Failure to Include VAT in Quotes, Results in Offence!

In many businesses it is standard practice that fees and services are often quoted exclusive of VAT, for example: our estimated fee for the work proposed is R150 000.00, excluding VAT. In terms of the VAT Act 89 of 1991 (‘the Act’), quoting like this is in contravention of section 65 of the Act, which requires that all prices advertised or quoted in respect of a taxable supply of goods or services must include VAT, or alternatively, that the advertisement or quotation must reflect the VAT cost, quoting both the VAT exclusive price and the VAT inclusive price.
 
A recent amendment to Section 58 of the Act takes this a step further, making it an offence where one willfully or negligently contravenes the provisions of section 65 of the Act. This means that if you willfully omit to quote in accordance with section 65 of the Act or even if you are not aware of the section at all, you will be guilty of an offence and liable on conviction to a fine or to imprisonment for a period not exceeding 24 months.
 
As such and going forward, we recommend that all quotations are set out inclusive of VAT. For example:
 
“Our estimated fee for the work proposed is R 172 500.00, inclusive of VAT at the standard rate”
 
Or in the alternative:

Our estimated fee for the work proposed (Excl VAT) = R 150 000.00
VAT (15%) = R 22 500.00
Total fee (Incl VAT) = R 172 500.00
 
If you are a VAT vendor and have any questions about this please feel free to reach out to a member of the Nolands Tax team.

FAQs

Is it mandatory to include VAT in quotes in South Africa?
Yes. Under Section 65 of the VAT Act 89 of 1991, all quoted or advertised prices for taxable supplies must include VAT or clearly show both VAT-exclusive and VAT-inclusive prices.

What are the consequences of not including VAT in a quote?
Failing to include VAT can be considered an offence under Section 58 of the Act, potentially leading to fines or imprisonment of up to 24 months.

How should a quote be structured to comply with VAT regulations?
Quotes should either state the total price including VAT or break down the cost into VAT-exclusive, VAT amount, and VAT-inclusive prices.

Can I be penalised for unknowingly excluding VAT from a quote?
Yes. The law applies to both wilful and negligent non-compliance, so ignorance of the requirement is not a valid defence.

What is the current VAT rate in South Africa?
The standard VAT rate is 15%.

Who must comply with VAT quoting regulations?
All VAT-registered vendors making taxable supplies in South Africa must comply.