In a nutshell, VAT is a government tax, charged by a vendor who is registered for VAT, on the supply of goods & services, which is payable to the South African Revenue Services (SARS) in order for the government to generate revenue.

There are two different types of taxes (government charges) in South Africa:

  • Direct Taxes: Personal Income Tax, Capital Gains Tax, Company Tax and so on;
  • Indirect Taxes: Value Added Tax, Customs Duty and Excise Duty.

On 1 July 1978 South Africa saw the introduction of General Sales Tax (GST). On 30 September 1991 GST was replaced with Value Added Tax (VAT). Like it’s predecessor, VAT is an important and effective source of revenue for the South African government. In 1995 VAT was levied on most goods and services at a standard rate of 14%.

Who has to Register for VAT?

Every natural person, trust, company, close corporation or partnership who produces goods or services, and expects to (or does) generate a turnover of R 300 000.00 or more, needs to register with SARS as a VAT vendor.

You may not register if your turnover is less than R 20 000.00, although you may voluntarily register if your turnover is between R 20 000.00 and R 300 000.00, but you must still then comply with all the provisions of the VAT Act 89 of 1991 (as amended). Therefore, if you purchase property from a developer, you will be paying VAT as the vendor will be registered for VAT.