Are there any inaccuracies in your VAT invoices? You may be charged a very high penalty!
The truth is brutal! Even if it wasn't you who made the mistake, it may be you who will bear the consequences. If SARS has found inaccuracies, you will be assessed, held liable to penalties and interest and possibly even additional tax! You may even be prosecuted! To be continued here
Tip: Think VAT doesn’t apply to your payroll? You’re wrong! Avoid this common error and keep SARS away from your door at audit time
A common mistake picked up by SARS auditors at on-site audits is that employers fail to pay over VAT on company car fringe benefits. This is one of the first areas the audit team will lock onto when they audit you, so make sure you’re paying your output tax on company cars!
Tip: Claim back the input tax credit on your monthly short-term insurance premium
Do you pay a monthly short-term insurance premium, for example to insure your premises or stock against theft, damage or fire? This is a common business expense and forms part of the cost of running your business... so it’s reclaimable.
Remember to claim your input tax credit on these monthly premiums, BUT if you ever get paid out on your policy, bear in mind that because you’ve claimed an input tax credit on your premiums, you will have to account to SARS for output tax on the payout.
Are you sure that the tax invoices you receive are issued properly? Are all the SARS requirements on the tax invoice? Have you ever thought about it?
What if something is omitted from a tax invoice on which you've already claimed input tax?
Anyone who has ever experienced a SARS VAT audit will tell you the first thing the auditors check are your tax invoices!
Do you know what to pay particular attention to? Even if it wasn't necessarily you who made the mistake, you could be held liable. If SARS auditors find errors, you could be assessed and liable for penalties and interest. You may even be prosecuted.
Errors in VAT invoices could cost you a fortune or even result in your company going bankrupt. It’s too late to have doubts when the SARS auditors visit your office.
What errors must not be made? If you are not sure, check in the Practical VAT Handbook immediately! Order it now and if you're not happy, simply return it within 30 days for a full refund.
Tip: Don’t underestimate the importance of retaining all your tax invoices.
Your tax invoice is the equivalent of the IRP5 for your income tax – if you want to claim an input tax credit, you need a tax invoice. Furthermore, you must keep your records for five years!
What keeps 93% of South African accountants awake at night?
Invoices! Do these 5 situations concern you too?
1. You are issuing an invoice. You must pay VAT but you’re not sure whether or not your client is going to pay the invoice… Do you have to pay the VAT with your own money?
Maybe you would like to find out how to avoid paying VAT for invoices until they’ve been paid by your clients and how to comply with the VAT regulations at the same time?
2. Your client says the invoice he received from you has errors, so he’s not going to pay it until you have issued a correct invoice.
Do you know how to argue in order to persuade him that he is not right?
3. The tax office called one of your invoices into question while auditing your client. What will you do when the tax office approaches you – as an issuer – and tries to make you responsible for that?
4. It turns out that your client has not declared VAT properly. Or even worse – he/she turns out to be unreliable: it’s a fictitious company, a tax cheater or simply a mail-box company. Can you deduct VAT from this invoice?
How do you handle this if SARS comes calling?
5. An invoice has become a bone of contention; non-uniform regulations are the basic reason for this.
Are you sure that your interpretation of the regulations is correct?
VAT and vehicles – Check the details before you get into trouble!
If you run a business and have to use a car, you should know how to declare VAT. It’s not easy though…
Your problems will begin as soon as you buy the car. You have to be 100% sure what you can and can’t deduct.
VAT law clearly disallows an input tax deduction on what it terms a “motor car”, but will allow a deduction on single cab vehicles, delivery vehicles, and some others.
Do you know whether the vehicle you have bought is allowable as a deduction? What else do you have to know? – Much more as there are many traps. Can you claim input tax on a car you rent while out of town on business?
What about repairs and insurance? Are you aware that there are many more unclear situations? Please look at the Practical VAT Handbook before you get into trouble!
Checklist: Common administrative errors vendors make when dealing with VAT.
Check you have fulfilled your VAT obligations in these areas – before SARS catches you out
Fringe benefits: Have you paid the tax on your company cars?
Short term insurance payments
Sundry sales and journal entries
Prohibited input tax deductions, e.g. for entertainment expenses or the hire of passenger motor vehicles
Quotes – are you issuing VAT inclusive quotes?
Documentation – is it all correct and do you have everything you need to support your claims?
Are you claiming all the VAT inputs on your debit order payments?
