your VAT increase-related questions were answered and you now have a better insight into understanding how your business is affected. As the accounting specialists, Brendmo Incorporated offers expert audit and accounting services to individuals and SMMEs. Get in touch with us for all your tax-related questions.

Laws Affecting Small Businesses in South Africa

Before you start a small business it’s important to know what legislation your business needs to comply with and how it impacts your business. One of the essential auditing and accounting services we offer our clients is the review of legislation and the effects of such legislation on the clients' operations. In our years of experience we’ve built up competent knowledge on this topic, so we decided to share some of this knowledge with you in this blog post.
Business Registration

Before beginning the registration process for your business, you really need to think about what type of entity it will operate as. There are different types of business entities as recognised by South Africa which include: close corporations; sole proprietorships; private or public companies; partnerships; NPOs or co-operatives. Each of these types has their own different legal structures and implications. For example, if you register your business as a sole proprietorship you would be held personally responsible if anything were to happen to your company. Contact the Companies and Intellectual Property Commission (CIPC) to find out more about registering your business. Relevant legislation:

  • Companies Act of 1973
  • Close Corporations Act of 69 of 1984
  • Non-Profit Organisations Act of 1997
  • Non-Profit Organisations Amendment Act of 2000
Tax Registration

Businesses are legally obligated to pay tax. This means you’ll have to register with SARS - the tax collecting and administering agency of the SA government. It’s important to consult with tax specialists or your accountants to be properly assured of the various requirements for paying tax. If a business’s revenue exceeds R1 million per annum then it has to register as a TAX vendor. Small businesses differ from other business entities as their income revenue is generally lower. This means that they are exempted from paying VAT and qualify for certain tax rebates. There are other levies such as Skills Development Levies and Unemployment Insurance, which businesses also need to pay. Relevant Legislation:

  • SARS and SARS Tax Guide for Small Businesses 2005/ 2006
  • Skills Development Act, 97 of 1998 (as amended) and Skills Development Levies Act, 9 of 1999
  • Unemployment Insurance Act, 63 of 2001 and Unemployment Insurance Contributions Act, 4 of 2002
Employment and Labour Laws

A business’s employees are an important asset and should be valued and protected. Many small businesses face consequences that could have been avoided if proper research had been done and employment and labour laws were complied with. The Basic Conditions of Employment Act is the fundamental legislation as it covers payments, leaves, working hours, deductions, notice periods, administration as well as the prohibition of victimisation and exploitation of workers. Relevant Legislation:

  • Basic Conditions of Employment Act, 75 of 1997 and Labour Relations Act, 66 of 1995
  • Unemployment Insurance Contributions Act 4 of 2002 and Unemployment Insurance Act 63 of 2001
  • Occupational Health and Safety Act 83 of 1993; Compensation for Occupational Injuries and Diseases Act 130 of 1993; and Compensation for Occupational Injuries and Diseases Amendment Act 61 of 1997
  • Skills Development Act 97 of 1998 (as amended) and Skills Development Levies Act 9 of 1999
Licenses and Permits

Depending on what type of products or services your business plans on offering, you’ll need the licenses and/ or permits required to do so – legally. This applies especially to businesses making or selling food, offering health-related services such as massages or selling alcohol. You’ll need to contact your local municipality and your required business license from them. Relevant Legislation:

  • Businesses Act
  • Informal Trading Permit Guidelines
  • Liquor Act 27 of 1989 (provincial) and Liquor Act 59 of 2003 (national)
  • Public Operating License Guidelines
  • Tourist Guide Registration Guidelines

We hope that by reading this blog post, you are now informed and aware of the various South African laws and legislation your business has to comply with. It’s always best to do as much research as possible and consult with professionals to help you fully understand the impact these laws have on your business. Here at Brendmo Incorporated, we’re committed to assisting and consulting our clients – it’s why we offer the best comprehensive audit and accounting services.

Money Management Tips

Tips for Personal Financial Management / Money Management Tips
Do you know to handle your money?

As a leading auditing and accounting company specialising in a range of financial-related services, we’re passionate about empowering businesses by helping them develop good management skills of their financial resources. However, it’s important to understand that behind these businesses are individuals who have their own personal finances. In this blog post, we’re going to be focusing on money management tips – for the individual. While some of these tips might be applicable to businesses as well, we’re hoping this blog will assist readers in developing a good sense of managing their own personal finances.

Set Goals

A good starting point, in general, is identifying and setting goals. In doing so make sure you prioritise which goals are most important and set a time frame for each one. Setting goals are pivotal because it allows you to keep track of your progress. Below are some good goals to think about. Remember that the earlier you start working toward your long-term goals, the easier it will be to achieve them.

Long-term

  • Purchasing a home
  • Purchasing a car
  • Saving plans
  • Dissolving debt
  • Retirement plans

Short-term

  • Budget
  • Saving
Start Planning

Planning is important – even more, when it comes to finances. It’s like a road map to how you’ll achieve those goals you set out in the first step. Reflect on your financial goals and strategise to create a plan of action that would help you achieve them. Setting your financial plan in action will help you utilise more control over your finances and manage it well. When doing this, keep in mind the following points:

  • Budgeting is the foundation of a financial plan
  • Build an emergency fund for unexpected expenses
  • In every stage of your plan, always save for long-term goals
Prioritise your Budget

By now, most of us have heard the saying “stick to your budget.” But do we really understand the significance of it? Your budget is one of the most powerful tools you have for managing your finances, so it’s important that you make use of it – properly! A foundational principle of budgeting is that you SHOULD NOT spend more than you earn. It might come across as being quite obvious, but with the increasing expenses of everyday life, it’s easy to spend more than you make. This is why prioritising your budget is crucial.

Manage your Debt

Financial debt can often be a burden, especially when you have more 1 than one debt that you need to pay off. Most financial advisors will tell you that the smart thing to do is prioritise paying the debts that incur the highest rates of interest first. These can include loans, credit cards and other types of credit accounts you might have. One way you could pay off your debt is by paying larger amounts to the highest interest-rates liabilities while still making minimum payments on the others. You may even consult with your financial advisor or bank about setting up a consolidation loan; however, keep in mind that you should opt for one with a lower interest rate.

If you’re a business owner who’s interested in finding out more about how you can better manage both your personal and business’s finances, contact Brendmo Incorporated and speak to one of our skilled professionals today.