The South African Revenue Service’s Commissioner Edward Kieswetter stated that the agency has increased its use of data to provide a more streamlined experience for customers. In a discussion with Wits Business School, Kieswetter said: “We use data to do risk profiling of every taxpayer. We use data and artificial intelligence to select taxpayers for further auditing or investigation, but we also use data and technology to provide a seamless experience for most taxpayers.” “We believe that the best service is no service. We don’t want to be better at queue management, we want to address the root causes, so we don’t have queues.” Use of Data in Tax Collection The commissioner went on to add that SARS also employs data and artificial intelligence to identify potential taxpayers for further examination or investigation. The tax firm claimed that efforts to increase and enhance the use of data in order to improve the fairness of outcomes and boost its ability to detect instances of non-compliance are starting to bear fruit. “Using the data from various domestic and international sources, as input into machine learning models, risk profiling and case selection, a number of trends have already been observed with positive outcomes in a number of instances.” Data Analysis in Tax Administration Some examples of domestic third-party sources that SARS said they would draw from include banks, retirement funds, medical insurance providers, and the companies register. The CSD (Central Supplier Database) from the National Treasury, as well as the national population register, are also viable sources. SARS expanding its use of data to ensure a seamless experience for customers. International data sources include the automatic exchange of information about South Africans with off-shore financial assets from about 100 foreign jurisdictions, as well as several mutual administrative agreements with sister organisations. SARS highlighted the potential of data and machine learning in last year’s report, saying that 33% of its results came from automated risk profiling of taxpayers based on data and machine learning. Recruitment SARS is looking for employees who are skilled in data analysis in order to build a “smart tax authority“. The goal is to use data-driven insights, machine learning, algorithms, and artificial intelligence to better understand the tax system and improve services. With technology always changing, this is an important step in preparing for the future. “In an era characterised by rapidly evolving technological innovation, SARS is preparing for a world where increasingly our work is informed by data-driven insights, machine learning, algorithms, artificial intelligence, and interconnectivity of people and devices,” it said. Build a pool of experienced resources Kieswetter stated that the revenue service intends to also create a pool of what are called ‘grey beards’ (and female equivalents) who not come back and work for the organisations but rather be part of a resource from which younger, less experienced people can gain knowledge. “We are also introducing new graduates, young people, into the organisation so that we keep the generational mix,” he said. The organisation has also established a junior board to formalise the voice of individuals under the age of 35. “We need to significantly step up our technology innovation capability, these are few and far between. So some of the skills we need for future orientation are hard,” he said, Kieswetter observed that it can be difficult to find employees with the specific skillset required for data science and government work. He described the process as inefficient and bureaucratic. State capture Kieswetter said that the actual damage at the South African Revenue Service from state capture “is significantly deeper than what any commission of inquiry could ever report”. A Persistent Threat He went on to say that he does not believe there are any institutions in the country that have been fully cured of state capture. The country’s political climate, with its competing claims for power – within a party or across parties – is an active battle to keep the endowment people gained from state capture alive, according to him. South Africa is still recovering from state capture, which has seeped into this current administration. As illustrated by the corruption during the Covid response procurement phase, said Kieswetter In Conclusion SARS is looking to expand its use of data in order to improve customer experience and increase tax revenue. The organization has recognized the importance of technology innovation and is preparing for a future where data-driven insights play a larger role in its operations. SARS also acknowledges that state capture is still a persistent threat in South Africa, and more work needs to be done to address the issue.
