Watch out for these VAT pitfalls

The VAT rate rose from 14% to 15% on April 1. While this means goods and services subject to the standard VAT rate that were previously sold for R114 (R100 plus R14 VAT) will now set consumers back R115, not all calculations are quite as simple.

In fact, some consumers who booked and paid for accommodation in early January or February but only plan to use the accommodation after April 1, have been contacted by establishments requesting that they pay the additional VAT.

Moneyweb asked PwC Africa head of indirect tax Charles de Wet to explain the rules in terms of the VAT Act.

1. If I booked in January 2018 to visit the Kruger National Park in June and paid, can the guest house now request that I pay the additional VAT?

Where a person has made a booking for accommodation that’ll be used on or after April 1, but paid for the accommodation in full prior to the date of the National Budget (February 21), the standard VAT rate of 14% would still be applicable.

But, if the booking was made in January with only a deposit paid, the supplier is entitled to levy the additional VAT, as the time of supply will either be when (actual) payment was made, or when the invoice was issued.

2. Will the situation be different if a consumer used a service before April 1, but only made a payment a er that date? For example, if my plumber issued an invoice on April 2 for services in March, can he claim VAT at 15%?

Specific rules will be applicable in circumstances like these and consumers need to determine exactly when the services were rendered.

If a plumber delivered services before April 1, even if the invoice was issued after that date (or payment made after the Easter weekend for example) the rate of 14% will still be applicable.

If the job required several days of work, started on March 25 and was only completed later in April, the plumber will have to issue an invoice at 14% VAT for the work completed before April 1, and 15% for the work thereafter.

3. Regarding cellphone contracts or insurance, are suppliers entitled to levy additional VAT automatically even though contracts were concluded long ago?

The VAT Act provides for such contracts to be adjusted automatically. If a quote or contract was issued inclusive of VAT – whether it was last month or 10 years ago – the higher VAT rate will automatically be applicable.