What is VAT registration?

Wondering about VAT registration and what this means for your business? Take a deep breath, and let us guide you through the process. At Hippo, we offer comprehensive business services, including VAT registration assistance, to simplify your operations. Additionally, we have partnered with TTT to provide tailored services specifically designed for small business owners. With our expertise and support, you can navigate VAT registration seamlessly while focusing on growing your business.

What is VAT?

In simple terms, it's a type of government tax that's charged by VAT-registered businesses on the goods and services they provide to their customers, and this then gets ploughed back into the local economy. It's basically a way that the government tax service (SARS) makes revenue, by legally requiring a certain type of trader (known as a 'vendor'), that operates an 'enterprise' to register for VAT.

What is VAT registration?

This is when you officially list your business with SARS to let the government know you're now making sales and providing services through your business, or as an individual or partnership. Enterprises that register are then given a unique VAT registration number (VRN). This is an identification number for your business (much like your personal ID number) that must be put on all your invoices.

Why should my business do a VAT registration?

According to South African tax laws, it's compulsory to register for VAT if a 'person' (a company, individual, partnership, trust fund or municipality) makes (or expects to make) more than R1 million in one tax year with their 'enterprise' (basically, this is any business activity, whether selling goods or providing services to another person/s or business). It's worth noting that there's a strict time limit to do this in, so don't dawdle if you're raking in the cash or you might get penalised. You must apply for a compulsory VAT registration within only 21 business days from the day your 'enterprise' earns R1 million or more.

If it’s compulsory, what is voluntary VAT registration?

This is something you can choose to do if you trade as an 'individual' or are part of a partnership, or own a micro-business that makes less than R1 million in a year, but if you earn more than R4 200 every month.

What are the benefits of VAT registration?

Apart from staying on the right side of the law (if your business is making more than R1 million a year), you can get a VAT refund from SARS for tax you've paid on company purchases, within five years that the VAT return was completed. And...

  • When you provide a VAT invoice to a customer, they need to pay this amount, and you don't have to, so it doesn't affect your business' monthly 'kitty' that's used by you to operate your 'enterprise'.
  • Listing your business with SARS as a licensed service provider can also mean potential clients, especially bigger companies, may choose you over an unregistered business, because it's easier for them to deal with enterprises that have a VAT number for tax purposes.

How do I register for VAT?

You can make the most of the benefits of being VAT registered and let us handle all the paperwork. It costs R2,750 and we offer a 20 day turnaround from when your documents are received. And your case will be escalated to SARS if they exceed their SLA. You will need:

  • A registered company
  • A business bank account
  • 3 months' worth of business bank account statements
  • Invoices exceeding R50,000
  • Signed power of attorney
  • Certified copies of the director's ID
  • Director's proof of residence
  • Proof of business address
Register your company for VAT today

Once I’ve registered, what will I have to do differently?

That's a good question! You'll have to:

  1. Charge VAT on any of the services you provide for customers as well as for the goods you sell
  2. Pay any VAT that's due to SARS, from your sales every VAT tax season
  3. Ensure you keep thorough records of your VAT transactions from all your invoices
  4. Open a special VAT account at your bank (this can't be a personal account that you use)
  5. Submit a VAT Return to SARS when required (there are VAT 'tax periods' every tax year).
  6. If you appoint a tax practitioner to do your VAT, you'll need to provide SARS with a special Power of Attorney to give them permission to do your tax return and deal with SARS on your business' behalf.

It all sounds like a lot to take in, but once you are VAT registered you can enjoy the benefits we have listed above, and rest easy knowing that yourenow tax compliant with SARS.

Other business services you may need

Do you need help getting to grips with the financial statements involved in running a business? Read our easy-to-understand breakdown of the four main types of financial statements.

Are you wondering what a Tax Clearance Certificate is and why you need one? We answer those questions and give you a step-by-step guide to requesting one online.

A guide to PAYE: what it is and why you need to register your company for PAYE

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