SARS VAT Registration Process: A Comprehensive Guide

The South African Revenue Service (SARS) is tasked with the collection of Value Added Tax (VAT) throughout the entire production and distribution process, from the initial manufacturing stage to the final consumer stage. If you’re a small business owner, calculating the VAT to be paid to SARS can be a straightforward process. In this in-depth guide, we will provide you with valuable insights into the VAT registration requirements, the registration process, and important details you need to know about VAT in South Africa.

Understanding VAT: What is it?

Value Added Tax (VAT) is an indirect tax on the consumption of goods and services within the South African economy. It is charged at each stage of the production and distribution process, making it essential for businesses to understand VAT registration requirements to remain compliant with the law. However, it’s worth noting that certain products, referred to as “zero-rated products,” are exempt from this indirect tax. These products include basic food items like maize meals and vegetables.

VAT Registration Requirements

When is VAT Registration Mandatory?

In South Africa, a business must obtain a VAT number when the total value of taxable goods or services it provides exceeds R1 million over a period of 12 months or more. Additionally, a business can opt to register voluntarily if its income for the past 12 months surpasses R50,000. To register for a VAT number, the following requirements must be met:

• A Certificate of Incorporation to prove that the business is registered with the Companies and Intellectual Property Commission (CIPC).
• Original banking statements covering the past three months. These statements should be from an account specifically designated for business transactions, without personal transactions.
• An original letter from your bank or an original stamped statement from the bank.
• Proof of trading, typically in the form of the latest month’s invoices from previous transactions.
• Proof of the business address, which can be confirmed using a recent copy of the business’s municipal account or a rental agreement.
• A copy of the Trust Deed and Authority Letter.
• A copy of your original ID.

These documents are necessary to complete the VAT 101 form. Once you have gathered all the required documents, visit the nearest SARS center to complete the VAT number registration process.

How to Register for VAT

Registering via the SARS eFiling System

The SARS eFiling system offers numerous benefits for businesses. To begin the registration process, follow these simple steps:

1. Visit the SARS eFiling website.
2. Click on the “Register” option at the top of the menu.
3. Complete the six-step registration process, which includes reading and accepting the Terms and Conditions, creating your User ID and a secure password, providing personal information for authentication, and detailing your organization and employer information.
4. Select the VAT tax type.
5. Upon completion, you will be registered and receive a unique User ID and access code, which should be kept private and secure. You have the flexibility to customize your access code as needed.

Manual VAT Registration

If you prefer to register for VAT manually, you can follow this guide:

1. Download the VAT 101 – Application for Registration form from the SARS website and complete it.
2. Compile the supporting documents and the VAT 101 form.
3. Bring these documents to a SARS branch near you for submission. It’s important to note that SARS does not accept hard copies sent via fax or photocopy for security reasons.
4. After a successful registration, you will be issued a unique VAT vendor number. This number must be included in all future invoices, receipts, quotations, and correspondence you receive from SARS.

Who Must Register for VAT?

According to section 1(1) of the VAT Act, any person or entity involved in an enterprise qualifies for VAT registration. This encompasses companies, individuals, partnerships, trust funds, and municipalities. There are two primary types of registration:

1. Mandatory VAT Registration: Businesses that exceed R1 million in annual sales are legally obligated to register for VAT at SARS. Such businesses are referred to as “vendors.” Upon registration, vendors are authorized to add the VAT charge to the total price of their products and services. New vendors must complete and submit the VAT 101 form, also known as the Application for Registration, at SARS centers within 21 days of surpassing the R1 million sales threshold.
2. Voluntary VAT Registration: New businesses can opt for voluntary VAT registration, provided their annual sales fall below R1 million. The minimum threshold for voluntary VAT registration was previously set at R50,000 in sales over a 12-month period. However, recent changes have raised this threshold. As of now, businesses earning more than R4,200 per month for at least two months are eligible to apply for voluntary registration. This category primarily includes micro-businesses, such as individuals, partnerships, or cooperatives. Since these micro-businesses are subject to a turnover tax, they are not required to register separately for VAT. The decision to scale business operations is at the discretion of the business owner.

VAT Registration Timelines

• If you register through the SARS eFiling system, your profile will be activated within 48 hours. If the activation takes longer than expected, it is advisable to contact SARS for further assistance.
• In the case of manual registration, the process may take around 10 days. Following a successful registration, you will receive a notice through various channels, including the eFiling system, the email address you provided during registration, or an SMS sent to your registered mobile phone number.

In the event of any delays, contact SARS via the following channels:

• Phone: 0800 00 7277
• International callers: +27 11 602 2093
• Visit a nearby SARS office during the weekdays, operating hours are from 08:00 to 16:30 (with extended hours until 16:30 on Wednesdays). SARS offices are closed on weekends and public holidays.

