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                VAT 404 – Guide for Vendors                                           10 Important principles             1
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                                                  VAT 404 
                                         Guide for Vendors 
                                          Value-Added Tax 
                 
        VAT 404 – Guide for Vendors      10 Important principles 
         
                      10 Important principles 
        1.  All prices charged, advertised or quoted by a vendor must include VAT at the applicable 
         rate (currently 15% for standard-rated supplies). 
        2.  Vendors are charged with the responsibility of levying VAT and paying it over to the State 
         after deducting permissible VAT inputs and other deductions – please make sure that you 
         pay it over on time, otherwise penalties and interest will be charged. 
        3.  VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) and 
         other permissible deductions = the amount of VAT payable/refundable. 
        4.  You need to be in possession of documentary proof prescribed by or which is acceptable 
         to the Commissioner to substantiate any input tax and/or other permissible deductions 
         which you want to make. You must also keep records of all your documentary proof and 
         other records of transactions for at least five years. 
        5.  Goods exported to clients in an export country (any country outside of the Republic) may 
         be charged with VAT at 0%. However, if delivery takes place in the Republic, you must 
         charge VAT at the standard rate to your client, unless the goods are supplied under 
         Sections A and B of Part Two of the Export Regulations which allow the zero rate to be 
         applied, subject to certain requirements, at the discretion of the supplier. This discretion 
         may only be applied when the goods are to be exported via road or rail or are delivered to 
         a harbour or an airport from where the goods will be exported. If VAT is charged at the 
         standard rate and your client is a vendor, your client may deduct the VAT charged as input 
         tax. If your client is not a vendor, and the goods are subsequently removed from the 
         Republic, a  claim  for  a  refund of the  VAT  may  be  submitted  to  the  VAT  Refund 
         Administrator (the VRA), subject to certain requirements being met. 
        6.  You may not register for VAT if you only make exempt supplies. If you are registered, 
         because you make both taxable and non-taxable supplies, you may not deduct any VAT 
         charged on goods or services acquired to make exempt supplies or for private use or other 
         non-taxable purposes. Also, as a general rule, any VAT incurred to acquire a motor car or 
         goods or services acquired for purposes of entertainment may not be deducted, even if 
         used for making taxable supplies. 
        7.  You are required to advise the South African Revenue Service (SARS) within 21 days of 
         any changes in your registered particulars, including any change in your representative, 
         business address, banking details, trading name or if you cease trading. 
        8.  If you have underpaid VAT as a result of a mistake, report it to SARS as soon as possible, 
         rather than  leaving it  for the SARS  auditors to  detect. You  can  make  a  request for 
         correction on eFiling if you file your returns electronically. Otherwise, approach your 
         nearest SARS office for assistance. 
        9.  You can pay your VAT electronically by using eFiling or by making an electronic funds 
         transfer (EFT) through internet banking. You may also pay at certain banks. 
        10. Report fraudulent activities to SARS by calling the Fraud and Anti-Corruption Hotline on 
         0800 00 28 70. You may report an incident anonymously if you wish. 
         
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                   VAT 404 – Guide for Vendors                                                                              Preface 
                   Preface 
                   The VAT 404 is a  basic guide where technical and legal terminology has been avoided 
                   wherever possible. Although fairly comprehensive, the guide does not deal with all the legal 
                   detail associated with VAT and is not intended for legal reference. 
                   All references to sections hereinafter are to sections of the Value-Added Tax Act 89 of 1991 
                   (VAT Act), unless the context indicates otherwise. The Tax Administration Act 28 of 2011, the 
                   Income Tax Act 58 of 1962 and the Customs and Excise Act 91 of 1964 are referred to as the 
                   “TA Act”, “Income Tax Act” and “Customs and Excise Act” respectively. The terms “Republic”, 
                   “South Africa” or the abbreviation “RSA”, are used interchangeably in this document as a 
                   reference to the sovereign territory of the Republic of South Africa, as set out in the definition 
                   of “Republic” in section 1(1). You will also find a number of specific terms used throughout the 
                   guide which are defined in the VAT Act and the TA Act listed in the Glossary in a simplified 
                   form for easy reference.  
                   The information in this guide is  based on the VAT Act and the TA Act as at the time of 
                   publishing and includes the amendments contained in the Taxation Laws Amendment Act 20 
                   of 2021, the Tax Administration Laws Amendment Act 21 of 2021 and the Rates and Monetary 
                   Amounts and Amendment of Revenue Laws Act 19 of 2021. These Acts were all promulgated 
                   on  19  January  2022  as  per  Government Gazettes (GGs) 45787, 45786  and  45788 
                   respectively.  
                   Some of the more important amendments that have been introduced since the previous issue 
                   of this guide are discussed briefly below. 
                   The following amendments came into effect from 1 April 2020 unless otherwise stated: 
                       •    Decisions to  overcome difficulties,  anomalies or incongruities –  Section 72  was 
                            amended with effect from 21 July 2019 to align the wording with the construct and 
                            policy intent of the other provisions of the VAT Act. See 15.4.4 for more details and 
                            explanation.  
                       •    Foreign Donor Funded Projects (FDFPs) – The provisions relating to the tax treatment 
                            of FDFPs have been changed significantly by the introduction of the definition of 
                            “implementing agency” as well as amending certain definitions in section 1(1) and 
                            section 50. See 2.1.4 and the VAT Reference Guide for Foreign Donor Funded 
                            Projects for more information. 
                       •    Transfer of ownership of reinsurance policies – The provision of reinsurance in respect 
                            of  a  life  insurance  policy  is  exempt  from  VAT  under  section 12(a)  read  with 
                            section 2(1)(i). The scope of the exemption was extended with an inclusion of the 
                            transfer of ownership of any life reinsurance policy to another reinsurer. 
                       •    Refining the VAT corporate reorganisation rules – A new proviso to section 8(25) was 
                            introduced to afford the roll-over relief in respect of the transfer of fixed property, only 
                            in  instances  where  the  supplier  and  the  recipient have  agreed  in  writing  that, 
                            immediately after the sale, the supplier will lease the fixed property back after it has 
                            been transferred, to the recipient. (Section 8(25) was also amended by the addition of 
                            a  further proviso with effect from 1 April  2021 –  see the summary  on the  2021 
                            amendments below).  
                       •    Zero-rating of sanitary towels (pads) – The zero-rating of sanitary towels (pads) was 
                            introduced with effect from 1 April 2019, under section 11(1)(w) read with Part C of 
                            Schedule 2. The importation of sanitary towels (pads) is  exempt from VAT under 
                            section 13(3) read with paragraph 7(d) of Schedule 1. 
                    
