Thomson's Master Tax and Business Accountants

THOMSONS TAX

2009/02/25 SPC V2.000

Guide for Vendors

All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies).

Vendors collect VAT on behalf of the State – please make sure that you pay it over on time, otherwise penalties and interest will be charged.

VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable.

You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.

Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic.

You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.

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 authorised representative, business address, banking details, trading name, or if you cease trading.

If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect.

You can pay your VAT by using various electronic methods, including eFiling, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks.

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.

2

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 "the VAT Act" or "the Act" are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. 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 of the VAT Act. You will also find a number of specific terms used throughout the guide which are defined in the Value–Added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference.

Taxation Laws Amendment Act 7 of 2010 and the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act 8 of 2010 both of which were promulgated on 2 November 2010 (as per GG 33726 and GG 33727 respectively). Below is a brief synopsis of some of the most important changes affecting the administration of VAT since the previous issue of this Guide:

Remission of interest – With effect from 1 April 2010 the Commissioner’s discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor’s control. Interpretation Note No. 61: Remission of interest in terms of section 39(7)(a) was issued on 29 March 2011 to provide further guidance in this regard. The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010.

Registration requirements – The documentary requirements with which a person must comply in order to obtain a VAT registration number were clarified. Any person that applies to register for VAT must ensure that the correct supporting documents as set out in the policy document AS-VAT-08 - Guide for Completion of VAT Registration Application Forms are submitted.

Tax invoices – A supplier is not obliged to issue a tax invoice in cases where the consideration for a taxable supply is less than R50, but the recipient must nevertheless be in possession of a source document such as an invoice or till slip as proof that the expense has been incurred before an input tax deduction will be allowed.

Second-hand goods – Vendors are required to maintain the prescribed records (form VAT 264) in respect of any second-hand goods acquired. Previously this was only required for purchases where the consideration was R1 000 or more. The proof of payment as well as the date on which payment was made is also required as part of the vendor’s records to validate any input tax deduction for second-hand goods acquired.

Foreign-going ships and aircraft – The scope of the definitions "foreign-going aircraft" and "foreign-going ship" was widened so that the supply of consumables and repairs to certain military craft may qualify as zero rated exports as in the case of commercial foreign-going ships and aircrafts.

Time of supply – The VAT law was amended to make it clear that the time of supply rule which is applicable to machines, meters or other devices that are operated by means of coins or tokens, is also applicable to machines that operate with paper currency. The time of supply for the supplier is when the coins, tokens or paper currency is removed from the machine or device. However, when payment is made via the machine or device by electronic means by credit or debit card, the normal time of supply rule applies (i.e. the earlier of the date of payment or the date that an invoice is issued).

3

VAT 201 return, modernisation and imported services – New fields were added to the VAT 201 return which came into operation on 28 June 2010. The changes were aimed mainly at addressing certain compliance aspects with regard to the import and export of goods – in particular fraudulent VAT refunds linked to exports. The new fields are 2A, 14A, 15A and the Customs Code. The effect of these changes is that vendors must distinguish between the value of zero-rated exports and other zero-rated supplies on their returns. Input tax in relation to the importation of goods must now also be indicated separately from other taxable supplies. Further, with effect from 1 February 2011, the VAT on any imported services must be declared on the VAT 201 in the case where the person is a vendor instead on form VAT 215. In April 2011, further modernisation changes came into effect in the form of a new look VAT 201 return which is in landscape format and contains additional demographic fields with certain pre-populated fields. Part of the changes are that VAT 201 returns are on no longer mailed in bulk to vendors, but instead must be requested by the vendor on eFiling or from a SARS office. It is expected that more modernisation changes will be implemented in phases in 2011. Vendors are therefore advised to check the SARS website for the latest information, as well as the new publication called VAT Connect which will be sent directly to vendors.

Carbon Dioxide (CO) emission levy – An environmental levy (CO levy) was introduced with effect from 1 September 2010 on new passenger cars, including SUVs and other motor vehicles manufactured in, or imported into, the Republic which are principally designed to carry a maximum of nine passengers. As with all excise duties, the levy amount is built into the price that the manufacturer or importer charges the client. The value on which VAT is calculated must therefore include any environmental levy which is applicable.

