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The Low-VAT Diet

30 April 2012   (0 Comments)
Posted by: Author: Herman Viviers and Sophia Brink
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The Low-VAT Diet

Slimming Down On Weights And Taxes

Slim down on your grocery list by buying VAT-free(Value-Added Tax) food items and you will be pleasantly surprised on how VAT-free food items can be cleverly combined into a healthy eating programme that are simultaneously good for your figure and will result in VAT savings of 14% per food item on your personal budget.

Section 11(1)(j) of the Value Added Tax Act of No. 89 of1991 read together with the Second Schedule to this Act provides for the supply of certain basic foodstuffs to be zero rated.This means that consumers could purchase these food items at a price inclusive of 0% VAT instead of paying the standard VAT rate levied at 14%.The legislation contains a list of 19 food items that qualify for the zero rating and includes items like fresh fruit and vegetables, brown bread, pilchards, milk, rice and eggs(just to mention a few).

This list of zero-rated items seems easy to apply at first,but tends to be harder to interpret once it is applied practically. If we take brown bread, for example: if a white bread is marketed as a brown bread disguised as white promising you the "best of both” this could create confusion in determining whether the bread you are buying will be classified as a white bread (meaning you will be charged VAT at the standard rate of 14% on it)as opposed to it being classified as a brown bread that will qualify as a zero-rated food item, saving you the VAT of 14%.Due to problematic practical scenarios like this, the South African Revenue Service (SARS) provides guidance in the form of numerous general rulings and VAT news articles on zero-rated foodstuffs.

What does legislation say ?
Regulation 1 of Government Notice No. R 577 provides that brown bread shall consist of dough made from brown wheaten meal and water, with or without other ingredients that has been fermented by yeast or other wise leavened and which has been baked in any form, size or shape.

VAT Practice Note: No. 12 determines that the supply of any type of brown bread shall be subject to tax at the zero rate, provided that:
(i) it is marketed and sold under the description brown bread;
(ii) the meal content of the dough consists of at least 50 per cent brown bread meal; and
(iii) the mass of the loaf exceeds 100 grams.

A further requirement is that brown bread will be subject to the zero rate only where it is not supplied in the course of the provision of a meal or refreshment.Buying a health brown bread sandwich from the canteen or cafeteria at work will therefore not apply for VAT at the zero rate.This means that you will have to make your lunchbox sandwiches yourself, but keep in mind that you will burn an extra few calories in the planning and preparation.

Therefore, you must be careful when selecting food items from the shelves as small differences like ingredient content, the condition in which a food item is sold, or the way a food item is marketed will determine whether that product is offered to you at a price inclusive of VAT at 14% or at a VAT rate of zero per cent, making a difference to your pocket.

Helpful tips
In an approach to ensure that you are loading your shopping basket with the correct food items in order to obtain the tax benefit of zero-rated products, you must be aware of certain guidelines.There is a possibility that your grocer may erroneously sell a product to you at the incorrect VAT rate, not only causing direct financial loss to himself, but also adding unnecessary expense to your account.

In certain circumstances where foodstuffs are further prepared or processed, the zero rating does not apply. In other cases where additives or flavourings were added or where food is cooked or supplied as a ready-to-eat meal, VAT will be charged at the rate of 14%.Milk versus milk powder (both zero-rated products)Milk powder costs less than fresh milk and has a similar nutrient content.Milk powder does not need to be stored in the refrigerator and can therefore be bought in bulk to save additional money. If you prefer the taste of fresh milk, you can save money by mixing one litre of fresh milk with 100 grams of milk powder and one litre of water.Unfortunately, you must do away with milkshakes as sweetened-flavoured milk is excluded from the zero rating.

Fruit and vegetables
Fruit and vegetables are zero rated except if cooked or treated in any manner except for the purpose of preserving such fruit or vegetables in their natural state.If you buy fruit or vegetables that are already chopped or sliced, it will still qualify for the zero rating as chopping and slicing do not qualify as "treated in any manner”.

Therefore, feel free to buy freshly sliced fruit,frozen chopped vegetables like stir fry mix and freshly sliced vegetables, but be aware of the fact that these fruit and vegetables are usually a bit more expensive.Do not be lazy, sharpen your knives and start chopping while saving money.Also keep in mind that dehydrated, dried, canned or bottled fruit and vegetables are excluded from the zero-rate provisions.This is actually good news as fruit and vegetables that are dried in the sun have lost a lot of their nutritional value.It is important to choose any fruit or vegetable in season as they are cheaper, fresher and more freely available.Limit the purchasing of expensive vegetables such as mushrooms, green pepper sand bean sprouts.

Pilchards
It does not matter whether this fish is flavoured,seasoned or preserved in oil, it will still qualify for the zero rating.The fact that it is tinned or canned also does not exclude it from being zero rated as long as the content of the can or tin consists of mainly pilchards. Further good news is that tinned fish is the cheapest form of fish.

Vegetable oil
Although olive oil is a well-known healthy alternative used in the preparation of food, it is important to be aware of the fact that olive oil is specifically excluded from the zero-rated items as listed in the Second Schedule to the VAT Act.Vegetable oils that do qualify for the zero rating as a cheaper alternative as opposed to butter are sunflower oil, canola oil or blended cooking oil..

The VAT-free diet
The VAT-free diet (indicated below) that you can follow includes 13 of the 19 zero-rated food items listed in the Second Schedule to the VAT Act and includes: brown bread, maize meal, dried beans, lentils, pilchards, milk and milk powder, rice, vegetables, fruit, vegetable oil, eggs and legumes (for example, peas and soya).

