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 have any questions about this please feel free to reach out to a member of the Nolands Tax team.