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Value Added Tax (VAT) become effective on 1st January 2013

The Ministry of Finance, Trade & Investment (MFTI) has announced that the implementation of Value Added Tax (VAT), which was postponed earlier this year, will now become effective on 1st January 2013.

Government approved a recommendation by the MFTI on the issue this week. This approval followed a series of consultative meetings since last July. All businesses with turnover of R5 million and above will automatically fall under the VAT regime.

It would be recalled that VAT implementation was originally planned for July 1, 2012. However, for various reasons, including insufficient administrative and operational preparedness and concerns over potential inflationary impact, Government postponed implementation of the VAT. Subsequently, the MFTI carried further in-depth analysis of the impact of this new tax and engaged in intensive consultations with the different sectors of the economy to better understand and address these concerns.

It would be recalled that one of the key concern of the general public was fear over the potential impact on the cost of living. MFTI’s analysis shows that since all basic items currently exempted from GST will also VAT-exempt, and the fact that the list of exempted commodities has been expanded to include new essential food items, such as meat, bread, vegetables and fruits, the cost of living should not increase in any significant way; in some cases prices should decrease. Further additional measures to mitigate any potential increase will be announced during the 2013 budget presentation.

The consultations with the private sector have also allowed the MFTI to address other concerns raised previously raised by the private sector. Evidence is the fact that most private sector operators are now in favor of VAT. About 390 companies will automatically fall under the R5 million VAT threshold whilst 98 others have registered to be voluntarily covered by VAT.


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