Registering for VAT?

[DK@MyBroadband]

I am sure that this question has been asked a few times on this thread and I do apology if it is a repeat...

My company registration has been completed and business bank accounts open. What I would like to know is the following:

1. How long does it take to VAT register a business? I will be working with VAT registered suppliers and customers that will only accept "VAT Invoices".
2. I have a substantial start up costs inclusive of VAT to pay over in the beginning. I assume that without a VAT# I will not be able to claim the VAT? Waiting for a VAT number will therefore delay getting the business operational which I am really keen on getting going.

Thanks for the advice and thoughts.....

 

[Purply]

Afaik you have a 6 months period in which you can claim back VAT, so doubt that will be an issue.

Took us about 7 working days to get registered, all depending on the documentation supplied and if there are any "errors" that need to be sorted out first.

 

[DK@MyBroadband]

Afaik you have a 6 months period in which you can claim back VAT, so doubt that will be an issue.

Took us about 7 working days to get registered, all depending on the documentation supplied and if there are any "errors" that need to be sorted out first.

Thanks Purply - Do you recollect the fee/cost of registration for VAT? Also, did you use a third party to do so on your behalf?

 

[Purply]

My Ex did everything for us at the time, so not really sure what it cost, doubt it's more than R250 since 3rd party places ask roughly R350.

That being said, I always figured it's free to register lol

PS.... I have a feeling you won't be able to register for VAT as your business needs to be operational for minimum 3 months......hopefully someone else with better knowledge would be able to shed some light on this.

 

[minty203]

You can register voluntarily if turnover is over R50 000 for the year. So you need sales of just over R4k per month. R1mil+ a year turnover and it is compulsory to register for VAT

Registering for VAT is free at SARS if you can do it yourself. Accountants charge different prices to do it for you. Upwards of like R800 I would assume. I charge between R1500 and R2000 because of the headache involved.

You register with the VAT 101 form. The form aslo states what docs you need to register. Proof of purchases, sales, bank statements, etc. Make sure all the documents are absolutely correct, because they will reject your application if anything isnt as per their requirements.

SARS is reluctant to register businesses without proof that they are actually trading. Because, I think that there are so many businesses that register in anticipation of contracts and tenders, but then they dont get the job, and the company never runs again. And then SARS still has to maintain these VAT numbers. Thats just my opinion though on why they dont like to issue VAT numbers to new businesses.

I had a client once for whom I registered a new business for VAT without any past trading figures. She was starting up a cleaning materials business, and same story as yours, the customers needed VAT numbers. So she got signed undertakings and contracts from these customers that they will only buy from from her company if she has a VAT number. The letter they provided stated the amount of supplies they would buy. They were firm undertakings on company letterheads.

Try this, maybe they will accept it. Depends how serious your customers are about buying from you and how strong your need is for a VAT number. You will need to motivate your application.

If they dont give it, then explain to your customers, that because you wont have a vat number, you wont charge them vat. So they will not lose out. Where your product will sell for R100(No VAT), your competitors price will be R114 (including VAT). So after they claim the R14 VAT on your competitors invoice, they will still have paid only R100.

What you cant be doing is charging R114 ex vat, where your competitor is charging R114 inc vat. Because then you are R14 more expensive.

I dont know whats your accounting knowledge like, but the customer wont be losing out. People think they are losing out if they buy from non VAT registered suppliers. Your margins will be less though than your competitors, because you will probably be paying VAT, but not claiming it.

Then if they accept your explanation and can trade for at least 3 months without a VAT number, in that three months, you can get your paperwork in order for the registration. Keep sales and purchase records, and show as much as possible on your bank statement. Like if you sell for R5k, let there be a deposit of R5k in your account. If you buy for R5k, your bank statement should show R5k. It isnt necessary absolutely and it isnt always practical if you provide terms or buy on account, but it all just looks more legitimate when you will present it to SARS.

And have the correct names on supplier invoices. If your company name is xyz pty ltd, that should be on your invoices. Not cash, not made out in your personal name.

It must really look like you are running a business, when you look at your documents.

Some businesses though absolutely need a VAT number. Like government and the bigger companies. With them, I know there is no way around it. So try registering with a contract.

And check out this link for more info:
http://www.sars.gov.za/ClientSegmen...ax/Pages/Register-and-Deregister-for-VAT.aspx

And good luck.

 

[minty203]

Forgot a few things about this:

1. How long does it take to VAT register a business? I will be working with VAT registered suppliers and customers that will only accept "VAT Invoices".
2. I have a substantial start up costs inclusive of VAT to pay over in the beginning. I assume that without a VAT# I will not be able to claim the VAT? Waiting for a VAT number will therefore delay getting the business operational which I am really keen on getting going.

From date of registration to getting the number can take anywhere from a week to 3 months. In my experience.

I dont know what it is you bought at start-up that you need to claim back VAT on, but if you try the contract thing as I said above, these invoices for start up costs will definitely help as motivation why you need a VAT number. I believe they would look favorably on it if it is stuff like equipment, machinery, bulk items, property, franchise fees, etc. I dont see them considering quotes of these start up costs.

 

[DK@MyBroadband]

Thank you Minty203, informative! Will give it some though on how to proceed.