15 Practical VAT Questions We Often Get Asked at On Q Accounting (2025 Update)

Understanding Value-Added Tax (VAT) in South Africa can feel overwhelming. With the VAT rate rising to 15.5% in May 2025 (and further to 16% in 2026), clear guidance is essential. At On Q Accounting and Tax Services, we often encounter practical VAT questions from our clients. Here we share answers to the 15 most frequently asked practical VAT questions, referencing the South African VAT Act (Act 89 of 1991) clearly.

1. Why can’t I claim VAT on staff refreshments or entertainment expenses?

Under Section 17(2)(a) of the VAT Act, VAT on entertainment costs like staff meals, refreshments, or client events is specifically denied as input tax. SARS regards these expenses as non-essential personal consumption, unrelated to generating taxable income.

2. Should I charge VAT on services provided to foreign clients?

Services to foreign companies are generally zero-rated, meaning you charge VAT at 0% if the recipient is outside South Africa (Section 11(2)). However, if services relate directly to property situated in South Africa or are consumed within the country, standard VAT rates apply.

3. Why can’t I claim VAT on my double-cab bakkie?

Input VAT on purchasing passenger vehicles, including double-cab bakkies, is usually prohibited by Section 17(2)(c) unless your business involves vehicle trading, vehicle hire, or specific vehicle-related enterprises.

4. Why must I charge VAT on an invoice including salary or fuel costs, even though these items don’t have VAT separately?

The VAT Act (Section 7(1)(a)) requires VAT to be charged on the total value of your taxable supplies. Salaries or fuel costs included as part of your overall service are integrated costs of providing that taxable supply, thus VAT applies to the full invoice amount.

5. Can I claim VAT on staff training expenses?

Yes, you can claim VAT incurred on staff training as input tax if the training directly relates to generating taxable income (Section 16(3)).

6. How does VAT apply to imported services under Section 7(1)(c)?

If your business uses services from a foreign supplier not registered for VAT in South Africa, and those services are consumed locally for exempt or non-taxable purposes, your business must pay VAT directly to SARS at the standard rate (currently 15%). This is known as the reverse-charge mechanism. You must declare this VAT on your VAT201 return.

7. Can I claim VAT on debts that have gone bad?

Yes, if you’ve already declared output VAT on sales and those debts become irrecoverable, you may claim back VAT under Section 22(1).

8. Should I charge VAT on customer deposits?

VAT applies to deposits only when they’re treated as payment for future taxable supplies. Refundable deposits not directly linked to supply are not immediately subject to VAT (Section 10(22)).

9. Can I claim VAT on business legal fees?

Yes, legal fees incurred for taxable business activities allow input VAT claims under Section 16(3).

10. Should I charge VAT on directors’ fees?

Generally, no. Directors’ fees are considered remuneration, not taxable business services, thus VAT does not usually apply (Section 12(a) and related SARS guidelines).

11. Can VAT be claimed on short-term business insurance premiums?

Yes, VAT paid on short-term insurance (e.g., business asset cover, fire, theft) is claimable (Section 16(3)). VAT on long-term insurance (life, income protection, personal policies) is not claimable (Section 12(a)).

12. Must VAT be charged on residential property rental?

No. Residential rental income is exempt from VAT (Section 12(c)), meaning you neither charge VAT nor claim input VAT on related expenses.

13. Is VAT claimable on office stationery and equipment?

Yes, office supplies and equipment directly related to taxable business activities qualify for input VAT deductions (Section 16(3)).

14. Does VAT apply to employee fringe benefits?

Yes, certain employee fringe benefits provided through business-purchased goods or services may require you to account for output VAT under Section 18(3).

15. Can I claim VAT on charitable donations?

No, VAT on donations made to charities or similar entities cannot be claimed as input tax. Donations aren’t seen as part of generating taxable income (Section 17(2)(a)).

Why Staying VAT Compliant Matters

With VAT rates changing soon, it’s crucial to review and adjust your VAT compliance strategies proactively. Mistakes or oversights could lead to penalties and interest charges by SARS.

At On Q Accounting and Tax Services, we provide expert assistance with VAT registrations, filings, queries, and compliance reviews, ensuring your business always meets SARS requirements.

If you have further questions or need tailored VAT support, contact our friendly team at On Q Accounting and Tax Services today.