Cancellation of VAT registration – this can give rise to an output tax liability on the remaining stock or assets
Leases and rentals – the time of supply is often wrong
The Practical VAT Handbook will give you all the information you need to ensure you meet all your VAT obligations.
3 Quick Tips
Tip: Did you know?
That domestic air tickets are subject to VAT? If you are a registered vendor and travel on company business within SA, you can claim back the 14% VAT on your air ticket! However, international air travel, and passenger transport by road and rail don’t attract VAT, and so you can’t claim it back. Remember the Golden Rule: You can’t claim it unless you’re charged it.
Tip: Claim back VAT on your banking charges
Although financial services such as transactions by cheque payment and interest on credit loans are exempt from VAT, the service fee on your bank accounts IS Vatable, and you can claim back the VAT you pay on these amounts. South African bank charges are very high and this is one way to contribute to your overall cashflow and get something back!
Tip: A little known office expense you can claim VAT on
Do you purchase flower arrangements for your reception area? Ever send get well flowers to a sick employee? You can claim back the input tax on these everyday office expenses.
Do your VAT invoices pass the 5 point check?
Checklist: VAT invoices
Make sure your VAT invoices contain all the following items to ensure trouble-free claims:
The words “Tax invoice” in a prominent place
The name, address and VAT registration number of the supplier
The name, address and VAT registration number of the recipient
An individual serialised number and the date the invoice was issued
A full and proper description of the goods or services supplied
Make sure you have complete and valid tax invoices or you will be making it very easy for SARS to meet its budget targets.
One of the most common issues that confuses people is whether or not to charge VAT for a supply or service you render to another person or business. Use this failsafe rule to solve your question in two EASY steps!
Step #1: While the new law is that you must record the name and VAT number of your client on your tax invoices, to determine whether to charge VAT or not, the VAT status of the vendor/seller/supplier counts, so always look at the VAT status of the vendor first – if he’s registered for VAT, it’s a taxable supply and VAT must be levied.
Step #2: Ask yourself, is the supply an exempt supply? The list of exempt supplies is very limited:
Passenger service by rail or road
Supply by a charitable organisation of any donated goods
Rentals on residential property
The sale or rental of land outside SA
Shareblock and body corporate levies – but not home owners’ associations
Union membership fees
Service of caring for children by a crèche or an after-school care centre (after-care)
Hr Holroyd signs a 12 month lease to rent a house to live in. No VAT is charged on the monthly rental as rental of residential property is an exempt supply.
Remember: If your business is only rendering exempt supplies, you may not register for VAT!
Best of all, you can start your subscription now and if you're not happy, simply return it within 30 days and get a full refund!
Small error, serious consequences!
How to avoid penalties for errors in VAT declarations
What should you do if SARS comes knocking at your door?
Unsure of when to submit your VAT payments to SARS?
Use our simple, failsafe flowchart to see where you fit in:
Category A or B
SARS will register you as a Category A or Category B vendor if your turnover in a 12-month period is less than R30 million. We’ll deal with these categories together, as their obligations and time frames are similar. Account for your input tax and output tax, on one VAT return every two months. You’ll be showing output and input tax for two months on one return. These will be alternating months depending on whether you’re category A or category B.
If your total turnover exceeds R30 million in a 12-month period, or is expected to do so, SARS will class you as a Category C vendor. You’ll need to submit monthly VAT returns.
This category only covers farmers, farming enterprises and associations-not-for-gain involved in farming activities.
You can also apply to SARS in writing to be classified as a Category D VAT vendor if your business is based on agricultural, pastoral or other farming activities, and its total turnover in a 12-month period doesn’t exceed (and
isn’t likely to exceed) R1.5 million.
You can apply to become a Category E vendor and submit annual VAT returns if your company or trust fund
meets the below requirements set out by SARS
How to get your VAT documentation right – first time, every time
Are these activities subject to VAT?
Determining exactly what activities are subject to VAT and those that are not is challenging for the taxpayer.
Check if you know the VAT application of the supplies below:
|Activity||Subject to VAT||Is not subject to VAT|
|a) Lottery||Yes, VAT included in the price|
|b) Tourist Services||Yes, where the tourist enjoys the services in SA|
|c)Selling copyright for a building project||Yes, sale of intellectual property|
Common questions about VAT, answered by our VAT experts
What our readers have to say
These are extracts from letters we have received from readers of our Practical VAT Handbook
You can rely on the information contained in the Practical VAT Handbook!Our advisers are top experts in the area of VAT.
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