List of Five goods on which no vat is charged in South Africa, In South Africa, the supply of goods and services is subject to a consumption tax known as VAT. Although the majority of goods and services are liable to VAT, there are several exceptions.
For individuals and companies operating in South Africa, it is essential to know which goods are excluded from Value Added Tax (VAT).
What is VAT?
Value-Added Tax is commonly known as VAT. According to SARS, VAT is an indirect tax on the consumption of goods and services in the economy. Revenue is raised for government by requiring a business, that carries on an enterprise (as defined in section 1(1) of the VAT Act), to register for VAT.
In doing so, the business will charge VAT on supplies of goods and services made by it, on the importation of goods and on imported services (subject to certain conditions). The business will also be entitled to deduct any VAT charged to it, or under limited circumstances from a business that is not registered for VAT, in respect of a supply made to it.
VAT is therefore non-cumulative, meaning that a credit/deduction is allowed for VAT paid in previous stages, within the production and distribution chain. The business is required to pay the difference between the VAT charged by it and the VAT charged to it, or claim a VAT refund where the VAT charged to it exceeds the VAT charged by it.
Common items that are exempt from VAT
In this comprehensive guide, we will explore the concept of VAT exemptions and provide an extensive list of common items that are exempt from VAT in the country.
Basic Food Items
In South Africa, basic food items are exempt from VAT to ensure affordable access to essential sustenance. These items include fresh fruits and vegetables, meat, fish, bread, milk, rice, maize meal, legumes, and other staple food products.
Agricultural Products
Certain agricultural products are also exempt from VAT. This category encompasses goods directly related to agricultural activities, such as live animals, seeds, plants, fertilizers, and various farming equipment and machinery.
Education and Medical Services
Education and medical services play a crucial role in society and are exempt from VAT. This exemption covers educational services provided by registered educational institutions, including tuition fees, and medical services provided by registered healthcare professionals and clinics.
Financial Services
Financial services, including bank fees, insurance premiums, and interest on loans, are exempt from VAT. This exemption acknowledges the role of financial institutions in facilitating economic activities and avoids double taxation on financial transactions.
Residential Rental Accommodation
Residential rental accommodation is exempt from VAT in South Africa. This applies to the leasing or renting of residential properties for the purpose of providing shelter to individuals or families. However, commercial property rentals are subject to VAT.
Municipal Services
Services provided by municipalities, such as water and electricity supply, refuse removal, sewerage services, and public parks, are generally exempt from VAT. These essential services are exempted to ensure affordability and accessibility for communities.
Public Transportation
Public transportation services, including bus, train, and taxi fares, are exempt from VAT. This exemption promotes affordable and accessible transportation options for the general public, facilitating mobility and connectivity.
Financial Instruments and Certain Transactions
Certain financial instruments, such as shares, debentures, and bonds, are exempt from VAT. Additionally, specific transactions like the sale of a going concern or the transfer of a farm as a whole may also be exempt, subject to specific conditions.
Exported Goods and International Services
Goods and services that are exported from South Africa, as well as certain international services, are generally zero-rated for VAT purposes. This means that while VAT is technically charged, the rate is set at 0%, effectively resulting in no VAT payable.
List of 19 basic food items that are zero-rated for VAT.
According to the South African government, there is no VAT that should be charged on the following list of food items:
- Brown bread.
- Maize meal.
- Samp.
- Mealie rice.
- Rice.
- Vegetables.
- Fruit.
- Vegetable oil.
- Milk.
- Cultured milk.
- Brown wheaten meal.
- Eggs.
- Dried mealies.
- Dried beans.
- Lentils.
- Pilchards/sardinella in tins.
- Milk powder.
- Edible legumes and pulses of leguminous plants.
- Dairy powder blend.
Wrap up
Understanding the items exempt from VAT in South Africa is essential for individuals, businesses, and consumers. The exemptions aim to ensure affordability, promote key sectors such as agriculture and education, and facilitate the well-being of individuals and communities. It is important to note that VAT exemptions may be subject to conditions and limitations, so it is advisable to consult the South African Revenue Service (SARS) or a tax professional for precise and up-to-date information.
Stay informed about VAT regulations and exemptions, as they may be subject to changes and updates. By being aware of these exemptions, you can make informed decisions and navigate the South African tax landscape more effectively.
South African Revenue Service (SARS): https://www.sars.gov.za/