It is a common misconception that all farmers may be, or are required to be registered on Category D (six-monthly or bi-annual tax period). This is not true as a farming enterprise is required to make a written application to the Commissioner to be registered on Category D. Further, vendors who qualify for the Category D tax period must meet the following criteria:
- The enterprise must consist solely of agricultural, pastoral or farming activities.
- The total turnover from all farming activities must not exceed R1,5 million per consecutive period of 12 months.
Where the value of taxable supplies exceed R1,5 million in any consecutive period of 12 months, the Commissioner will allocate either a Category A or B tax period to the vendor (two-monthly tax period).
Where the value of taxable supplies exceeds R30 million per consecutive period of 12 months, the vendor will be obliged to pay over the VAT and submit monthly returns per Category C tax period.
Zero rated supplies
To assist farmers with their cash flow, many of the products which are used or consumed in the course of conducting a farming enterprise are zero-rated, or exempt from VAT on importation. Some examples of goods that may be purchased at the zero rate are –
- Animal feed;
- Animal remedy;
- Plants and seeds used for cultivation.
(please refer to Part A of Schedule 2 to the VAT Act for the complete list)
What are the requirements for buying goods at zero rate?
The following requirements must be met in order for the farming enterprise to purchase the goods in the mentioned Schedule at the zero rate:
- The farming enterprise must be in possession of a VAT registration certificate indicating the farming enterprise’s entitlement to purchase the goods listed in Schedule 2 at the zero rate;
- The aforementioned notice of registration must be presented the the supplying vendor;
- The VAT registration number of person carrying on the farming activity must appear on the tax invoice issued by the supplying vendor ;
- The goods supplied must be specified in Part A of Schedule 2 to the VAT Act and must not be prohibited goods.
For information on Diesel refunds for farming, click here
Top Tip: The total amount received from the supply of zero-rated goods (and services) must be shown in field 2 on the VAT return.
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