VAT Exempt Goods and Services in South Africa

Not all goods and services in South Africa are subject to the standard 15% VAT rate. Understanding which items are VAT exempt or zero-rated can help consumers save money and businesses apply the correct tax treatment. This comprehensive guide covers all the goods and services that fall outside the standard VAT rate in South Africa.

Understanding VAT Exemptions vs Zero-Rating

Before exploring the specific items, it is important to understand the difference between exempt supplies and zero-rated supplies. While both result in no VAT being charged to the consumer, they have different implications for businesses.

What are Exempt Supplies?

Exempt supplies are goods or services that are not subject to VAT at all. Businesses making only exempt supplies cannot register for VAT and cannot claim input tax on their purchases. Examples include certain financial services, residential rental accommodation, and educational services provided by recognized institutions.

What are Zero-Rated Supplies?

Zero-rated supplies are taxable at 0% VAT. Unlike exempt supplies, businesses making zero-rated supplies can register for VAT and claim input tax on their business purchases. This makes zero-rating more beneficial for businesses than exemption.

Zero-Rated Basic Food Items in South Africa

To ease the burden on lower-income households, certain basic food items are zero-rated in South Africa. These items represent essential nutrition and are accessible at lower prices due to the 0% VAT rate.

Complete List of Zero-Rated Foods

• Brown bread and brown bread mix
• Maize meal
• Samp
• Mealie rice
• Dried mealies
• Dried beans
• Lentils
• Pilchards and sardines in tins
• Milk (not flavored)
• Cultured milk
• Milk powder
• Dairy powder blend
• Rice
• Vegetables
• Fruit
• Vegetable oil
• Eggs
• Edible legumes and pulses of leguminous plants
• Cake flour (since April 2019)
• White bread flour (since April 2019)
• Sanitary pads (since April 2019)

Other Zero-Rated Supplies

Beyond basic foods, several other categories of supplies are zero-rated in South Africa.

Exports

Goods and services exported from South Africa are zero-rated. This supports South African businesses competing in international markets by not adding VAT to their export prices. Proper documentation proving the export is essential to claim zero-rating.

International Transport

International transport services, including air and sea transport to destinations outside South Africa, are zero-rated. This applies to both passenger and freight transport.

Farming Inputs

Certain farming inputs, including diesel used for farming purposes, are zero-rated to support the agricultural sector and keep food production costs lower.

VAT Exempt Supplies in South Africa

Several categories of supplies are exempt from VAT in South Africa. Businesses making these supplies do not charge VAT and cannot claim input tax.

Financial Services

Most financial services are exempt from VAT, including:

• Interest on loans and deposits
• Life insurance premiums
• Unit trust management fees
• Foreign currency exchange margins
• Certain retirement fund services

Residential Accommodation

The rental of residential accommodation is exempt from VAT. This includes long-term residential leases but excludes short-term holiday accommodation, which is subject to VAT.

Educational Services

Educational services provided by recognized educational institutions are VAT exempt. This includes schools, universities, and other registered educational providers. However, private tutoring services may be subject to VAT depending on the provider.

Public Transport

Certain public transport services are exempt from VAT to keep transport costs affordable for commuters. This typically includes minibus taxi services and some rail services.

Impact on Consumers and Businesses

VAT exemptions and zero-rating have significant impacts on both consumers and businesses in South Africa.

Benefits for Consumers

The zero-rating of basic food items helps reduce the cost of living for South African households, particularly those with lower incomes who spend a larger proportion of their budget on basic necessities.

Considerations for Businesses

Businesses need to carefully track which of their supplies are standard-rated, zero-rated, or exempt to ensure correct VAT treatment and compliance with SARS requirements.

Conclusion

Understanding VAT exempt and zero-rated goods and services in South Africa is essential for both consumers and businesses. Zero-rated items, particularly basic foods, provide tax relief for households, while exempt supplies in sectors like financial services and education operate outside the VAT system entirely.

For standard-rated goods and services at 15% VAT, use our free VAT calculator to quickly determine VAT amounts and total prices.