Tax Administration Bill (TAB) – The TAB is in the final stages of completion and was published for a second round of public comment in October 2010. The TAB seeks to provide a single body of law that outlines common procedures, rights and remedies. It is expected that the TAB will become an Act of Parliament in the latter part of 2011. Once in effect the TAB will have a major impact on the administration of all taxes in general. The effect from a VAT perspective is that a number of administrative type provisions which are currently in the VAT Act will be deleted or amended. The corresponding provisions in the TAB will then apply from the effective date. Schedule A – Schedule of Amendments reflects the proposed consequential amendments to the various tax acts which were necessary to align them with the TAB. The TAB is available on the SARS website under "Draft Bills" on the Legal and Policy page.

Voluntary disclosure programme (VDP) – The VDP has been implemented to provide taxpayers with an opportunity to voluntarily apply to SARS to disclose their defaults and regularise their tax affairs. The period within which VDP applications can be made to SARS is prescribed by the Commissioner and runs from 5 November 2010 to 31 October 2011. The VDP applies for various taxes including VAT.

4

www.sars.gov.za;

policycomments@sars.gov.za.

VAT 404 – Guide for Vendors Contents 5

THOMSONS TAX

2009/02/25 SPC V2.000

Guide for Vendors

All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies).

Vendors collect VAT on behalf of the State – please make sure that you pay it over on time, otherwise penalties and interest will be charged.

VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable.

You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.

Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic.

You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.

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 authorised representative, business address, banking details, trading name, or if you cease trading.

If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect.

You can pay your VAT by using various electronic methods, including eFiling, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks.

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.

2

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 "the VAT Act" or "the Act" are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. 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 of the VAT Act. You will also find a number of specific terms used throughout the guide which are defined in the Value–Added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference.

Taxation Laws Amendment Act 7 of 2010 and the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act 8 of 2010 both of which were promulgated on 2 November 2010 (as per GG 33726 and GG 33727 respectively). Below is a brief synopsis of some of the most important changes affecting the administration of VAT since the previous issue of this Guide:

Remission of interest – With effect from 1 April 2010 the Commissioner’s discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor’s control. Interpretation Note No. 61: Remission of interest in terms of section 39(7)(a) was issued on 29 March 2011 to provide further guidance in this regard. The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010.

Registration requirements – The documentary requirements with which a person must comply in order to obtain a VAT registration number were clarified. Any person that applies to register for VAT must ensure that the correct supporting documents as set out in the policy document AS-VAT-08 - Guide for Completion of VAT Registration Application Forms are submitted.

Tax invoices – A supplier is not obliged to issue a tax invoice in cases where the consideration for a taxable supply is less than R50, but the recipient must nevertheless be in possession of a source document such as an invoice or till slip as proof that the expense has been incurred before an input tax deduction will be allowed.

Second-hand goods – Vendors are required to maintain the prescribed records (form VAT 264) in respect of any second-hand goods acquired. Previously this was only required for purchases where the consideration was R1 000 or more. The proof of payment as well as the date on which payment was made is also required as part of the vendor’s records to validate any input tax deduction for second-hand goods acquired.

Foreign-going ships and aircraft – The scope of the definitions "foreign-going aircraft" and "foreign-going ship" was widened so that the supply of consumables and repairs to certain military craft may qualify as zero rated exports as in the case of commercial foreign-going ships and aircrafts.

Time of supply – The VAT law was amended to make it clear that the time of supply rule which is applicable to machines, meters or other devices that are operated by means of coins or tokens, is also applicable to machines that operate with paper currency. The time of supply for the supplier is when the coins, tokens or paper currency is removed from the machine or device. However, when payment is made via the machine or device by electronic means by credit or debit card, the normal time of supply rule applies (i.e. the earlier of the date of payment or the date that an invoice is issued).

3

VAT 201 return, modernisation and imported services – New fields were added to the VAT 201 return which came into operation on 28 June 2010. The changes were aimed mainly at addressing certain compliance aspects with regard to the import and export of goods – in particular fraudulent VAT refunds linked to exports. The new fields are 2A, 14A, 15A and the Customs Code. The effect of these changes is that vendors must distinguish between the value of zero-rated exports and other zero-rated supplies on their returns. Input tax in relation to the importation of goods must now also be indicated separately from other taxable supplies. Further, with effect from 1 February 2011, the VAT on any imported services must be declared on the VAT 201 in the case where the person is a vendor instead on form VAT 215. In April 2011, further modernisation changes came into effect in the form of a new look VAT 201 return which is in landscape format and contains additional demographic fields with certain pre-populated fields. Part of the changes are that VAT 201 returns are on no longer mailed in bulk to vendors, but instead must be requested by the vendor on eFiling or from a SARS office. It is expected that more modernisation changes will be implemented in phases in 2011. Vendors are therefore advised to check the SARS website for the latest information, as well as the new publication called VAT Connect which will be sent directly to vendors.