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                   VAT 404 – Guide for Vendors                                                                             Preface 
                       •    Deregistration of  certain foreign electronic services  suppliers –  With  effect from 
                            1 April 2019, the registration threshold for which a foreign electronic services supplier 
                            is obliged to register for VAT, was  increased from R50 000 to R1 million. Binding 
                            General Ruling (VAT) 51 "Cancellation of Registration of a Foreign Electronic Services 
                            Supplier"  (BGR 51)  was  issued  clarifying that  those  foreign electronic services 
                            suppliers  that  fell  below  the  new  threshold could  have  their  VAT  registrations 
                            cancelled. Section 24(1) was subsequently amended and BGR 51 was withdrawn.  
                       •    Tax invoices issued by foreign suppliers of electronic services – Section 20(5B) was 
                            introduced in 2014 to give the Minister of Finance powers to issue a regulation that 
                            prescribed the particulars that must be contained in a tax invoice issued by foreign 
                            suppliers of electronic services. In the absence of such Regulation, SARS issued 
                            Binding General Ruling (VAT) 28 “Electronic services” (BGR 28) to provide clarity at 
                            the time. The Notice has since been published. See GN 1594 in GG 45324 dated 
                            10 December 2021.  
                   The following amendments came into effect from 1 April 2021: 
                       •    Cross border leases of foreign-owned ships, aircraft and rolling stock – proviso (xiii) to 
                            the definition of “enterprise” was inserted to clarify that a foreign lessor is not regarded 
                            as carrying on an enterprise in the Republic where foreign-owned ships, aircraft or 
                            rolling stock are leased for use in the Republic, subject to certain conditions being met. 
                            See 2.1.7 for more information.  
                       •    Refining the VAT corporate reorganisation rules – A further proviso to section 8(25) 
                            was introduced to address the situation where under the Income Tax Act certain assets 
                            may not qualify for the roll-over relief even though the asset form part of the entire 
                            transaction. The amendment allows for the parties to agree that the entire transaction 
                            be treated under the going concern provisions of section 11(1)(e), thereby qualifying 
                            for VAT relief.  
                       •    Zero-rating of telecommunication services – The zero-rating of international roaming 
                            services between resident telecommunication services suppliers and non-resident 
                            telecommunication services suppliers was  introduced, under section 11(2)(y). To 
                            qualify for the zero-rating, the service must be as contemplated in the International 
                            Telecommunication Regulations that were concluded at  the World Conference on 
                            International Telecommunications held in Dubai in 2012. 
                       •    Accounting basis for an intermediary – Section 15(2)(a)(vii) has been amended to 
                            allow an “intermediary” involved in the supply of electronic services to account for VAT 
                            on the payments basis.     
                       •    Irrecoverable debts – Proviso (ii) to section 22(3) deals with the VAT adjustment to be 
                            made in respect of irrecoverable debts by a vendor that is sequestrated, declared 
                            insolvent, enters into a comprise arrangement or ceases to be a vendor. Proviso (ii) to 
                            section 22(3) has been amended to clarify that the output tax must be calculated by 
                            applying the tax fraction (at the rate applicable when the input tax deduction was made) 
                            to the unpaid amount. 
                       •    Management of superannuation schemes – The application of the special valuation 
                            rule in section 10(22A) has proved to be challenging. This has ultimately resulted in 
                            the provision being deleted. 
                    
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