“Who loves paying VAT?”
Sadly, more often than not, no one puts their hand up. Everyone pays VAT in one form or another.
That said, here are a few tips in terms of what must be done regarding the VAT requirements.
Number one on the list is that you have to be a VAT vendor in order for any of this to apply to you. If your turnover is R1 million or more per annum, then being a VAT vendor is compulsory. You can, however, apply to become a ‘voluntary’ VAT vendor. The threshold is R 50 000.
VAT has to be charged at the current rate which is 15% (changed as at 1 April 2019) and it must be included on a valid ‘Tax Invoice’. This has to be kept in terms of the correct retention period as promulgated by law. That means that your documents must be archived and retained.
VAT must be charged for all services and/or products supplied by the vendor. These services and/or products must be wholly and/or partly used for consumption in the course of making supplies or supplying a service that is taxable.
- If you buy a potato (as a basic foodstuff this does not attract VAT which means you cannot offset it) to make chips or mash or even a roast potato dish for your restaurant, you used the potato (but changed it in the cooking process) in your product and your product does now attract VAT.
- Going out for a meal with clients is called ‘entertainment’ and as such, you can claim it as a business expense, but you cannot claim the VAT on it. There is always an exception and here it is: If you or one of your staff are going out for a meal with a client and you (they) are out of town for longer than one night, you can claim the VAT back on this. In fact, you can claim the VAT back for any meals enjoyed by you and your staff (including alcohol) while you are out of town on business for a period longer than one night.
- Normally, you cannot claim VAT for ‘office refreshments’ like tea, coffee and snacks. BUT if you purchase refreshments for the delegates that you are training, then you can claim VAT on those refreshments.
As usual, it is about what you know and how you use it that will allow you to make the most of your relationship with SARS. Below, there are some links to articles that look at some more expenses you can claim VAT on.
If you hire a car for business purposes, then you are entitled to claim the VAT on the insurance that you are required to take out on the vehicle. Be sure to get an invoice that lists the insurance, or itemizes it separately, this will make it much easier for record-keeping purposes.
Should one of your staff fall ill at work or get hurt in an accident while they are at work and the medical expenses are paid by the company, the VAT on these medical bills can also be claimed back.
Parking fees. This is one of my favourites. Do you know how much we spend on parking in the malls and in office park complexes – it’s frightening! Parking fees, particularly fees that are paid, while working, that have VAT charged on them (in other words Tax Invoice should appear, somewhere on the receipt, and yes you have to have a receipt to claim the VAT back), can be claimed back. This is provided that you are there for business!
Most malls that have those ‘pay machines’ actually give out receipts – be sure to request and submit those receipts. Obviously, monies that are paid out to the ‘car guards’ cannot have the VAT claimed for, but you can, of course, claim them as a business expense as long as they are “reasonable” and it is always better to be able to substantiate them. I use my diary as a guide to when I paid the car guards.
When you send wreaths and/or flowers to staff and/or customers who have had a death or bereavement in their families, you can claim the VAT back.
In terms of postage stamps and postage, this too, the VAT portion can be claimed back provided of course that the postage is being used for business purposes.
Artwork, in the form of carpets or paintings and pictures or even plants, can have the VAT claimed for, provided of course that they were actually purchased for the office. Here’s the thing though – they have to physically be in the office. Understand that if they are not in the office and the VAT man comes to visit, you could be in the deep brown smelly stuff.
VAT on vehicles
Many companies, that are sales driven and who employ a large number of sales representatives. This is a situation where the staff either own their own vehicles, or the company has a large fleet of vehicles for the employees to use.
Improvements that are made to these vehicles (including the vehicles that are owned by the staff themselves), that are used for business purposes can claim the VAT back. Some examples of these improvements are (but not limited to):
- Tow Bar
- Air Conditioning
- Cruise control
- Radio/CD player
- Gear Lock
- Hands-free phone kit
- Tracker (or similar tracking type device)
- Smash and grab window tinting etc.
Toll fees that are incurred during the course of staff business travelling can have the VAT portion claimed for. Again the whole transaction has to go through the Company books, which would then have an impact on Company Tax.
Subscriptions to magazines, trade journals and associations that relate to your business can also be claimed for in terms of VAT. Flower arrangements for the reception rooms and offices can have the VAT portion claimed for. They must be present on the premises if you are unlucky enough to have a SARS site inspection.
Should you own a fixed property in your personal capacity, that you now start using for business purposes, the VAT portion of the transfer duties can be claimed for.
VAT on aeroplane tickets that were purchased for local business travel and please note the “local” in the business travel, as well as the accommodation and other expenses (such as food and drink) can all be claimed. VAT on air travel is slightly different, ie: not a standard 15% on all of it.
Remember though, if you are travelling for pleasure and claim everything as a business expense and SARS finds out about this – you will be told to pay the VAT and in fact, you probably will be audited.
In the end . . .
Ensure your relationship with the VAT man is a great one because it is quite simply this – find out what you can claim for and claim for it, find out what you cannot claim for and don’t claim for it!
The last point: ALWAYS keep your slips – either the paper or digitally (recommended).
- If you need advice on accounting services or tax returns, please contact us.
More VAT articles:
- This post was updated on 8 October 2020.
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