Carbon Dioxide (CO) emission levy – An environmental levy (CO levy) was introduced with effect from 1 September 2010 on new passenger cars, including SUVs and other motor vehicles manufactured in, or imported into, the Republic which are principally designed to carry a maximum of nine passengers. As with all excise duties, the levy amount is built into the price that the manufacturer or importer charges the client. The value on which VAT is calculated must therefore include any environmental levy which is applicable.

Tax Administration Bill (TAB) – The TAB is in the final stages of completion and was published for a second round of public comment in October 2010. The TAB seeks to provide a single body of law that outlines common procedures, rights and remedies. It is expected that the TAB will become an Act of Parliament in the latter part of 2011. Once in effect the TAB will have a major impact on the administration of all taxes in general. The effect from a VAT perspective is that a number of administrative type provisions which are currently in the VAT Act will be deleted or amended. The corresponding provisions in the TAB will then apply from the effective date. Schedule A – Schedule of Amendments reflects the proposed consequential amendments to the various tax acts which were necessary to align them with the TAB. The TAB is available on the SARS website under "Draft Bills" on the Legal and Policy page.

Voluntary disclosure programme (VDP) – The VDP has been implemented to provide taxpayers with an opportunity to voluntarily apply to SARS to disclose their defaults and regularise their tax affairs. The period within which VDP applications can be made to SARS is prescribed by the Commissioner and runs from 5 November 2010 to 31 October 2011. The VDP applies for various taxes including VAT.

4

www.sars.gov.za;

policycomments@sars.gov.za.

VAT 404 – Guide for Vendors Contents 5

THOMSONS TAX

2009/02/25 SPC V2.000

Guide for Vendors

All prices charged, advertised or quoted by a vendor must include VAT at the applicable rate. (Presently 14% for standard rated supplies).

Vendors collect VAT on behalf of the State – please make sure that you pay it over on time, otherwise penalties and interest will be charged.

VAT charged on supplies made (output tax) less VAT paid to your suppliers (input tax) = the amount of VAT payable/refundable.

You need a valid tax invoice with your VAT number indicated on it as proof of any input tax deductions which you want to make. You must also keep records of all your tax invoices and other records of transactions for at least five (5) years.

Goods exported to clients in an export country are charged with VAT at 0%. However, if delivery takes place in RSA, you must charge VAT at 14% to your client. If your client is a vendor, the VAT charged may be deducted as input tax. If your client is not a vendor, and the goods are subsequently removed from the country, a claim for a refund of the VAT may be made at the offices of the VAT Refund Administrator (the VRA). The VRA is only present at certain points of exit from the Republic.

You may not register for VAT or deduct any input tax on goods or services acquired to make exempt supplies, for private use or other non-taxable purposes. Also, as a general rule, input tax may not be deducted where the expense incurred is for the acquisition of a motor car or entertainment, even if utilised for making taxable supplies.

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 authorised representative, business address, banking details, trading name, or if you cease trading.

If you have underpaid VAT as a result of a mistake, report it to your SARS branch office as soon as possible, rather than leaving it for the SARS auditors to detect.

You can pay your VAT by using various electronic methods, including eFiling, internet banking, debit order and electronic funds transfer (EFT). You may also pay at any of the four major banks.

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.

2

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 "the VAT Act" or "the Act" are to the Value-Added Tax Act, 1991 unless the context otherwise indicates. 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 of the VAT Act. You will also find a number of specific terms used throughout the guide which are defined in the Value–Added Tax Act, 1991 and listed in Chapter 19 in a simplified form for easy reference.

Taxation Laws Amendment Act 7 of 2010 and the Voluntary Disclosure Programme and Taxation Laws Second Amendment Act 8 of 2010 both of which were promulgated on 2 November 2010 (as per GG 33726 and GG 33727 respectively). Below is a brief synopsis of some of the most important changes affecting the administration of VAT since the previous issue of this Guide:

Remission of interest – With effect from 1 April 2010 the Commissioner’s discretion to remit interest will be based solely on whether the interest was incurred as a result of circumstances beyond the vendor’s control. Interpretation Note No. 61: Remission of interest in terms of section 39(7)(a) was issued on 29 March 2011 to provide further guidance in this regard. The new dispensation applies to any interest imposed in terms of section 39 on or after 1 April 2010.

