Issue Date: 
Monday, September 22, 2014

Tenders and VAT

By Werner van Rooyen

22 September 2014

One question that gets raised during each How to Tender Workshop is must my business (or I) be registered for Value Added Tax (VAT) in order for me to tender? Or, must I register my business for VAT?

The answer according to the VAT Act, 1991 (Act No. 89 of 1991) is simple:

  • If your turnover is more than R1.2 million per annum then you have to register your business (or yourself in the case of a sole proprietor) for VAT.
  • There are commodities that are exempt from VAT and if you supply these commodities you do not have to register for VAT. I am not going to go into these technical issues for now.

There is such a thing as voluntary registration. You can register your business voluntary for VAT if your turnover was more than R50 000 for the previous twelve months preceding your registration application.

It is about voluntary VAT registration that I want to talk about. One thing that is a fact in South Africa is that businesses are legislated to death. There are so many laws and Regulations that have to be complied with that entrepreneurs struggle to focus on the most important thing in their business and that is sales. My advice is to stay un-registered for as long as possible - especially if you are a start-up business or a small business. I ask the business owners why they want to give themselves more paper work to do if it is not compulsory to register for VAT.

In my opinion the problem lies within big business. They force the small businesses to register for VAT otherwise they do not want to do business with the small business. It starts with big business` procurement procedures from which they do not want to deviate - you as small business owner must supply them with a TAX INVOICE otherwise they cannot do business with you. This is nonsense; big business must compromise to assist the small business to grow.

Then there is the matter of pricing. Theoretically there should be no difference in price between a VAT registered and a Non-VAT registered supplier. If they procure form the same wholesaler and their mark-up is the same then the price should bee the same. The only difference being the VAT that the registered supplier has to add to its price.

Although there are ample places in the Standard Bidding Documents that ask for your business` VAT registration number it is not a pre-requisite to be registered for VAT in order to respond to a Tender or a Request for Proposal or any other name it might be called. You might be confronted with a Tender Official that says you have to be registered for VAT, if so, just remind that Tender Official of the VAT Act.

The most important thing to remember when it comes to VAT when you respond to a tender is when it comes to pricing - 99.99% of the time your price must include VAT.

If you want to learn more about VAT and any other tender issues be sure not to miss out on our tender workshops. Visit our website www.how2tender.com for more information on our tender workshops or invest in our Tender Manual that is available as an eBook.

Until next time.

Title Closing Date Tender No.
The University of South Africa invites tenders from suitably qualified service providers to provide the University with professional mechanical engineering services for the Sunnyside development design and project management 2018-10-03 12:00 PT2018/19
Supply and Installation of New Street and Area Lighting 2018-10-12 12:00 UZ08/2018
Services of an investment Consultant 2018-10-02 12:00 PT2018/20
Lease Application: Port of East London: Latimer's Landing 2018-10-12 12:00 ELS/HPM 3/17/09/2018/3D
Supply 150 each high voltage operator's instruction book 2018-09-24 11:00 GM11900241
Vacant Land - Dale street houses 2018-10-12 12:00 ELS/HPM 3/17/09/2018/3C
Vacant land - old scrap metal site 2018-10-12 12:00 ELS/HPM 3/17/09/2018/3C
Supply: Furniture 2018-09-27 12:00 GL11900254
Vacant Land - Gately (Erf no. 20436) 2018-10-12 12:00 ELS/HPM 3/17/09/2018/3C
Supply and install ferric dosing station at Voelvlei Water Treatment Plant. 2018-10-05 12:00 SK11900114
Workshop adjacent to Dry dock 2018-10-12 12:00 ELS/HPM 3/17/09/2018/3C
Land and face-brick building adjacent to Car Terminal 2018-10-12 12:00 ELS/HPM 3/17/09/2018/3C
Land and building - Radio workshop 2018-10-12 12:00 ELS/HPM 3/17/09/2018/3C
Appointment of a Civil Maintenance Contractor for a Period of three years. 2018-10-16 12:00 PLZ 17/2018
Land and building-Old dredging building 2018-10-12 12:00 ELS/HPM 3/17/09/2018/3C
Heritage Houses 2018-10-12 12:00 ELS/HPM 3/17/09/2018/3B
Cape Town Stadium two day catering(25 and 26 September 2018). 2018-09-21 10:00 SD11900231
Supply: Tools and equipment 2018-09-26 12:00 GD11900336
Supply: Clothing 2018-09-26 10:00 GA11900263
Supply: Tools and equipment 2018-09-26 12:00 GD11900339

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Advantages and disadvantages of Consortiums

Consortiums are often considered as entities to use when responding to tenders in South Africa. The question that arises is whether to use a Consortium or a Joint Venture when responding to a tender. To help you with this we have compiled a list of advantages and disadvantages for both Consortiums as well as Joint Ventures. In this article we list the advantages and disadvantages of Consortiums. Look out for the same article on Joint Ventures.

Consortiums Advantages:

  • Easy to establish as there are no formal procedures... Read More
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