VAT registration for consultants

[JerryMungo]

So my monthly billing suggests I'm going to exceed the 1 mil mark before FY end. All my billing goes to overseas clients for my time. Does this mean I have to register for VAT and start billing them an extra 15% for VAT (which they will have to just write off as an expense)?

Seems daft. I won't be able to claim VAT on much since my local expenses are minimal. This is really going to complicate my life... it may even make more sense to do what I'm doing from another country. Where is the incentive to stay SARS?

 

[f2wohf]

Services Supplied to Non-Residents

In line with the destination based principles of the VAT Act, services which are rendered to non-residents may qualify for VAT at the rate of zero per cent in terms of section 11(2) (ℓ) of the VAT Act. The rate of zero per cent may, however, not be applied if the non-resident or any other person to whom the services are supplied is present in South Africa when the services are rendered. The zero rate may also not be applied if the services are rendered in respect of movable property which is located in South Africa hen the services are supplied, unless the movable property is exported from South Africa.

In the recent case of Master Currency v CSARS (155/2012) [2013] ZASCA 17 the SCA ruled that the exchange of currency for a non-resident at the airside of customs at an international airport does not qualify for VAT at the zero rate because the non-resident is physically present in the "Republic” as defined in the VAT Act when the service is rendered. The SCA also did not accept the argument of the vendor that the service is rendered in respect of movable property (banknotes) which is exported from South Africa by the non-resident. The SCA ruled that the movable property must be exported by the supplier of the service for the zero rate to apply.

Master Currency argued in the alternative that its services qualified for the zero rate in terms of section 11(2)(g)(i) of the VAT Act, which provides for the zero rating of services supplied directly in connection with movable property situated in an export country. Master Currency contended that banknotes embody personal rights of payment of the face value to the bearer which rights are situated at their place of issue, i.e. in the foreign country. The banknotes therefore evidence movable property situated in the country where they were issued. The SCA held that banknotes cannot be regarded as promissory notes embodying an incorporeal right against the foreign issuing bank, and dismissed the arguments of the vendor. The High Court of Australia came to a different conclusion on a similar issue in Travelex Ltd v Commissioner of Taxation [2010] HCA 33.

https://www.thesait.org.za/news/146080/The-VAT-Challenges-Of-Cross-Border-Supplies.htm

 

[AchmatK]

I'm assuming it's services and not physical goods. You can take the exported services out of your annual turnover to calculate when you should register for vat.

Even if you are vat registered, services supplied to a non-resident can be zero-rated if the services are supplied directly to that non-resident person or company and both the non-resident person or company are not in South Africa at the time the services are supplied.

 

[JerryMungo]

https://www.thesait.org.za/news/146080/The-VAT-Challenges-Of-Cross-Border-Supplies.htm

ooohh... f2wohf, I may just owe you a sixpack. Of beer, that is, not champagne mind you

 

[JerryMungo]

I'm assuming it's services and not physical goods. You can take the exported services out of your annual turnover to calculate when you should register for vat.

Even if you are vat registered, services supplied to a non-resident can be zero-rated if the services are supplied directly to that non-resident person or company and both the non-resident person or company are not in South Africa at the time the services are supplied.

Awesome!! Seems like I can work with this.

 

[The_Traveller]

you don't issue a tax invoice to an international client. You issue a commercial invoice in their currency.
No VAT involved with a commercial invoice issued in international currency.

 

[KalMaverick]

I'm assuming it's services and not physical goods. You can take the exported services out of your annual turnover to calculate when you should register for vat.

Even if you are vat registered, services supplied to a non-resident can be zero-rated if the services are supplied directly to that non-resident person or company and both the non-resident person or company are not in South Africa at the time the services are supplied.

Based on what exactly?

The rule is a company must register as a VAT vendor if the taxable supplies exceed/is expected to exceed R1 million.

Zero-rated supplies are still taxable supplies.

[MENTION=136901]JetsetWilly[/MENTION], you will probably need to register for VAT. You won't levy any output VAT because it's zero-rated but you'll be able to claim any input VAT, however minor that may be.

 

[JerryMungo]

Based on what exactly?

The rule is a company must register as a VAT vendor if the taxable supplies exceed/is expected to exceed R1 million.

Zero-rated supplies are still taxable supplies.

[MENTION=136901]JetsetWilly[/MENTION], you will probably need to register for VAT. You won't levy any output VAT because it's zero-rated but you'll be able to claim any input VAT, however minor that may be.

Thanks, that makes sense!

 

[derp90]

I'm assuming it's services and not physical goods. You can take the exported services out of your annual turnover to calculate when you should register for vat.

Even if you are vat registered, services supplied to a non-resident can be zero-rated if the services are supplied directly to that non-resident person or company and both the non-resident person or company are not in South Africa at the time the services are supplied.

