VAT (Standard)

Overview

Value Added Tax (VAT) is a tax that is spread across organisations. Each organisation only accounts for the portion of value it adds. This is done by claiming the portion of VAT paid (Input) against the portion of VAT charged (Output). In South Africa, organisations can register for Invoice-based VAT (larger organisations) or Payments-based VAT (smaller organisations):

• With Invoice-based VAT the VAT is due when an invoice is generated and may be claimed when an invoice is received. It does not matter if the invoices were paid. This is the system implemented by QuickEasy BOS Professional.

• With Payments-based VAT vendors only need to pay over the VAT when they have been paid. Similarly, they can only claim the VAT on invoices they have paid. Users will have to manually adjust their VAT for payments basis. However, BOS Professional does provide reports that clearly show unpaid customer and supplier invoices.

VAT Rate: The standard VAT rate in South Africa is 15% (April 2025). This rate applies to most goods and services.

Exemptions: Some goods and services are exempt from VAT. If an organisation only offers exempt goods or services, it may not register for VAT. An organisation that offers a mix of exempt and standard goods or services may register for VAT. However, this organisation may not claim Input VAT on the goods or services used to supply the exempt goods or services. A list of exempt goods and services can be found in Chapter 7 of the VAT Guide. (Also see the latest VAT newsletters for changes to these regulations).

Zero-Rating: Certain goods and services are subject to VAT at a rate of 0%. When a zero-rated good or service is supplied, an organisation may still claim Input VAT. A complete list of zero-rated goods can be found in Chapter 6 of the VAT Guide. (Also, see the latest VAT newsletters for changes to these regulations.) 

VAT Registration: Organisations with an annual turnover consisting of taxable supplies or services above a specific threshold are required to register for VAT (R1 million per annum in 2024 in South Africa). Other organisations may still voluntarily apply (taxable supplies exceed R50 000 per annum in 2024 in South Africa). 

VAT Returns: VAT-registered businesses are required to submit regular VAT returns and payments to SARS. In BOS Professional, the process of calculating VAT due is named a VAT Reconciliation.

Settings

General Settings

Navigation: Main Menu > Setup > Settings & Defaults > Settings (tab)

• Accounting > VAT - Default Pricing

  • Options are VAT Exc (VAT Exclusive) or VAT Inc (VAT Inclusive).

  • Recommended setting: VAT Exclusive

• Accounting > VAT - Default Type: Exempt: Select the VAT Type to be used for Sales or Services that are Exempt from VAT.

• Accounting > VAT - Default Type: Standard: Select the VAT Type to be used for transactions subject to the prevailing VAT rate.

• Accounting > VAT - Reporting Frequency (Months): Type the number of months between VAT Return submissions (in South Africa, it is normally every two months for small organisations and monthly for large organisations).

• Accounting > VAT/GST Model

  • Choose VAT (Value Added Tax) or GST (General Sales Tax).

  • The VAT model is universal; the GST model is based on GST legislation in India.

Accounting Settings

Navigation: Main Menu > Setup > Accounting > Accounts (tab)

A VAT or GST Control Account must be created with the following settings:

• Code = Blank

• Currency = Blank

• Report = VAT Only

• VAT Control = Blank

• Defaults = VAT Control

This account is normally created as a current liability:  Statement of Financial Position > Liabilities + Equity > Liabilities > Taxation.

• Report: Choose to display VAT inclusive or exclusive values.

• VAT Control:

  • Applies to accounts on which VAT is declared or claimed.

  • Select Output or Input from the dropdown list.

    • Output = Income on which VAT is charged.

    • Input = Expenses, Cost of Sales, Assets on which VAT is claimed.

• Defaults: Select the default VAT Control for the VAT Control account.

VAT Types

Navigation: Main Menu > Setup > Accounting > VAT Types (tab)

VAT Types are used when transactions are captured and sort VAT amounts into the correct categories for VAT calculations and VAT returns.

A VAT Type is required for every type of VAT that must be declared on the VAT submission report. However, the same VAT Type can be used for Input or Output VAT because that is specified per account (e.g. all transactions that post to Sales are declared as VAT Output).

A VAT Type must be selected for every transaction. However, transactions on which VAT cannot be claimed back (either because of legislation or because the supplier is not registered for VAT), users should select No VAT.  For income, the VAT Type should be Standard, Zero-Rated or Exempt.

It is up to users to select the correct VAT Type when capturing transactions (e.g. to override the default VAT type when applicable).

• Field Chooser (*): Allows users to add or remove fields (columns).

• Add VAT Type (button): Opens a row for a new VAT Type to be entered.

• ID: The system-generated number for the VAT Type.

• Description: The description of the VAT Type.

• VAT %: The percentage of VAT for the VAT Type.

• Menu (...)

  • Click the last column to display an X. Click the X to delete the VAT Type.

  • VAT Types that have been used cannot be deleted.

