VAT implications for VAT vendor on imports

[alkit]

Hi,

I'm an importer in the process of registering for VAT.

Had a discussion with a friend of mine that is becoming a CA.
He holds that an importer is able to earn HIGHER profits by being VAT registered (as opposed to not being registered for VAT).
My opinion is that importing has the same VAT implications as buying stock from a local supplier, which means that VAT causes you to earn a LOWER profit (as opposed to not being registered for VAT).

We are assuming that the cost of the good is R100, and it is sold for R115.

Please could someone with VAT knowledge check the following file and let me know if it is correct?
The left hand side is the comparison of non-VAT/VAT registered seller who is supplied by a local supplier (and in my own opinion, by an international supplier too).
The right hand side is the same comparison when supplied by an international supplier (according to my friend's logic).

http://filegooi.co.za/get2/91ab007f8...VAT+profit.xls

Thanks a ton for the help!

[Greg C]

Hi,

I'm an importer in the process of registering for VAT.

Had a discussion with a friend of mine that is becoming a CA.
He holds that an importer is able to earn HIGHER profits by being VAT registered (as opposed to not being registered for VAT).
My opinion is that importing has the same VAT implications as buying stock from a local supplier, which means that VAT causes you to earn a LOWER profit (as opposed to not being registered for VAT).

We are assuming that the cost of the good is R100, and it is sold for R115.

Please could someone with VAT knowledge check the following file and let me know if it is correct?
The left hand side is the comparison of non-VAT/VAT registered seller who is supplied by a local supplier (and in my own opinion, by an international supplier too).
The right hand side is the same comparison when supplied by an international supplier (according to my friend's logic).

http://filegooi.co.za/get2/91ab007f8...VAT+profit.xls

Thanks a ton for the help!

Lets attempt to keep it simple.

Basically not registering as a vat vendor will generally increase your bottom line.

However lets focus on some of the necessities to know as to why someone should register as a vat vendor or is forced too

Pros: can claim input vat...sounds so simple but can have significant differences on your overall vat payment over to sars.

Depending on the vat group type you are vat is payable in certain periods which can help with cashflow

Requirements if your turnover is more than R1000 000

My suggestion.

If you are under that threshold(should be 1000 000 stand to be corrected) DONT REGISTER FOR VAT.

You will make more money in general depending on purchases of stock etc and other things that can be offset to your vat output,but in general you will have a better looking bottom line.

[MVE]

There is a couple of factors to consider to register when considering registering for VAT or not.

- Who you are selling to, consumers or companies who are VAT registered
- Do you provide services or goods. Services companies generally does not have a lot of input vat costs while if you sell goods there is more input VAT you can claim.

Generally depending on a couple of factors being vat registered or not vat registered does not influence your bottom line rather at what price you can sell the goods at.

In you example if you are not registered for VAT your profit is R1 (R115 - R114). Registered for VAT R0.88 (R115/1.14-R100). If however you are selling to a vat vendor and you can make the selling price R131.1 (R115 + VAT) you will be making a R15 profit. The cost for the VAT vendor will still be R115 as the company can claim back the VAT.

You need to register for VAT when your turnover is R1 million or is going to exceed R1 million in the year. You can register if you have made R50 000 worth of sales.