How to Calculate VAT Payable Or Refundable

By Klenam JU •  Updated: 01/23/24 •  6 min read

If you operate a business in South Africa, you should know that value-added tax (VAT) is charged on certain items and services sold within the country or imported. The standard VAT rate is 15%, while others are charged at zero rate. Some items are exempted from VAT. Therefore, it is important to know how to calculate VAT

to comply with the law and charge the right prices for your goods and services. This article explains everything you want to know about calculating VAT payable or refundable.    

How Is VAT Payable or Refundable Calculated in South Africa?

Registered vendors are required to pay VAT, but it does not necessarily mean that they should pay everything collected from sales to SARS. The amount payable to SARS or refundable to the vendor is determined by output VAT and input VAT. 

Input VAT is the tax payable when one purchases goods and services. On the other hand, output VAT refers to the tax collected from the sale of services and products to the final consumers. The difference between output VAT and input VAT is paid to SARS. You can use the formula below to calculate payable VAT to SARS. 

VAT Payable = Output VAT – Input VAT 

As expected, output VAT should be payable to SARS since that is the essence of VAT. VAT is among the major sources of revenue for the government. 

In contrast, if the input VAT is more than the output VAT, the vendor is entitled to get a refund. In such a scenario, no VAT is paid to SARS since the vendor gets a refund. You can automate VAT calculations by utilizing special software to determine VAT payable and VAT refundable.    

What Is the Formula for VAT Payable?

VAT payable includes refers to the difference between output VAT and output VAT. It is represented by the formula below:

VAT Payment = Output VAT – Input VAT

If input VAT is higher than output VAT, you will not pay VAT to SARS, but you will get a refund. You need to use accurate figures when calculating VAT to comply with the laws.

How Much Is the VAT Payable?

Vendors are required to charge VAT on supplies of services and goods, known as output tax. VAT only applies to taxable supplies, and it is charged at the current standard rate of 15% or 0% (zero rate). Only a few goods qualify for the VAT zero rate or are exempt from this indirect tax. For instance, goods meant for charity or educational purposes are not charged VAT.   

Is VAT Refundable in South Africa?

VAT-registered vendors can claim a refund if they mistakenly pay an excess amount than required. If the input tax charged on the acquisition of goods and services exceeds the output tax charged on the supply of goods and services, a vendor is entitled to claim a refund.

Vendors can claim a refund by submitting a VAT return via the eFiling platform or booking an appointment with a SARS official. Refundable claims must be filed before the end of the month. Once you submit your claim for refund, SARS must pay you within 21 working days. If you don’t get your refund within this period, SARS will pay you interest. Just make sure that the details you provide are correct to avoid delays.  

However, SARS can withhold your refund under the following circumstances:

If you have outstanding tax returns, your refund may be processed, but you will not get it. Instead, it will be used to pay your credit.  

If you are a foreign visitor, you are entitled to claim VAT paid on tangible assets valued at R250 or more which you want to take out of the country. To qualify for a refund, the purchaser must be:

Upon departure, you must lodge your application for a refund at the VAT Refund Administrator’s Offices. Ensure you have the goods you want to take out of the country and other relevant documents like invoices, valid passport, and contact details. You can only claim VAT at designated points of departure from South Africa, such as international airports, land borders, or commercial harbors. There are 43 ports of exit where you can claim VAT, so you should do your research first to avoid inconveniences.  

The VRA official must inspect the goods and check the qualifying purchaser’s invoice to ensure they correspond. Only original documents are tolerated, so avoid photocopies or facsimiles. If the VRA is not physically at the port of exit, then you can apply in writing. Attach the invoice for the items you want to take out of the country and other relevant supporting documents. 

It is a good idea to send your application in writing before your departure day if you are not sure you will get a VRA official. You need to export the goods within 90 days from the date of getting the tax invoice to be eligible to claim a VAT refund. Consult a tax professional before your departure day to ensure you have everything required to get your VAT refund before leaving South Africa.  

VAT is charged on certain services and items sold in South Africa. It is known as indirect consumption tax where the registered vendor is the one who pays to SARS, not the ultimate consumer of the product. Likewise, the vendor can only pay VAT if their output VAT or tax is higher than the input tax applied when purchasing the goods and services. The difference between output tax, and input tax is the VAT payable to SARS. Vendors can reclaim a refund if their input tax is higher than the output tax. Non-residents and foreign visitors can also claim VAT on tangible goods they want to take out of the country.  

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