How VAT works
VAT for South African businesses, in plain English
VAT is a 15% tax added to most goods and services in South Africa, collected by businesses on behalf of SARS. The customer ultimately pays it. You, the business, are just the collector — and the bookkeeper who has to account for it correctly.
The two directions
VAT calculations only go two ways. You either have the net (VAT-exclusive) price and need the gross, or you have the gross and need to know what’s inside it.
- Add VAT. Net × 1.15 = gross. R1,000 + 15% VAT = R1,150. The VAT itself is R150.
- Remove VAT. Gross ÷ 1.15 = net. R1,150 ÷ 1.15 = R1,000. VAT inside = R150.
The common mistake: subtracting 15% from a gross. R1,150 − 15% = R977.50, which is wrong because the original 15% was added to a smaller base (the net), not the gross. The calculator above does both correctly.
When you have to register
Compulsory VAT registration is triggered once your taxable supplies over any rolling 12-month period cross a threshold set by SARS. Once you cross it, you must register within 21 days. The current threshold is on sars.gov.za — verify the figure there before deciding.
Voluntary registration is available below the compulsory threshold, once your revenue clears a lower minimum. It usually only makes sense if (a) your customers are themselves VAT-registered businesses who reclaim it, so charging VAT costs them nothing, or (b) you have meaningful VAT-bearing business expenses you’d like to reclaim.
Input vs output — and the VAT201 return
Once registered, two flows matter.
- Output VAT— the 15% you charge customers. Money you collect on SARS’s behalf. Held funds, not revenue.
- Input VAT — the 15% you paid on qualifying business purchases. You can claim it back against your output VAT.
At return time (monthly or bimonthly, depending on your category), you file a VAT201 on eFiling. SARS works out output minus input. You pay the difference if positive; SARS refunds the difference if input exceeded output (often the case in capex-heavy months).
Tax invoices done right
A tax invoice that doesn’t meet SARS’s requirements can be rejected at audit, costing the customer their input VAT claim. Once you’re registered, every sale above the small-amount threshold needs to show:
- The words “Tax Invoice”
- Your business name, address, and VAT number
- The customer’s name (and VAT number, above a higher SARS threshold)
- A unique invoice number and the date
- A description of what was sold
- The amount, the VAT amount, and the total
Most invoicing software gets this right automatically. If you’re writing invoices by hand or in Word, check the current format on sars.gov.za and copy it exactly.
Zero-rated vs exempt
Two different things that often get confused.
- Zero-rated items are technically VAT-able, but at 0%. So no VAT is charged to the customer, but you can still reclaim input VAT on costs related to selling them. Basic foods (brown bread, maize meal, rice, samp, beans, milk, fresh produce, etc.) and exports are zero-rated.
- Exemptmeans no VAT applies at all, and you can’t reclaim input VAT on related costs. Residential rent and most financial services are exempt.
If your business deals heavily in zero-rated or exempt items, talk to a tax practitioner — the apportionment rules between taxable and non-taxable supplies can get fiddly.