Guidance on Payment Plans for VAT Obligations (VAT201): What Business Owners Need to Know

sh8107
Nov 22
2 min read

Managing VAT obligations can feel overwhelming—especially when cashflow becomes tight. To help South African business owners stay compliant and avoid unnecessary penalties, here’s a clear guide on how VAT201 payments work and how SARS payment plans apply only after a debt becomes overdue.

1. VAT Charged to Clients Is a “Moral Tax” — What Does That Mean?

VAT is not your business’s money.

When you invoice a client and add VAT, you are collecting tax on behalf of SARS.This is often called a moral tax because:

You hold VAT in trust for SARS.
The VAT collected never belongs to the business.
It must be paid over whether customers pay you or not (the invoice-based system).

This is why SARS is strict on VAT arrears—because it is public money temporarily held by the business.

2. When Is VAT Payable?

VAT vendors file VAT201 returns on either:

Monthly cycle, or
Bi-monthly cycle (every 2 months)

Your VAT payment is due one month after the end of the cycle.

Example:If your VAT period ends on 30 April, your VAT201 and payment are due by 31 May.

3. SARS Charges a 10% Penalty + Interest for Late or Partial Payments

If VAT is:

Paid late,
Paid partially, or
Not paid at all,

SARS automatically applies:

10% late payment penalty, and
Daily interest until the debt is settled.

These charges cannot be waived simply because of cashflow issues.

4. If Cashflow Is Tight: Pay What You Can & Inform Your Accountant

If you cannot pay the full VAT amount:

Pay whatever you can afford before the due date.
Immediately tell your accountant how much you have paid.
This reduces penalties and interest because the outstanding balance will be smaller.

Even a small partial payment helps reduce SARS debt.

5. SARS Payment Plans (Up to 6 Months) — Only Available After VAT Is Late

A very important rule:

👉 SARS does not grant payment arrangements for VAT before it becomes overdue.

Payment plans can only be applied for once:

The VAT201 has been filed,
The due date has passed,
Penalties (10%) and interest have already been levied.

Only then can SARS negotiate a payment plan—typically up to 6 months, depending on compliance history.

6. You Cannot Apply for a Payment Plan Before the VAT Due Date

Payment plans cannot be requested:

Before the payment is due
Before penalties are applied
While the VAT account still shows no outstanding amount

SARS requires the tax to first be due and payable, which only happens after the deadline.

Final Thoughts

o stay compliant and avoid unnecessary penalties:

Treat VAT as trust money, not business income.
diarise your VAT cycles and due dates.
Pay as much as possible before the deadline if cashflow is tight.
Speak to your accountant early—they can guide you and apply for a SARS payment plan only once the VAT is overdue.