VAT in South Africa
Value-Added Tax is charged at a standard rate of 15% on most goods and services supplied in South Africa. It has been 15% since 1 April 2018, when it rose from 14%. As a registered vendor you charge VAT on what you sell, called output tax, and claim back the VAT on what you buy, called input tax. What you pay over to SARS on the VAT201 return is the difference between the two.
The arithmetic trips people up in one specific place: taking VAT out of a price that already includes it. The instinct is to subtract 15%, but that is wrong. VAT is 15% of the excluding-VAT amount, which is the smaller number, so the VAT inside a VAT-inclusive R100 is R13.04 and not R15. The reliable way is to multiply the inclusive amount by 15/115, or divide by 1.15 and subtract.
Not everything carries VAT. Zero-rated supplies are taxable at 0%, which includes most basic foodstuffs such as brown bread, maize meal, rice, vegetables, fruit and paraffin, along with exports. You charge nothing on these but you can still claim the input VAT on your costs. Exempt supplies, such as residential rent and most financial services, sit outside the system altogether, and the input VAT on related costs cannot be recovered. The difference matters more than it sounds, because it decides what you get back.
Registration becomes compulsory once your taxable supplies exceed R1 million in any consecutive 12-month period. That rolling window catches people out: a business that grows through the middle of its financial year can cross the line months before it looks at annual figures. Voluntary registration opens above R50,000 and is worth considering when your customers are themselves VAT-registered, because the 15% you add costs them nothing once they claim it back, while you start recovering the VAT on your own expenses.
Frequently Asked Questions
What is the VAT rate in South Africa?
The standard rate is 15%. It has been 15% since 1 April 2018, when it rose from 14%. Some supplies are zero-rated, including most basic foodstuffs such as brown bread, maize meal, rice, vegetables, fruit and paraffin, and exports. Others, such as residential rent and most financial services, are exempt.
How do I add VAT to a price?
Multiply the amount excluding VAT by 1.15. R100 excluding VAT becomes R115 including VAT, of which R15 is the VAT.
How do I work out the VAT already inside a price?
Divide the VAT-inclusive amount by 1.15 to get the amount excluding VAT, then subtract to find the VAT. A useful shortcut is to multiply the inclusive amount by 15/115, which is roughly 0.1304. R100 including VAT contains R13.04 of VAT, not R15.
When must I register for VAT in South Africa?
Registration is compulsory once your taxable supplies exceed R1 million in any consecutive 12-month period, or when you have a contractual obligation that will take you over R1 million in the next 12 months. This is a rolling 12 months, not your financial year, which is the part most people get wrong. Voluntary registration is available once you exceed R50,000 in the past 12 months.
Should I register for VAT voluntarily?
It depends on who your customers are. If they are VAT-registered businesses, they claim back the VAT you charge, so registering lets you recover input VAT on your own costs at no real cost to them. If you sell to the public, adding 15% either raises your prices or cuts your margin, and voluntary registration also brings bi-monthly VAT201 returns and record-keeping obligations.
What is the difference between zero-rated and exempt?
Zero-rated supplies are taxable at 0%, so you charge no VAT but can still claim input VAT on your costs. Exempt supplies fall outside the VAT system entirely, so you charge no VAT and cannot claim the input VAT on related costs. The distinction matters because it changes what you can recover.
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