Does anyone know where this rule is regarding taking out the exported services from your turnover calculation?

I can't find anything about it.

 

[deweyzeph]

Does anyone know where this rule is regarding taking out the exported services from your turnover calculation?

I can't find anything about it.

It's in the VAT Act. There is a definition of "taxable supplies".

 

[derp90]

Not sure it's that simple. In my case my only client is US based so I don't have to register for VAT... if you have a mix, you might still need to if some clients are local. Speak to an accountant.

This is what I'm trying to understand. From what I've read, even if your client is US-based, whatever you charge them is zero-rated, but I don't see where it says the amounts you earn are excluded from the amount used to calculate whether you need to be vat-registered or not.

 

[deweyzeph]

This is what I'm trying to understand. From what I've read, even if your client is US-based, whatever you charge them is zero-rated, but I don't see where it says the amounts you earn are excluded from the amount used to calculate whether you need to be vat-registered or not.

Home

The South African Institute of Chartered Accountants (SAICA) is the foremost accountancy body in South Africa and one of the leading Institutes in the world.

www.saica.co.za

For VAT purposes all supplies are treated as either being a standard rated supply, a zero-rated supply or an exempt supply. Supplies that are standard rated or zero-rated are considered to be 'taxable supplies' as defined.

 

[deweyzeph]

The reason I think you might need to register is that my accountant was cagey about it but did some homework and said that because my only client is US based, I don't have to... which leads me to believe it would be different if I had a mix of local and foreign clients. You'd still zero-rate their invoices, but you might still need to include their invoices in your turnover calculation.

From what I can see zero-rated supplies DO count towards the R1 million VAT registration threshold.

 

[derp90]

From what I can see zero-rated supplies DO count towards the R1 million VAT registration threshold.

That's what I understood too. So if someone had a 'contractor' contract with a company based overseas and they earned over the VAT threshold per year, they would have to register for VAT, but they would not charge VAT to their overseas client, because it's an export.

 

[deweyzeph]

That's what I understood too. So if someone had a 'contractor' contract with a company based overseas and they earned over the VAT threshold per year, they would have to register for VAT, but they would not charge VAT to their overseas client, because it's an export.

That's correct. And you would need to submit a VAT201 return every 2 months and record the amount of zero-rated supplies even though you don't need to charge any VAT on it. On the plus side, you can claim input VAT on expenses incurred in the generation of zero-rated supplies, which you can't do with exempt supplies.

 

[derp90]

That's correct. And you would need to submit a VAT201 return every 2 months and record the amount of zero-rated supplies even though you don't need to charge any VAT on it. On the plus side, you can claim input VAT on expenses incurred in the generation of zero-rated supplies, which you can't do with exempt supplies.

So how would it work on business expense bills? Let's say I bought a new keyboard for my business computer for R100.

Do I claim back the R15 VAT and then when I list my business expenses as deductions, claim the amount less VAT i.e. R75?

 

[deweyzeph]

So how would it work on business expense bills? Let's say I bought a new keyboard for my business computer for R100.

Do I claim back the R15 VAT and then when I list my business expenses as deductions, claim the amount less VAT i.e. R75?

That's correct. The ex-VAT amount is the value of the expense if you are VAT-registered. Just remember that small asset purchases of less than R7000 can be written off immediately in the same tax year as they were purchased. Any asset purchases over that value have to be written off over multiple years as per SARS's wear and tear allowances, e.g. if you buy a laptop for R20 000, it has to be written off over 3 years, you can't claim the whole R20 000 in one year.

 

[GMAN03]

So how would it work on business expense bills? Let's say I bought a new keyboard for my business computer for R100.

Do I claim back the R15 VAT and then when I list my business expenses as deductions, claim the amount less VAT i.e. R75?

Well if the R100 is incl. VAT then it's R13.04 VAT that you'd claim and R86.96 excluding that you'd claim as a business expense. As noted above, check the SARS tables for wear and tear if it's capital in nature over R7k.

 

[deweyzeph]

Well if the R100 is incl. VAT then it's R13.04 VAT that you'd claim and R86.96 excluding that you'd claim as a business expense. As noted above, check the SARS tables for wear and tear if it's capital in nature over R7k.

Also, note that the input VAT on a capital asset purchase over R7000 is claimed in its entirety in the VAT period that you incurred the expense, it's only the ex-VAT amount that has to be written off over multiple years as per the wear and tear allowances table. So let's say you buy that laptop for R23 000 inc VAT, you claim the R3000 input VAT immediately, and then write off the R20 000 over 3 years.

 

[derp90]

Do you use any software to track expenses that can provide you with VAT reports and profit/loss statements, preferably with receipt upload?

I'm currently looking into Zoho Books or Xero. So far Zoho Books doesn't seem to have properly integrated VAT filing stuff/reports