VAT (value-added tax) is South Africa's tax on consumption, currently levied at 15% on most goods and services. A registered vendor charges VAT on its sales (output VAT) and can claim back the VAT it paid on its purchases (input VAT), paying SARS only the net difference.
What it means
VAT is ultimately borne by the end consumer, but it is collected in stages along the supply chain - each vendor adds VAT to its selling price and offsets the VAT already paid on its inputs. A business must register for VAT once its taxable turnover exceeds the statutory threshold.
Where it fits in
VAT is a transaction tax on supplies of goods and services and does not apply to remuneration - an employee is not a VAT vendor in respect of their salary. Payroll and VAT are separate tax systems that both report to SARS but on different bases.
Key rules
- VAT = value-added tax, currently 15% in South Africa.
- Output VAT charged on sales less input VAT on purchases is paid to SARS.
- Borne by the end consumer, collected at each stage of the supply chain.
- Does not apply to remuneration paid to employees.
