BizNis Africa
Latest News
AfDB and AIMS to transform industry-led research in Africa
The African Development Bank and the African Institute of...
ATNS Executives attend 59th ACI Africa Regional Conference in Nigeria
Air Traffic and Navigation Services (ATNS) SOC Limited is...
Melville Douglas appoints Paolo Senatore as Global Strategist
Melville Douglas, a boutique investment management company has appointment...
Vodacom provides over 80% 4G coverage in South Africa
Vodacom has become the first African mobile network to...
Malawi Stock Exchange to launch new Automated Trading System
The Malawi Stock Exchange, in conjunction with the Reserve...
National Oil Corporation to list on Nairobi and London Stock Exchanges
Besides the meeting, trade and diplomacy, security and regional...
Pick n Pay Group’s Africa operations contribute ZAR4.6 billion
Pick n Pay today, 19 April 2018, published its...
Alpha Investment Group invests ZAR400 million in KidZania
Alpha Investment Group (Alpha), a 100% black-owned investment holding company, is...
How fintech transforms banking industry across Africa
The FinTech space in Africa is witnessing rapid growth...
How to promote economic growth in South Africa’s emerging tech industry
Despite decades of progress towards achieving equality in the...

South African VAT increase offers opportunities for SMEs

The VAT increase, which comes into effect in just 13 days, is an opportunity for Small and Medium Businesses to review their processes and identify opportunities to cut costs and streamline operations.

For more than 25 years, the VAT rate has remained unchanged at 14%. Unlike with income tax, many businesses have never had to adjust their systems or train their teams on new VAT rates. Until now.

In preparing for the adjustment, your small business should grab the opportunity to review all other areas of your business and figure out where you can do more with less.

Tax tips:

  • Take stock. You will need to adjust the prices of all your products – unless they are zero-rated – to reflect the new VAT rate. This has to be done by 31 May. While you’re at it, you might as well do a stock audit and work out what is selling and what isn’t, the latter of which you could put on sale to try and move the stock and give your business a cash flow boost.
  • Automate wherever possible. If you’re still using spreadsheets and other manual systems to keep VAT records, now is the perfect time to switch to a cloud-based accounting solution. Automated systems eliminate many of the headaches and admin associated with tax compliance and ensure that all your invoices, credit and debit notes comply with the ‘time of supply’ clause in the VAT Act. Cloud-based software also optimises your record-keeping, maximising the expenses you can claim back from SARS.
  • Cut costs. Initially, the new VAT rate may force small businesses into cash flow problems as they balance VAT charged to their customers with the VAT they will need to pay their suppliers. Shop smarter and aim to process all stock purchases on or before 31 March so that you only pay 14% VAT. You can then sell the stock at 15% VAT and put the balance back into your business.
  • Upskill your team. There’s no better reason or opportunity to train your team than a change in regulations. VAT has not increased in 25 years so it’s likely that your team is not familiar with the VAT Act. Set up some time with your accountant, who can clearly explain the ‘time of supply’ clause to your team. They’ll need to know how to correctly process sales and refunds that occur before and after 1 April. Your accountant can also provide refresher training on all tax laws to ensure your business remains compliant.

While VAT should not be seen as a cost to the business, smaller businesses might have to spend money to become compliant, e.g. by printing new price labels, shutting down shop for a day to prepare, and investing in team training.

However, if you also view the VAT change as an opportunity to review your processes, you could identify problem areas and growth opportunities, which will leave your business in a much stronger position than before.

Leave a Reply

%d bloggers like this: