VAT (Standard)

Overview#

Value Added Tax (VAT) is a tax that is spread across organisations. Each organisation only accounts for the portion of value it adds. Each organisation does this by claiming the portion of VAT paid (Input) against the portion of VAT charged (Output). In South Africa, organisations can register for Invoice-based VAT (larger organisations) or Payments-based VAT (smaller organisations):

• With Invoice-based VAT the VAT is due when an invoice is generated and may be claimed when an invoice is received. It does not matter if the invoices were paid. This invoice-based system is the one implemented by QuickEasy BOS Professional.
• With Payments-based VAT vendors only pay over the VAT when they are paid. Similarly, they can only claim the VAT on invoices they pay. You must manually adjust your VAT for payments basis. However, BOS Professional does provide reports that clearly show unpaid Customer Invoices and Supplier Invoices.

VAT Rate: The standard VAT rate in South Africa is 15% (April 2025). This rate applies to most goods and services.

• Exemptions: Some goods and services are exempt from VAT.
• If an organisation only offers exempt goods or services, it may not register for VAT.
• An organisation that offers a mix of exempt and standard goods or services may register for VAT. However, this organisation may not claim Input VAT on the goods or services used to supply the exempt goods or services.
• A list of exempt goods and services can be found in Chapter 7 of the VAT Guide. (Also see the latest VAT newsletters for changes to these regulations).

• Zero-Rating: Certain goods and services are subject to VAT at a rate of 0%.
• When a zero-rated good or service is supplied, an organisation may still claim Input VAT.
• A complete list of zero-rated goods can be found in Chapter 6 of the VAT Guide. (Also, see the latest VAT newsletters for changes to these regulations.)

VAT Registration: Organisations with an annual turnover consisting of taxable supplies or services above a specific threshold are required to register for VAT (R1 million per annum in 2024 in South Africa). Other organisations may still voluntarily apply (taxable supplies exceed R50 000 per annum in 2024 in South Africa).

VAT Returns: VAT-registered businesses are required to submit regular VAT returns and payments to SARS. In BOS Professional, the process of calculating VAT due is named a VAT Reconciliation.

Settings#

General Settings#

Accounting Settings#

A VAT or GST Control Account must be created with the following settings:

• Code = Blank
• Currency = Blank
• Report = VAT Only
• VAT Control = Blank
• Defaults = VAT Control

This account is normally created as a current liability: Statement of Financial Position > Liabilities + Equity > Liabilities > Taxation.

VAT Types#

Entry Type Settings#

• VAT Type
  • Select a VAT Type from the dropdown list.
  • If VAT does not apply (e.g. Inventory Movements) select No VAT.
• Exc / Inc (block next to VAT Type)
  • Select whether the transaction is entered VAT exclusive or VAT inclusive.
  • Choose inclusive for expenses and bank entries.
  • Choose exclusive for customer and supplier transactions (assuming material prices are VAT exclusive).
• VAT Type (Forex)
  • Applicable to income (e.g. Customer Invoices).
  • Select the VAT Type applicable to foreign invoices (e.g. Zero-Rated or Exempt).

Customers and Suppliers#

• VAT Type: Provides a dropdown list of VAT Types.
  • Customers: Choose Standard, Exempt or Zero-rated. (Check with your accountant which option to choose for foreign customers.)
  • Suppliers:
    • Choose Standard if the supplier is VAT registered.
    • Choose No VAT if the supplier is not registered for VAT.
    • Choose NO VAT if the supplier only supplies goods on which VAT may not be claimed even if they charge VAT. The expense in this case is the full VAT inclusive amount.
• VAT No.: 
  • Enter the customer or Supplier's VAT registration number. The numbers must appear on invoices over a certain value.
  • VAT registration numbers can be verified here.

Materials#

• VAT Type: Provides a dropdown list of VAT Types.
  • Supplier Prices
    • Choose Standard if the supplier is VAT registered.
    • Choose No VAT if the supplier is not registered for VAT.
    • Choose No VAT if the supplier only supplies goods on which VAT may not be claimed even if they charge VAT. The expense in this case is the full VAT inclusive amount.
  • Cost & Selling Prices
    • Depends on the product or service offered.
    • If the organisation is VAT registered, the VAT Type is mostly Standard.
• Price: Select one of these options:
  • Exc: Choose exclusive to enter VAT exclusive prices.
  • Inc: Choose inclusive to enter VAT inclusive prices.
  • N/A: Choose this option if VAT does not apply.

Services#

• VAT Type
  • Provides a dropdown list of VAT Types.
    • Depends on the product or service offered.
    • If the organisation is VAT registered, the VAT Type is mostly Standard.
• Inc / Exc (block next to VAT Type)
  • Exc: Choose exclusive to enter VAT exclusive prices.
  • Inc: Choose inclusive to enter VAT inclusive prices.
  • N/A: Choose this option if VAT does not apply.

How VAT is Calculated#

• In BOS Professional, VAT is calculated on Transaction Items, and the calculation depends on whether the price is input as VAT exclusive or inclusive.
  • VAT Inclusive prices are calculated by adding VAT at the prevailing rate to the exclusive prices.
    • For example, Exclusive Price + 15% of the VAT Exclusive Price (where 15% = the prevailing VAT rate) = VAT Inclusive Price.
  • VAT Exclusive prices are calculated by deducting VAT from the default inclusive prices.
    • For example, Inclusive Price - VAT Portion = Exclusive Price.
    • VAT Portion = Inclusive Price x 15/(100 + 15) (where 15% = the prevailing VAT Rate).
• BOS Professional uses a fractal calculation (compared to limiting the fraction to five decimals).
• VAT is calculated at an Item level, rounded to two decimals and then summed to the transaction total. Because of this, VAT calculated on the transaction total may differ slightly from the sum of VAT on items.
• Similarly, the VAT on all the transactions might differ a few cents from calculating VAT on the total transaction value.
• For example:
  • Customer Invoices Total Exclusive = 2 521 370.21
  • VAT as per BOS Professional = 378 205.56
  • Customer Invoices Total Inclusive = 2 899 575.77
  • VAT manually calculated on the exclusive total (2 521 370.21 x 0.15) = 378 205.53
  • Difference = 0.03 (378 205.56 - 378 205.53)
  • VAT manually calculated on the inclusive total (2 899 575.77 x 15/115) = 378 205.54
  • Difference = 0.02 (378 205.56 - 378 205.54)