A seven-day VAT-free diet, compiled in collaboration with the Nutrition Information Centre from the University of Stellenbosch (NICUS), can be used as a guideline to a healthy, well balanced and economical lifestyle for moderate active healthy adult females or inactive healthy adult males.

Day 1
Day 2
Day 3
Day 4
Day 5
Day 6
Day 7
Breakfast
BreakfastBreakfastBreakfastBreakfastBreakfastBreakfast
1 cup of cooked maize
porridge, with 125 ml
skim or low-fat milk,
5 ml sugar*
1 cup seasonal fruit
tea/coffee*, with 60 ml
skim or low-fat milk
2 slices of brown
bread, with 3 heaped
teaspoons peanut
butter*
125 ml skim or low fat
milk
tea/coffee*, with 60 ml
skim or low-fat milk
1 cup of cooked maize
porridge, with 125 ml
skim or low-fat milk,
5 ml sugar*
1 cup seasonal fruit
tea/coffee*, with 60 ml
skim or low-fat milk
1 cup of cooked maize
porridge, with 125 ml
skim or low-fat milk,
5 ml sugar*
tea/coffee*, with 60 ml
skim or low-fat milk
1 cup of cooked maize
porridge, with 125 ml
skim or low-fat milk,
5 ml sugar*
1 cup seasonal fruit
tea/coffee*, with 60 ml
skim or low-fat milk
1 cup of cooked maize
porridge, with 125 ml
skim or low-fat milk,
5 ml sugar*
tea/coffee*, with 60 ml
skim or low-fat milk
2 slices brown
bread, with 5 ml soft
margarine* and jam*
250 ml skim or low fat
milk
tea/coffee*, with 60 ml
skim or low-fat milk
Light-Meal
Light-MealLight-MealLight-MealLight-MealLight-MealLight-Meal
2 slices brown bread,
with 5 g soft margarine*
½ cup dried beans
1 sliced tomato
1 cup seasonal fruit
250 ml skim or low-fat
milk
2 slices brown bread,
with soft margarine*
1 egg
1 sliced tomato
1 cup seasonal fruit
250 ml skim or low-fat
milk
2 slices brown bread,
with soft margarine*
1 egg
1 sliced tomato
250 ml skim or low-fat
milk
2 slices brown bread,
with soft margarine*
90 g pilchards
1 cup seasonal fruit
250 ml skim or low-fat
milk
2 slices brown bread,
with soft margarine*
90 g pilchards
1 sliced tomato
250 ml skim or low-fat
milk
2 slices brown bread,
with peanut butter* or
1 egg
1 cup seasonal fruit
250 ml skim or low-fat
milk
1 cup lentils
½ cup dried beans
1 tomato
1 onion
1 cup cabbage
5 ml sunflower/ canola
oil
1 cup seasonal fruit
250 ml skim or low-fat
milk
Main meal
Main mealMain mealMain mealMain mealMain mealMain meal
1 cup lentils
1 cup seasonal
vegetables
2 to 3 cup rice
10 ml sunflower/
canola oil
tea/coffee*, with 60 ml
of skim or low-fat milk
1 cup of cooked maize
porridge
90 g pilchards
½ cup tomato and
onions
1 cup cabbage
½ cup pumpkin
10 ml sunflower/
canola oil
tea/coffee*, with 60 ml
skim or low-fat milk
1 cup seasonal fruit
2½ cups of beans
1 cup spinach
½ cup carrots
1 sliced tomato
10 ml sunflower/
canola oil
tea/coffee*, with 60 ml
skim or low-fat milk
1 cup seasonal fruit
2 to 3 cups of rice/
maize rice
60 g beef*/ pork* or
chicken*
1 cup cabbage
½ cup carrots
10 ml sunflower/
canola oil tea/coffee*,
with 60 ml low-fat milk
1 cup seasonal fruit
2 to 3 cups of rice/
maize rice
1 cup lentils
1 cup green beans
½ cup carrots
10 ml sunflower/
canola oil
tea/coffee*, with 60 ml
skim or low-fat milk
1 cup seasonal fruit
2½ cups of beans
½ cup tomato and
onion
1 cup spinach
½ cup pumpkin
10 ml sunflower/
canola oil
tea/coffee*, with 60
ml skim or low-fat milk
1 cup seasonal fruit

 

90 g chicken*

1 medium potato
1 cup split peas
½ cup carrots
10 ml sunflower/
canola oil
tea/coffee*, with 60 ml
skim or low-fat milk

1 cup seasonal fruit

(*) Products are not zero-rated items listed in the Second Schedule to the VAT Act but are necessary for a balanced diet.
All portion sizes refer to cooked food with the exception of fruit.

Daily extras:
The following can be used as additional snacks or menu items:
• 250 ml skim or low-fat milk (may be consumed with additional cups of tea).
• One teaspoon of salt for food preparation and seasoning.
• Herbs and spices.
The following vegetables can be eaten without restriction and according to appetite (no added fat or sauce): broccoli, cauliflower, cabbage, baby marrow and brinjal.

In order to live a cheap and healthy lifestyle, just sticking to the seven-day VAT-free diet will not be enough.Water is an essential nutrient and a vital component of good nutrition and no other substance is as widely involved in as many different functions in the body as water.If you are a male, it is recommended that your daily water intake is 12 glasses as opposed to 10 glasses for female.Tap water is freely available and there is no need to buy expensive bottled water on a restricted budget. Enjoy!

References
Value Added Tax Act No. 89 of 1991
VAT Practice Note: No. 12 of 24 November 1993
Nutrition Information Centre University of Stellenbosch [NICUS]

Source: By Herman Viviers and Sophia Brink (TaxTALK)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

 

 

 



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