VAT Increase and Accounting Systems

As you are aware, the National Treasury announced an increase in Value Added Tax (VAT) from 14% to 15% effective 1 April 2018. The last increase was in April 1993. The increase of 1% is expected to raise R22.9 billion. (Wealthiest 30 per cent of households contribute 85 per cent of VAT revenue) The increase will increase the cost of living for all households. However, the zero-rating of basic food items and paraffin will reduce the impact on the poor, who will receive further assistance through an above-inflation increase in social grants.

We urge you to ensure that your accounting systems are set up to process transactions at the new VAT rate of 15% from 1 April 2018.This is to avoid any penalties or interest due to an under declaration or an over claim on your VAT201 return. Sage rolled out the update for pastel for the clients who use version 18. Sage One will be automatically updated before the effective date.

Also note that vendors under Category B (March/April), Category E (annual return) and most farmers registered under Category D VAT reporting periods, will have transactions subject to the VAT rate of 14% and 15% which must be correctly reflected on the VAT201 return.

How do you determine which rate to use if your company falls in the above-mentioned category?

Easy!!!!

You will use the following rule (Time of supply, Section 9)

That states the following:

The general rule of the time of supply is the earlier of:

  • The date of the invoice
  • The date the payment is received by the supplier
Example

Company X send a tax invoice for services rendered to Company M on 13th March 2018 (Still 14% VAT).

Company M pays the tax invoice on 30th June 2018 (Now 15% VAT).

Question

What VAT rate will I use (14% or 15%) and when will I record the transaction in my books?

Answer

You will use the rule (Time of supply, Section 9) to determine which one happens first, date of invoice or payment received?

Date of invoice 13th March 2018 (14% VAT)

Date of payment 30th June 2018 (15% VAT)

You will use 14% VAT and you will record the transaction in your books on the 13th March 2018.


The following transactions needs to be looked at:

  • Debtors
  • Creditors
  • How sales will reflect or your 2019 financial statements
  • Selling of Property before 31 March 2018 (In short section 67A(4) of the VAT act will be used, which states that the VAT rate applicable on time of the conclusion of the contract will determine which rate to use.)
Please feel free to contact us if you have any questions regarding the above-mentioned topics.

This article was edited and revised by Christo Bosch, a Senior Accountant at CMV Accountants Incorporated – 28 March 2018.



This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.Errors and omissions excepted (E&OE)
CMV Group of Companies

Tel : 012 991 4400
Fax : 012 991 3001
Physical: 17 Midas Avenue, Olympus, Pretoria, 0081
E-mail: info@cmv.co.za

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