Entry Type Settings

Navigation: Main Menu > Setup > Accounting > Entry Types (tab)

Default VAT Types can be selected for every entry type.

These defaults can be overridden when transactions are captured. 

Users capturing transactions must be on top of VAT regulations so they can determine when to override the defaults (e.g. on which expenses and assets they may claim VAT).

• VAT Type

  • Select a VAT Type from the dropdown list. 

  • If VAT is not applicable (e.g. Inventory Movements) select No VAT.

• Exc / Inc (block next to VAT Type)

  • Select whether the transaction is entered VAT exclusive or VAT inclusive.

  • Choose inclusive for expenses and bank entries.

  • Choose exclusive for customer and supplier transactions (assuming material prices are VAT exclusive). 

• VAT Type (Forex)

  • Applicable to income (e.g. Customer Invoices).

  • Select the VAT Type applicable to foreign invoices (e.g. Zero-Rated or Exempt).

Customers and Suppliers

Navigation: Main Menu > Setup > Customers > Double-click any Customer > Accounting (tab)

Navigation: Main Menu > Setup > Suppliers > Double-click any Supplier > Accounting (tab)

• VAT Type: Provides a dropdown list of VAT Types.

  • Customers: Choose Standard, Exempt, or Zero-rated. (Please check with your accountant which option to choose for foreign customers.)

  • Suppliers:

    • Choose Standard if the supplier is VAT registered.

    • Choose No VAT if the supplier is not registered for VAT.

    • Choose NO VAT if the supplier only supplies goods on which VAT may not be claimed even if they charge VAT. The expense in this case is the full VAT inclusive amount.

• VAT No.: 

  • Enter the Customer or Supplier's VAT registration number. The numbers must appear on invoices over a certain value. 

  • VAT registration numbers can be verified here.

Materials

Navigation: Main Menu > Setup > Materials > double-click any Material > Costs & Prices (tab)

VAT defaults can be specified for Supplier Prices and Cost & Selling Prices.

VAT defaults on Materials override VAT defaults on Entry Types. 

• VAT Type: Provides a dropdown list of VAT Types.

  • Supplier Prices

    • Choose Standard if the supplier is VAT registered.

    • Choose No VAT if the supplier is not registered for VAT.

    • Choose No VAT if the supplier only supplies goods on which VAT may not be claimed even if they charge VAT. The expense in this case is the full VAT inclusive amount.

  • Cost & Selling Prices

    • Depends on the product or service offered.

    • If the organisation is VAT registered, the VAT Type will mostly be Standard.

• Price: Select one of these options:

  • Exc: Choose exclusive to enter VAT exclusive prices.

  • Inc: Choose inclusive to enter VAT inclusive prices.

  • N/A: Choose this option if VAT is not applicable.

Services

Navigation: Main Menu > Setup > Services > double-click any Service

VAT defaults can be specified for Service Prices.

VAT defaults on Services override VAT defaults on Entry Types.

• VAT Type

  • Provides a dropdown list of VAT Types.

    • Depends on the product or service offered.

    • If the organisation is VAT registered, the VAT Type will mostly be Standard.

• Inc / Exc (block next to VAT Type)

  • Exc: Choose exclusive to enter VAT exclusive prices.

  • Inc: Choose inclusive to enter VAT inclusive prices.

  • N/A: Choose this option if VAT is not applicable.

How VAT is Calculated

• In BOS Professional, VAT is calculated on Transaction Items, and the calculation depends on whether the price is input as VAT exclusive or inclusive.

  • VAT Inclusive prices are calculated by adding VAT at the prevailing rate to the exclusive prices.

    • For example, Exclusive Price + 15% of the VAT Exclusive Price (where 15% = the prevailing VAT rate) = VAT Inclusive Price.

  • VAT Exclusive prices are calculated by deducting VAT from the default inclusive prices.

    • For example, Inclusive Price - VAT Portion = Exclusive Price.

    • VAT Portion = Inclusive Price x 15/(100 + 15) (where 15% = the prevailing VAT Rate).

• BOS Professional uses a fractal calculation (compared to limiting the fraction to five decimals).

• Because VAT is calculated at an Item level, rounded to two decimals, and then summed to the transaction total, there may be small discrepancies between calculating VAT on the transaction total and the sum of VAT on items.

• Similarly, the VAT on all the transactions might differ a few cents from calculating VAT on the total transaction value.

• For example:

  • Customer Invoices Total Exclusive = 2 521 370.21

  • VAT as per BOS professional = 378 205.56

  • Customer Invoices Total Inclusive = 2 899 575.77

  • VAT manually calculated on the exclusive total (2 521 370.21 x 0.15) = 378 205.53

  • Difference = 0.03 (378 205.56 - 378 205.53)

  • VAT manually calculated on the inclusive total (2 899 575.77 x 15/115) = 378 205.54

  • Difference = 0.02 (378 205.56 - 378 205.54)