What are the Vat implications if you receive an insurance settlement?

Simangele Mzizi, Fsp Business, 15 Sep. 2014

Tags: vat, sars, insurance settlements and vat implications, insurance settlements and vat

It seems like nothing escapes the Vat net.

Believe it or not, there are Vat implications when it comes to insurance, more specifically, insurance settlements.

It’s important that you understand these implications well and apply the correct Vat. If you don’t, SARS penalties and interest will come your way.

Here are four Vat implications if you’re the insured and you receive an insurance settlement

#1: If you make a claim and receive a payment, it includes 14% Vat.

#2: You must account for Vat as output tax on your Vat return for the period when you receive the payment.

The Practical Vat Loose Leaf Service explains that you only make this calculation when the payment relates to the loss of goods/items/supplies on which you can claim an input tax deduction when you first buy them.

#3: To calculate this amount you’ll multiply the amount you receive by the Vat rate 14/114. This will give you the Vat amount you must put into block 12 of your Vat return.

#4: If the insurance company replaces or repairs the goods, you don’t have to calculate output tax.

Sound complicated?

This example will clarify things for you.

*********** Hot off the press ************
Do your Vat refund in ten simple steps

Calculate your Vat, submit your Vat return form and get your refund back from SARS without any delays when you follow this ten-step action plan.

Get your hands on this ten step action plan now to get your Vat refund when its due.


Take a look at this example – it shows the Vat implications when you get an insurance settlement

There’s a fire at Sloppy Joe’s Casual Clothes. Joe, the owner, claims R150 000 from his insurance company.

The insurance company pays out R150 000 on 31 August 2014. Joe must now calculate and pay over the corresponding Vat in the Vat 201 return that covers his August tax period.

He does his calculation as follows:

R150 000 x 14/114 = R18 421.05

He must add the amount of R18 421.05 to his output tax at Block 12A on his Vat 201 return.

Now that you know there are Vat implications if you receive an insurance settlement, account for Vat correctly so you avoid SARS penalties.

Related articles:




RSS Facebook Share the experience
Accounting and Tax Club.co.za

  • Accounting
  • Allowances and deductions
  • Audit/Assessment
  • Capital gains tax
  • Dividends
  • Donations Tax
  • Exports and imports
  • Fringe benefits
  • Input tax
  • Provisional tax
  • Sars
  • Tax basics
  • Tax invoices
  • Tax returns
  • Vat basics
  • Vat registrations
  • Vat return
Premium Services
  • Company Registration
  • Objections
  • PAYE
  • Trusts
  • Turnover Tax
  • UIF
  • Wear and Tear
how to get my tax number online[read more]
Published on 16 Feb. 2018 1 answer
Need some help on correcting payslips taken over from outsourced payroll person. As soon as the company pays ANYTHING...[read more]
Published on 06 Feb. 2018 1 answer
Dear Sir, Please advise the CGT calculation in the following scenario: Close corporation with one member purchased...[read more]
Published on 18 Jan. 2018 1 answer
Video Archive Video club

Your library of Free eReports
View full library
SARS Tax Tables 2016/2017 Download

Simply click download for your FREE SARS Tax Tables 2016/2017 to ensure you calculate your tax correctly.