VAT Is Levied on All Supplies of Goods and Services in Accordance to an Act of the State
VAT MANUAL
GENERAL
VAT is levied on all supplies of goods and services in accordance to an Act of the State known as The Value Added Tax Act.
1. Any person than carries on any enterprise will under certain circumstances be liable to register for VAT. Once registered the levying of VAT becomes compulsory on all supplies made by such person.
2. Vat levied on sales is known as “Output Tax” and VAT incurred on expenses is known as “Input Tax” VAT paid on expenses may under certain circumstances be deducted from the Output tax levied and only the difference is payable to SARS
3. At the end of each tax period the vendor will be liable to submit a return to SARS, calculating the Output- and Input Tax and paying the difference to SARS. Where Input Tax exceeds Output Tax, the difference will be refunded to the vendor
4. VAT is levied at a rate of 14% and is known as the standard rate of VAT. Under certain circumstances VAT may be charged at the zero rate which means that the transaction is taxable but at the rate of 0%. In effect VAT is charged at 0% but the input tax paid may still be claimed. The last category is exempt supplies and attract no VAT as it is seen not being a taxable supply.
Examples:
Standard rate: Sales R100.00 VAT R14.00 Total R114.00 – Input Tax can be claimed
Zero Rate Sales R100.00 VAT R0.00 Total R100.00 – Input Tax can be claimed
Exempt Supplies Sales R100.00 No VAT Total R10.00 – Input Tax may not be claimed
5. Input Tax may only be claimed on expenses for the making of taxable supplies i.e. standard rate and zero rate. No VAT may be claimed on expenses for making exempt supplies
6. The broad spectrum of the university’s activities includes all type of supplies and therefor a clear distinction must be made for the correct allocation of expenses.
7. For the above purpose the KFS system must be able to distinguish the:
1. VAT % allocated to each account
2. The VAT indicator allocated to each object code
8. Where supplies are mad, the KFS system will use these information to calculate the output- and input tax on each transaction.
1. Output Tax is always calculated at 14% on the total amount of sales or services invoiced except where the account is0% VAT or the income object code is marked NO for VAT. In such cases no VAT will be levied.
2.Input Tax is calculated by multiplying the amount of VAT on the expense invoice with the VAT % allocated to that account and also taking into account the VAT indicator allocated to the specific object code. The % allocated to the account indicates the % of the VAT that may be claimed.
a. Overhead costs 12.5%
b. NRF 50%
c. Services and sales 100%
b. Educational services 0%
KUALI Financial System
When logging on to the KFS system and navigating to the “Maintenance” tab, there is a separate tab for VAT. On this tab there are 3 sections:
1. VAT Income Rate
2. VAT Recovery Rate
3. VAT Classification Type
1.VAT Income Rate
This is the rate of VAT that must be levied on income objects linked to an account.
Standard Rate
Zero Rate
Exempt
2. VAT Recovery Rate
This is the % of VAT claimable on all qualifying expenses.
Apportionment 12.5%
Exempt 0%
Research 50%
Standard 100%
3. VAT Classification Type
This is the classification code linked to each object type to distinguish where the relevant income and expenses should be reflected on the VAT return as required by SARS.
Chart Of Accounts
All VAT calculations are dependent on the allocation of a VAT % to each account and the VAT indicator linked to each object code.
When a VAT calculation is made on a transaction, KFS will firstly verify the percentage on the account and then the indicator on the object code.
1. If the percentage is 0% on the account, no further calculation will be done.
2. If the percentage is greater than 0%, the second test will be done on the object’s VAT indicator. If the indicator is NO, no further calculations will be done
3. If the percentage is greater than 0% and the indicator is YES, the VAT calculation takes effect.
3a. On all expense object codes the calculation is done by multiplying the VAT amount on the invoice with the percentage allocated to the account.
Example: Invoice amount is R100.00 plus R14.00 VAT – Total R114.00. VAT % on account is 50%
VAT R14.00 X 50% = R7.00
VAT of R7.00 will be credited to the expense object code.
3b. On all income object codes that are indicated as YES for VAT, the VAT calculation will be done by adding 14% to the total amount of goods or services supplied.
Example:
Services rendered R1000.00
Invoice amount R1000.00 plus 14% VAT R140.00 – Total R1140.00
The amount of R140.00 VAT will be debited against the income object code and credited to the central VAT control object.
Note that on income objects the full amount of VAT will always be levied irrespective of the percentage allocated to the account.
Internal Service Billing
These transactions occur where internal services are rendered by maintenance departments, for example the repair of air conditioners.
These departments keep their own stock in their stores which are used as demands arise.
The items are taken into stock inclusive of VAT and the recovery of the VAT will depend on the VAT percentage on the account and the object code requesting the service. The amount of labor or service will not attract VAT as it constitutes an internal service which is not VAT liable.
General Ledger
When posting of transactions, as generated by all the e-docs, occur, the transaction lines will be captured reflecting the total amount of the transaction and a second line indicating the amount of VAT recovered on expenses or the VAT amount levied on income.
Example:
Account 100% VAT and both income and object codes YES
Income invoice R200.00 + VAT R28.00 Total R228.00
Expense invoice R100.00 + VAT R14.00 Total R114.00
Income -R228.00
VAT R28.00
Purchases R114.00
VAT recovered -R14.00
Nett Total R100.00
Where an account is 0% VAT the total amount of the invoices will be reflected and no VAT lines will reflect as no VAT calculation will be done.
KMM
There are currently 2 types of stores being used. These are the stores which operates in KFS and those that operate in VV.
For the stores in VV there also exist accounts in KFS but are for financial entries only as they do not have physical stock. The stock are physically held in VV
When VV purchases stock, the order is done by KFS and when goods are received, the transaction is posted to VV. VAT is not accounted for in KFS as the transactions are part of the VV system. Only the VAT payable and recovered are then posted to KFS by the integration process.
Stock in KFS stores are posted including VAT. The reason for this being that it is unknown at this stage where these stock will be applied.
When stock are transferred from the store to an account, the VAT will be calculated according to the VAT % and indicator as applicable to the account and object code.