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Do You Know Your VAT Principles?
Recent discussions with individuals in various business areas have highlighted a lack of understanding of the basic concepts and principles of value-added tax (VAT). The principle of 'starting at the very beginning' is thus an important principle in that it is often a lack of understanding of these basic principles which leads to an inaccurate understanding of the more complex areas of VAT. Taxand South Africa provides a basic outline of some of the principles of VAT as well as a brief look at other overlooked areas of VAT.
VAT is a tax added to the cost of a product or service and is levied for purposes of generating revenue for government. VAT is often referred to as a tax on consumption of goods or services, and is levied on the supply by a vendor of goods or services in the course and furtherance of any enterprise carried on by a vendor.
Persons registering as vendors should bear in mind the duties associated with being a vendor. These include, inter alia, the collection or levying of VAT on taxable transactions, payments of output tax to SARS within the relevant time periods, the issuing of tax invoices, record retention for a period of 5 years and the submission of VAT returns during the relevant tax periods. This serves as a basic outline of the starting principles of VAT.