VAT for farmers in South Africa
Farmers in South Africa play a critical role in providing food for the nation. The government recognizes this contribution and has provided VAT exemptions on all seeds, feed, fertilizers, and medications. However, to benefit from these exemptions, farmers must register their farming activities for VAT.
Registering for VAT not only ensures that you can claim back the VAT paid on general inputs, but it also allows you to charge VAT on your sales. This means that you can recover the VAT paid on your expenses and improve your cash flow.
The VAT Act:
Under the VAT Act, vendors engaged in agricultural, pastoral, or other farming activities are eligible for special dispensations. One such dispensation enables them to acquire certain goods at a zero rate or import certain goods exempt from VAT, provided that they are used or consumed in the course of conducting their farming enterprise. This helps with cash flows. Examples of eligible goods include animal feed, animal remedies, fertilizer, pesticide, and plants/seeds used for cultivation.
Requirements for VAT exemption as a farmer
To acquire goods at the zero rate, a farming enterprise must meet the following requirements: SARS must confirm the vendor’s farming enterprise, issue an authorization on the vendor’s Notice of Registration, and the vendor must possess a valid Notice of Registration and authorization. Additionally, the vendor must issue a valid tax invoice, and the supplied goods must be listed in Part A of Schedule 2 to the VAT Act, and not be prohibited goods.
Cancellation of VAT exemption
SARS can cancel a farming enterprise’s authorization to acquire goods at zero rate if the vendor fails to submit VAT returns or pay VAT, ceases the farming enterprise, or uses the registration for another purpose. Goods that qualify for zero rate acquisition can be imported exempt from VAT if requirements under Part A of Schedule 2 to the VAT Act are met. Vendors carrying on a farming enterprise can register under Category D(6 monthly) tax period, provided total turnover from farming activities is under R1.5 million per consecutive 12 months. If taxable supplies exceed R1.5 million, the Commissioner may allocate Category A or B tax period(2 monthly tax period), and if it exceeds R30 million, the vendor falls under Category C tax period(monthly tax period).
How to register for VAT as a farmer?
To register for VAT, farmers must meet specific criteria. Once registered, farmers must keep accurate records and submit VAT returns on time. Failure to comply with these requirements can result in penalties and interest charges.
In conclusion, registering for VAT can provide significant benefits to farmers in South Africa. If you meet the criteria, we encourage you to register and take advantage of the VAT exemptions on seeds, feed, fertilizers, and medications. Visit the South African Revenue Service website for more information on how to register for VAT.