VAT on South African quotations
How VAT appears on a South African quotation in Achekam, what to do when a quote mixes 15% and 0% items, and wording that makes VAT clear.
By Achekam · · 4 min read · For Running a business businesses in South Africa
A quotation is a promise about price, and VAT is part of the price. A builder who quotes "R" and a figure without saying whether VAT is included has started an argument that will surface on the invoice. A supplier of mixed goods who puts 15% on everything, including items that should be zero-rated, has quoted a price the customer may later refuse to pay.
South African VAT on quotations is not complicated, but it has a few traps, one of them specific to how Achekam builds a quote. This article explains how VAT works on a quotation, what to do with quotes that mix standard-rated and 0% items, and the wording that leaves the customer in no doubt.
One VAT rate for the whole quotation
A quotation or proposal in Achekam carries one VAT rate for the whole document. Every line on it is taxed at that rate. There is no line-by-line choice on a quote the way there is on an invoice.
For most service businesses, that is no trouble: a consultancy, a cleaning company or an IT support firm usually supplies everything at the standard rate. It becomes a problem only when some of what you quote is zero-rated, which is covered below.
One other limit is worth knowing. The quote screens on the Billing & Finance and Smart Accounting pages keep quotes only in your browser: they are lost when the page reloads, and a quote saved there cannot later be turned into an invoice. Whichever screen you use, keep a PDF or copy of every quotation you send, so the price you promised is on record.
The approved standard rate as the default
The rate a quotation starts with is the approved standard VAT rate for your country. For South Africa that is 15%, held in Achekam as an approved rule effective from 1 April 2018; before that date the rate was 14%.
On invoices, Achekam takes the standard rate from the approved rule in force on the document's date, and refuses rather than guesses a rate when no approved rule applies. A quotation's default comes from the same approved rule book, not from a figure someone typed into a template years ago.
Leave the default alone for a fully standard-rated quote. Change it only for a reason you could explain to SARS.
Quotes that mix standard-rated and 0% items
Some businesses quote both kinds of supply together. A food wholesaler may quote zero-rated basic foodstuffs alongside standard-rated household goods; an exporter may quote zero-rated export goods alongside standard-rated local services. With one rate per quote, you cannot put both rates on the same document.
The honest way through is to split the quote:
- Prepare one quotation for the standard-rated items at 15%.
- Prepare a second quotation, with the same reference and date, for the 0% items.
- In the covering message, give the customer the combined total and explain why there are two documents.
What you should not do is put the whole quote at 15% and plan to "fix it on the invoice", or put it all at 0% because most of the items are zero-rated. Either way, the customer is given a price that is wrong, and they are entitled to rely on it.
Checking each line again when the invoice is drafted
A quotation does not become the invoice automatically, so the invoice is a fresh document and its VAT has to be set again. On an invoice, a South African business sets each line's VAT to 15% or 0%.
Invoices start as drafts you can change or delete; issuing one takes the next number in your sequence and posts it to the ledger as debtors, sales and output VAT. Use the draft stage to compare the invoice with the accepted quote, line by line:
- the same items and quantities as the quote;
- 15% on the lines that were standard-rated on the quote;
- 0% on the lines from the zero-rated quote;
- the same total the customer accepted.
Bear in mind that 0% on the invoice screen does not tell zero-rated and exempt apart. If you also make exempt supplies, tell your accountant which lines are which, so your VAT return reports them correctly. Line-by-line VAT on invoices is explained in VAT on invoice lines in South Africa.
Wording that tells the customer whether prices include VAT
Customers compare quotes, and a quote that is silent on VAT will be read in whichever way suits the customer. SARS lists the duties of a registered vendor, including charging VAT on taxable supplies, quoting VAT-inclusive prices and issuing tax invoices, on its page on the obligations of a VAT vendor.
In practice, make the VAT position impossible to miss:
- show the total including VAT as the headline figure;
- show the VAT amount and the total excluding VAT beneath it;
- add a line such as "All prices include VAT at 15% unless marked 0%";
- on a split quote, label the second document "zero-rated items".
If you are not yet registered for VAT, none of this applies: your quotes should carry no VAT at all, and the default rate needs changing on every one. That case is covered in invoicing before you register for VAT.
Before your next quote goes out, check the rate at the top of the document and the wording at the bottom. Those two lines prevent most VAT disputes before they start.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
