The 2018 Budget has already generated a great deal of comment and debate, which will, we are sure, continue for a while. However, together with our good friend Dee (“The VAT Lady”), we have identified a few relevant points from the Budget that may affect our clients.
The first, and most obvious, is the increase in the standard rate of VAT from 14% to 15% on 1 April 2018, which will impact on us all. Consumers will pay more for goods and services and therefore the cost of living will increase, affecting the poor most of all.
If your organisation is registered as a VAT vendor, “The VAT Lady” has these practical tips for you:
- f you need to submit a 2 monthly VAT 201 return that covers the March/April 2018 tax period, SARS will produce a VAT return that addresses the fact that the standard rate of VAT is 14% for March 2018 and 15% for April 2018.
- When completing your VAT returns, you may not claim 15% input tax on expenses on which 14% VAT has been charged! This makes it even more important that you check your suppliers’ tax invoices to ensure they have charged you the correct rate of VAT! In this regard:
i) if you entered a contract before 1 April 2018, the supplier may increase the contract price to recover the additional VAT; and
ii) where there are periodic or continuous supplies, such as rentals of property or equipment or on-going contracts for maintenance or insurance or subscriptions, the rate of VAT applicable is the rate which is in force at the time the payments are made.
- If any supplier charges you 14% VAT after 1 April 2018, you are only entitled to claim the 14% and not recalculate and claim 15%.
- For any goods or services that you supply:
i) You MAY adjust your prices to cover the VAT increase, although SARS does not say that you must! If you do not add the additional percentage point to the VAT, it will effectively reduce the net amount you receive for the goods/services you provide.
ii) If you are registered on the payments basis, the VAT rate you use to account for output tax is the rate applicable at the original time of supply.
Here are some other tax changes worth noting:
- Where an employee is obliged to spend at least one night away from her/his usual place of residence on business within the Republic of South Africa and has to pay for meals and/or incidental costs, the maximum allowance is either:
an amount of R416 (previously R397) per day for meals and incidental costs; or
an amount of R128 (previously R122) for incidental costs only.
(Country specific allowances are available for travel outside South Africa.)
- Where an employee is reimbursed, on the basis of actual distance travelled, for use of her/his own car on the organisation’s activities, no tax is payable on reimbursements made up to the rate of R3.61 per kilometre (previously R3.55), regardless of the value of the employee’s vehicle.
- The monthly medical scheme fee tax credit will from, 1 March 2018, be increased from R303 to R310 per month for the first two beneficiaries; for each additional beneficiary, the increase will be from R204 to R209.
- Donations to approved public benefit organisations are exempt from donations tax; otherwise, donations tax is levied at a flat rate of 20% on the value of the donation, up to R30 million, after which the rate is now 25%. Note, also, that the first R100,000 of donations in each year by a natural person is exempt from donations tax.
We do hope that this brief summary of Budget points-to-note will be of help to you but Dee (regarding VAT) and CMDS will be glad to assist further if required – please do not hesitate to contact us.
With kind regards,
Cathy, Dee, Brenda and Paul