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What is the Meaning of VAT?

  • Tax Consultant Gavin Bacon gives us a layman's definition of VAT or Value Added Tax.

  • What is the meaning of Vat?
    Vat stands for Value Added Tax. It translates as the value that is added to the goods or serves. In a basic example - you buy a pencil for R3.00 and sell it for R4.00, you have added value of R1.00. So, to calculate the revenue collected by SARS (which you have to pay to SARS for being a Vat Vendor) - it is the Vat on R1.00. When you buy the pencil - you pay vat on the R3.00 - thus R0.42 and when you sell the pencil for R4.00 you add vat of R0.56. You then pay over the difference to SARS - in this case R0.14. Which is the exact amount of Vat on R1.00 = R0.14.