Everyone likes the idea of getting money back from the tax man, right? Most of us are required to pay VAT on the items we buy at the till point in South Africa. However, two types of users can get the VAT they pay refunded to them, instead. The first, and more common, scenario is for registered VAT vendors in South Africa.
These businesses meet the requirements to be VAT-registered, whether compulsorily or via voluntary registration. They are allowed to offset the VAT they charge customers (output) against the VAT they pay in their supply chain (input), and may get a VAT refund if their inputs have exceeded their outputs. Additionally, non-South African visitors to South Africa can claim back the VAT they pay during their stay from SARS when they leave the country. Today we look at some facts everyone should know about VAT refunds in South Africa and claiming them.
How Do I Get A VAT Refund From SARS?
To get a VAT refund as a business in South Africa, you must meet either the mandatory or voluntary taxable turnover requirements to become a VAT vendor. You will then be required to register for VAT with SARS. Once the registration is complete, and you are issued a separate VAT number from SARS, you will be required to submit regular VAT returns. These act as a summary of all the output and input VAT you have paid or charged through that period. If it is found that you have paid more VAT than you charged, you will be entitled to a VAT refund from SARS.
To claim a VAT refund from SARS as a visitor to South Africa, you will need to visit the VAT Refund office at your port of exit with the proof of items (receipts) you have paid VAT on during your stay.
How Do VAT Returns Work In South Africa?
Once you are registered as a VAT vendor in South Africa, part of your added administrative burden is regularly completing VAT returns for SARS. This works very similarly to other return types you may already be registered for, like the IRP6 provisional tax return.
Businesses are required to submit VAT returns regularly, typically bi-monthly or six-monthly, depending on their turnover. VAT returns document both input and output VAT. Input VAT is the VAT paid on your business purchases, while output VAT is the VAT collected on your sales. Your VAT liability is calculated by subtracting the input VAT from the output VAT. If output VAT is higher than input VAT, you will owe SARS a payment. If your input VAT is higher, they will owe you a VAT refund- but you will only be paid this amount if you are otherwise in good standing with SARS. Refunds will not be paid out if you owe other tax types to SARS.
On What Items Can You Claim VAT In South Africa?
Most items in your supply chain (i.e. that are needed to produce your goods or services) will attract VAT. The only exceptions are goods and services which are specifically exempt from VAT under SARS legislation. While zero-rated goods seem similar, they are still part of the VAT ecosystem. If you make zero-rated goods, you cannot charge VAT to the end customer. However, you can still claim VAT inputs from your supply chain.
Additionally, VAT paid on the following items can be claimed:
- Business expenses such as office supplies, utilities, and rent.
- Capital goods, including machinery, vehicles, and equipment.
- Some entertainment and travel expenses, provided SARS deems them legitimate, can also be claimed.
VAT paid on imported goods and services can often be claimed as well, provided they are used for business purposes.
For tourists leaving SA, most goods and services are standard rated for VAT, meaning you can claim a refund. Zero-rated and VAT-exempt goods will not attract a VAT refund, however.
How Long Does It Take To Get A VAT Refund?
SARS currently offers a 21-business-days timeline to process all types of tax refunds, including VAT refunds. However, this timeline can be delayed by many factors. To ensure you receive your refund as timeously as possible, make sure you fill in all forms completely and accurately, try to avoid filing around bottlenecks (like the end of income tax season) when SARS is very busy, and make sure your banking details are up to date on their system.
Can You Claim VAT Without A Receipt?
In general, claiming VAT without a receipt as a VAT vendor is rather challenging and is not recommended. Proper documentation is a cornerstone of the VAT refund process, and SARS will require valid invoices and receipts as evidence for claims. While these are not uploaded alongside your monthly VAT returns, you will be required to provide them in the event of an audit, and severe penalties can result if you do not have complete records.
However, in certain cases, SARS may accept alternative proof of expenditure, such as bank statements or written confirmation from suppliers. It’s crucial to consult with SARS or seek professional advice in situations where original receipts may be unavailable.
If you are a tourist leaving SA and hoping to claim your VAT refund at the VAT Refund office, you will need to show receipts for all claims. Anything you did not get a receipt for will, regrettably, be forfeited.
You should now feel much more comfortable about VAT refunds and when you qualify for one in South Africa.
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