05 Oct The VAT of food? Delicious and Nutritious for your bank account.
The VAT of food? Delicious and Nutritious for your bank account.
The VAT Act allows for certain food products to be zero rated (meaning that there is no VAT applied to the food product). The idea behind this is to make necessities more affordable for the poor.
The list of zero rated food items consists of the following:
- Brown bread • Maize meal
- Samp • Mealie rice
- Dried mealies • Dried beans
- Lentils • Pilchards/sardinella in tins
- Milk powder • Dairy powder blend
- Rice • Vegetables
- Fruit • Vegetable oil
- Milk • Cultured milk
- Brown wheaten meal • Eggs
- Edible legumes and pulses of leguminous plants
Zero rating only applies while the food is in its raw form. So if you buy brown bread from the supermarket there it will not receive VAT, however if you buy breakfast from a restaurant and brown bread is included in the meal it will receive VAT.
Some interesting rules put forward by SARS include the following:
- The supply of fresh paprika is zero rated, whereas dried paprika is standard rated
- The supply of coriander is standard rated
- Vegetable oil can be zero rated even if a colorant is added, but not if flavoring is added
- Frozen potato chips that are blanched as part of the preservation process can still be supplied at the zero rate, but not if it contains an additive to make it darker
- Brown bread must weigh more than 100 grams and the content of the dough must consist of at least 50% brown bread meal.
So here are some basic guidelines to take into account when considering the application of VAT:
- Figure out if any standard rated products were added e.g. flavoring. If so, these products are most likely not zero rated.
- Was a process involved other than for the purpose of preserving the product in its natural state? If not, it might not be zero rated.
- If the product is created as a ready to eat meal, VAT must be applied.
Knowing what is zero rated can be quite helpful as in the case of Marks & Spencer, who successfully claimed a refund of £3 500 000 in the UK based on the fact that their items were zero rated instead of standard rated. So be vigilant when it comes to tax, it might produce a delightful dessert when VAT returns are issued.