Output VAT is the VAT a vendor adds to the price of its taxable supplies and collects from its customers on the seller's behalf for SARS. It is a liability the vendor holds until it is paid over, not income the business gets to keep.
What it means
Output VAT is recorded as a liability the moment a taxable sale is invoiced, separate from the revenue the sale generates. Each VAT period, output VAT is netted against input VAT to determine what is actually due to, or refundable from, SARS.
Where it fits in
Output VAT applies to a vendor's sales, never to remuneration paid to employees - payroll has its own withholding system (PAYE) that runs in parallel to, and independently of, VAT.
Key rules
- VAT charged on sales, collected on SARS's behalf.
- Recorded as a liability, not as the vendor's own income.
- Netted against input VAT to arrive at the amount due.
- Never arises on remuneration paid to employees.