Registration requirements – The documentary requirements with which a person must comply in order to obtain a VAT registration number were clarified. Any person that applies to register for VAT must ensure that the correct supporting documents as set out in the policy document AS-VAT-08 - Guide for Completion of VAT Registration Application Forms are submitted.

Tax invoices – A supplier is not obliged to issue a tax invoice in cases where the consideration for a taxable supply is less than R50, but the recipient must nevertheless be in possession of a source document such as an invoice or till slip as proof that the expense has been incurred before an input tax deduction will be allowed.

Second-hand goods – Vendors are required to maintain the prescribed records (form VAT 264) in respect of any second-hand goods acquired. Previously this was only required for purchases where the consideration was R1 000 or more. The proof of payment as well as the date on which payment was made is also required as part of the vendor’s records to validate any input tax deduction for second-hand goods acquired.

Foreign-going ships and aircraft – The scope of the definitions "foreign-going aircraft" and "foreign-going ship" was widened so that the supply of consumables and repairs to certain military craft may qualify as zero rated exports as in the case of commercial foreign-going ships and aircrafts.

Time of supply – The VAT law was amended to make it clear that the time of supply rule which is applicable to machines, meters or other devices that are operated by means of coins or tokens, is also applicable to machines that operate with paper currency. The time of supply for the supplier is when the coins, tokens or paper currency is removed from the machine or device. However, when payment is made via the machine or device by electronic means by credit or debit card, the normal time of supply rule applies (i.e. the earlier of the date of payment or the date that an invoice is issued).

3

VAT 201 return, modernisation and imported services – New fields were added to the VAT 201 return which came into operation on 28 June 2010. The changes were aimed mainly at addressing certain compliance aspects with regard to the import and export of goods – in particular fraudulent VAT refunds linked to exports. The new fields are 2A, 14A, 15A and the Customs Code. The effect of these changes is that vendors must distinguish between the value of zero-rated exports and other zero-rated supplies on their returns. Input tax in relation to the importation of goods must now also be indicated separately from other taxable supplies. Further, with effect from 1 February 2011, the VAT on any imported services must be declared on the VAT 201 in the case where the person is a vendor instead on form VAT 215. In April 2011, further modernisation changes came into effect in the form of a new look VAT 201 return which is in landscape format and contains additional demographic fields with certain pre-populated fields. Part of the changes are that VAT 201 returns are on no longer mailed in bulk to vendors, but instead must be requested by the vendor on eFiling or from a SARS office. It is expected that more modernisation changes will be implemented in phases in 2011. Vendors are therefore advised to check the SARS website for the latest information, as well as the new publication called VAT Connect which will be sent directly to vendors.

Carbon Dioxide (CO) emission levy – An environmental levy (CO levy) was introduced with effect from 1 September 2010 on new passenger cars, including SUVs and other motor vehicles manufactured in, or imported into, the Republic which are principally designed to carry a maximum of nine passengers. As with all excise duties, the levy amount is built into the price that the manufacturer or importer charges the client. The value on which VAT is calculated must therefore include any environmental levy which is applicable.

Tax Administration Bill (TAB) – The TAB is in the final stages of completion and was published for a second round of public comment in October 2010. The TAB seeks to provide a single body of law that outlines common procedures, rights and remedies. It is expected that the TAB will become an Act of Parliament in the latter part of 2011. Once in effect the TAB will have a major impact on the administration of all taxes in general. The effect from a VAT perspective is that a number of administrative type provisions which are currently in the VAT Act will be deleted or amended. The corresponding provisions in the TAB will then apply from the effective date. Schedule A – Schedule of Amendments reflects the proposed consequential amendments to the various tax acts which were necessary to align them with the TAB. The TAB is available on the SARS website under "Draft Bills" on the Legal and Policy page.

Voluntary disclosure programme (VDP) – The VDP has been implemented to provide taxpayers with an opportunity to voluntarily apply to SARS to disclose their defaults and regularise their tax affairs. The period within which VDP applications can be made to SARS is prescribed by the Commissioner and runs from 5 November 2010 to 31 October 2011. The VDP applies for various taxes including VAT.

4

www.sars.gov.za;

policycomments@sars.gov.za.

VAT 404 – Guide for Vendors Contents 5