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Every time you buy something, VAT is already included in the price. Every time your business sells something above a certain threshold, you are required to collect and pay VAT to the government. Understanding how VAT works — and when it applies to you — is fundamental to running any business or understanding your spending.
This guide covers VAT in South Africa, the UK, Australia, and the USA — because each country handles it differently.
What Is VAT?
VAT (Value Added Tax) is a consumption tax charged at each stage of the production and sale of goods and services. Unlike income tax, which is paid on what you earn, VAT is paid on what you spend. It's ultimately borne by the final consumer — but collected progressively through the supply chain.
The USA calls its equivalent "sales tax" (applied only at the point of final sale, not throughout the supply chain). Australia calls it GST (Goods and Services Tax). The mechanism is similar; the structure differs.
VAT Rates by Country — 2026
| Country | Standard Rate | Reduced Rate | Zero Rate | Called |
|---|---|---|---|---|
| South Africa | 15% | No reduced rate | Yes (basic foods, exports) | VAT |
| United Kingdom | 20% | 5% (energy, children's car seats) | Yes (food, children's clothes) | VAT |
| Australia | 10% | No reduced rate | Yes (basic food, healthcare) | GST |
| USA | No federal rate | State rates: 0–10.25% | Varies by state | Sales Tax |
The USA is notably different. There is no federal sales tax in America — each state sets its own rate, and even within states, counties and cities add their own. Oregon has no sales tax. California's combined state and local rate can reach 10.25%. This creates significant complexity for businesses selling across state lines.
South Africa — VAT at 15%
South Africa's VAT rate is 15% on most goods and services. Zero-rated items include basic foods (brown bread, dried beans, lentils, mealie rice, maize meal, samp, pilchards, eggs, milk, fruit and vegetables, cooking oil), certain agricultural products, and international exports.
SA VAT Registration Threshold (2026)
Compulsory: If your total taxable turnover exceeds or is expected to exceed R1,000,000 in any 12-month period, you must register as a VAT vendor with SARS.
Voluntary: You may register if turnover exceeds R50,000 — useful if you have significant VAT input costs to claim back.
When you register for VAT in South Africa, you charge 15% VAT on your sales (output tax) and can claim back VAT paid on your business expenses (input tax). The difference is paid to SARS every 1 or 2 months.
United Kingdom — VAT at 20%
The UK's standard VAT rate is 20%, with a reduced rate of 5% for items like domestic energy and children's car seats. Zero-rated items include most food, children's clothing, and books. Financial services and insurance are exempt (different from zero-rated — exempt suppliers cannot reclaim input VAT).
UK VAT registration threshold in 2026: You must register if your taxable turnover exceeds £90,000 in any rolling 12-month period. The UK raised this threshold in 2024 from £85,000 — one of the most significant VAT threshold changes in years.
Australia — GST at 10%
Australia's Goods and Services Tax is 10% on most goods and services. Fresh food, health services, education, and childcare are GST-free. Financial services are also exempt.
Australian GST registration threshold: You must register if your turnover is or is expected to be AUD $75,000 or more annually (AUD $150,000 for non-profit organisations).
USA — Sales Tax by State
The United States has no national sales tax. Each state, county, and city sets its own. For businesses selling goods, the complexity is significant:
| State | State Rate | Avg Combined Rate | Notes |
|---|---|---|---|
| Oregon | 0% | 0% | No sales tax |
| Montana | 0% | 0% | No sales tax |
| New York | 4% | ~8.5% | NYC adds 4.5% |
| Texas | 6.25% | ~8.2% | Local adds up to 2% |
| California | 7.25% | ~8.8% | Up to 10.25% in some areas |
| Florida | 6% | ~7.1% | No state income tax instead |
For online businesses, the Supreme Court's 2018 South Dakota v. Wayfair ruling means businesses selling into a state must collect that state's sales tax once they hit economic nexus thresholds — typically $100,000 in sales or 200 transactions in that state.
How to Calculate VAT — Quick Reference
VAT Quick Calculations
To add VAT to a price (SA 15%): multiply by 1.15
→ R100 + 15% VAT = R100 × 1.15 = R115
To remove VAT from a VAT-inclusive price: divide by 1.15
→ R115 ÷ 1.15 = R100 (ex-VAT) | VAT portion = R15
UK: multiply/divide by 1.20 | Australia: multiply/divide by 1.10