As a small business owner in South Africa, it’s important to be aware of your VAT obligations. This includes understanding how VAT works, VAT rates, and VAT registration. In this ultimate guide, we’ll provide you with all the information you need to make sure your VAT is in order. We’ll also discuss some common VAT mistakes made by small businesses, and provide tips on how to avoid them. Stay informed and stay compliant – it could save you a lot of trouble down the line! What is VAT? Value-Added Tax (VAT) is an indirect tax that is levied on the consumption of goods and services in the economy. In South Africa, VAT is charged at a rate of 15%. Who Must Register for VAT? According to SARS: Businesses must register for VAT if the value of taxable supplies made or to be made, is in excess of R1 million in any consecutive 12 month period. This includes businesses that are sole proprietorships, partnerships, companies, close corporations, trusts, and even individuals who are self-employed. There are a few exceptions to this rule – businesses that make only exempt supplies (such as financial services) or whose turnover is below the VAT threshold are not required to register for VAT. Simplify your key financial information. Let’s connect for a FREE consultation. Let’s Connect What is the VAT Threshold? The VAT threshold is the turnover limit at which businesses are required to register for VAT. In South Africa, the VAT threshold is R1 million per year. This means that if your business’ turnover is below R1 million, you are not required to register for VAT. How Does VAT Work? When a business makes a taxable supply, they must charge VAT at the rate of 15%. The VAT charged is then paid over to SARS. When a business purchases goods or services from another VAT-registered business, they can claim VAT credits for the VAT charged on these purchases. This VAT credit can be used to offset any VAT payable on taxable supplies made by the business. The 3 Types of VAT There are three types of VAT: standard-rated, zero-rated, and exempt. Standard-rated VAT is charged on most goods and services in South Africa. The VAT rate for standard-rated supplies is 15%. Zero-rated VAT is charged on certain essential items, such as food and medical supplies. The VAT rate for zero-rated supplies is 0%. Exempt VAT is not charged on certain supplies, such as financial services. This means that businesses that make only exempt supplies are not required to register for VAT. What to know as a small business in South Africa As a small business owner in South Africa, there are a few things you need to know about VAT. First and foremost, VAT is mandatory for all businesses that make taxable supplies. This includes a range of businesses, manufacturers, home businesses, and even those that are self-employed. The only businesses that are exempt from vat registration are those that make only exempt supplies or whose turnover is below the vat threshold of R1 million per year. If your business is required to register for vat, you will need to charge vat on all taxable supplies made by your business. It’s important to note that vat is a complex tax, and there are many rules and regulations that businesses need to comply with. If you are unsure about anything, we recommend speaking to a tax professional or accountant for advice. 4 Common VAT Mistakes Made by Small Businesses Failing to register One of the most common vat mistakes made by small businesses is failing to register for vat when they are required to do so. If your business is required to register for vat and you fail to do so, you may be liable for penalties and interest charges. Failing to charge vat Another common vat mistake made by small businesses is failing to charge vat on taxable supplies. Remember, if your business is registered for vat, you must charge vat on all taxable supplies made by your business. If you don’t, you may be liable for penalties and interest charges. Failing to pay VAT Another mistake often made by small businesses is failing to pay over vat charged on sales to SARS. When you make a sale, you will need to add vat at the rate of 15% to the price of the goods or services sold. The vat charged on the sale will then be paid over to SARS. Failure to do so can lead to penalties and interest charges. Failing to claim VAT And finally, another common vat mistake made by small businesses is failing to claim vat credits for vat paid on purchases. Remember, if you purchase goods or services from another vat-registered business, you can claim vat credits for the vat charged on these purchases. You can use these vat credits to offset any vat payable on taxable supplies made by your business. Frequently Asked Questions about VAT in South Africa What services are excluded from VAT? In South Africa, the following services are excluded from vat: Financial services Insurance services Transport services Educational services Healthcare services Is vat payable on exports? No, vat is not payable on exports. This means that businesses that export goods or services can claim vat refunds for vat paid on purchases used to produce these exports. How often do you file vat returns? In South Africa, the following five categories of tax periods are available: Every 2 months; Every month; Every 6 months; Every 12 months. https://www.sars.gov.za/types-of-tax/value-added-tax/tax-periods-for-vat-vendors/ Can you register for vat online? Yes, businesses can register for vat online through the SARS eFiling portal. Alternatively, businesses can complete and submit a VAT101 application form to their nearest SARS office. Voluntary Registration? A person may apply for voluntary registration if: Their taxable supplies have exceeded R50 000 in a preceding 12-month period; They carry on an enterprise that can be expected to result in taxable supplies in excess of R50 000 during a 12-month period due to its nature; They