Canceling VAT Registration

A vendor can apply for the cancellation of their VAT registration when the value of taxable supplies falls below the compulsory registration threshold of R1 million within any consecutive 12-month period. The Commissioner may also cancel a VAT registration if:

• The vendor’s enterprise ceases all operations for the next 12 months.
• The enterprise has no plans to commence operations within the next 12 months.
• The vendor no longer complies with the requirements for voluntary registration.
• The vendor has failed to furnish a return required for the calculation of tax.
• The vendor was previously registered under the VAT Act or Sales Tax Act but failed to fulfill any obligations stipulated by those Acts.

Understanding Your VAT Number

A VAT number is a unique 10-digit identifier that begins with the number “4.” The digit “4” on the South African tax number indicates that an individual or entity is a registered VAT vendor in South Africa. For example, a VAT number may appear as “4330182355.” Once you have been issued this unique identifying number, it should be displayed on all valid tax invoices generated by your business.

Benefits of Registering for VAT in South Africa

Obtaining a VAT number in South Africa can provide your business with several advantages, including:

• Enhanced Credibility: Your business is recognized as a licensed service provider, which can increase its reliability and trustworthiness among potential clients.
• Eligibility for Tenders and Contracts: Many tenders and contracts, especially those with the government, require businesses to have a verifiable VAT number.
• Preferred by Large Companies: When sending quotes and invoices, larger companies often prefer to engage with businesses that possess a valid VAT number.
• Potential for Tax Refunds: Businesses with a VAT number can claim tax refunds from SARS when purchasing products from other companies that have applied VAT.

Do You Need to Register for VAT?

If you’ve ever wondered about the qualifications for VAT registration, a business is required to register for VAT when the total value of taxable supplies made within any consecutive twelve-month period exceeds or is likely to exceed R1 million.

How to Obtain a VAT Number in South Africa

To register for a VAT number, you can choose from the following methods:

1. SARS eFiling: Register electronically through the SARS eFiling platform.
2. Manual Registration: If you prefer to register manually, download the VAT 101 – Application for Registration form from the SARS website, fill it out, and submit it to a local SARS office within 21 days from the date you exceed R1 million in sales.

Requirements for VAT Registration

SARS requires specific documents for VAT registration, including:

• A Certificate of Incorporation.
• Original bank statements covering the past three months from a dedicated business account.
• An original letter from your bank or an original stamped statement from the bank.
• Proof of trading, typically in the form of the latest month’s invoices from previous transactions.
• Proof of the business address, verified with a recent copy of the business’s municipal account or a rental agreement.
• A copy of the Trust Deed and an Authority Letter.
• A copy of your original ID.

Understanding the VAT Cycle

The frequency with which VAT payments are made to SARS is determined by your taxable period. SARS imposes penalties or interest on businesses that fail to submit VAT returns within 25 days of the end of each VAT cycle. In addition, it’s essential to retain your records for five years from the date of the last entry, as SARS may request them within this timeframe. There are six VAT cycles or tax periods:

Category A

• A vendor submits one return every two calendar months, ending on the last day of January, March, May, July, September, and November.

Category B

• A vendor submits one return every two calendar months, ending on the last day of February, April, June, August, October, and December.

Category C

• A vendor submits one return for each calendar month. A business must exceed a turnover of R30 million in any consecutive 12 months to fall into this category. To be placed in Category C, a business must apply in writing.

Category D

• This category is designed for those engaged in farming activities and with a total turnover of less than R1.5 million over 12 months. Vendors in Category D submit one return every six months, concluding on the last day of February and August.

Category E

• Category E, also known as the annual tax period, involves a vendor submitting one return for 12 calendar months. A business must be structured as a company or trust fund to fall into this category. Additional criteria are outlined in Chapter 3 of the VAT 404 guide.

Category F

• The four-monthly tax period is tailored for small businesses. The submission schedule is as follows:
  • March to June: Submitted in July.
  • July to October: Submitted in November.
  • November to February: Submitted in March.

Filling out the VAT registration form is a quick and easy process if you have the required documents. Seek assistance from a certified tax practitioner if you lack any of the necessary VAT registration requirements. Additionally, ensure you obtain your South African tax number before the deadline, as vendors who file returns past the due date may face penalties or fines.

For more information, consult the official SARS website or reach out to their support team:

• Phone: 0800 00 7277
• International callers: +27 11 602 2093
• Visit the nearest SARS office during weekdays, with operating hours from 08:00 to 16:30 (with extended hours until 16:30 on Wednesdays). SARS offices are closed on weekends and public holidays.

This comprehensive guide aims to simplify the VAT registration process for businesses in South Africa. Stay compliant and informed about the requirements and benefits associated with VAT registration. If you have any further questions or require assistance, don’t hesitate to reach out to SARS or a certified tax practitioner for guidance.