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VAT Tips for Companies in South Africa

VAT Tip#1: Residential Rent is exempt

Residential rental income is an exempt supply. If you earn money from renting out property for residential accommodation, don’t register for VAT, irrespective of your income.

VAT Tip#2: Reflect the correct VAT registration numbers

A tax invoice must reflect you or your principal’s VAT registration numbers.

VAT Tip#3: If turnover exceeds R 30 million change tax periods

If your total income in a 12-month period is more than R30 million, or is reasonably expected to be more than R30 million, then report this to SARS. Request that your tax period be changed to a monthly one!

VAT Tip#4: Normal input tax rules apply to farmers

The normal input tax rules apply to farmers. Claim your input tax on all expenses incurred in the course of your farming activities.

VAT Tip#5: Match your turnover and financial statements

SARS has a habit of reconciling the turnover reflected on your VAT returns with the turnover reflected in your financial statements. If the financial statement figure is greater, it’s indicative of sales not being declared for VAT purposes.
Your turnover figure on your financial statements should match your VAT turnover (less the output tax).

VAT Tip#6: Never inflate your claim

An inflated input claim will either incorrectly reduce your VAR liability, or result in you receiving a refund for more than is legally due to you.
Don’t make this mistake. Your SARs auditors will slap you with up to 200% additional tax, penalties and interest on your revised figures.

Filing a false return is a criminal offence!

VAT Tip#7: Rather too many VAT numbers than not enough

A tax invoice for over R 3,000 must reflect the VAT numbers of both your business and your client’s business. If it fails to contain all the required disclosures, your client won’t be able to claim the input credit relating to the purchase of your goods or services.

VAT Tip#8: Claim back the VAT paid on bad debts

Claim back the VAT paid on all your debts that have become irrecoverable!

 

VAT Tip#9: Write off bad debt before claiming

You must have actually written off the debt before you can claim the input tax. Don’t claim any adjusting input tax for provisions for bad debts. SARS will disallow this.

VAT Tip#10: All quotes must include VAT

Whether in general commercial dealings or private transactions, prices are deemed to include VAT. Therefore, all quotes and advertisements must include VAT, regardless of whether the rate of VAT is standard or zero.

VAT Tip#11: Keep documentary proof of zero-rating

If you supply zero-rated goods, still claim back the input VAT you incurred to make those supplies, even though output tax is levied at a zero rate.
However, don’t be caught out. If you’re a vendor who applies the zero rate to the supply of your goods, keep documentary proof that you’re entitled to do so. SARS will demand this from you.

VAT Tip#12: Include zero-rated supplies in calculations

When you calculate your taxable turnover for VAT purposes, include the value of zero-rated supplies.
Be sure to exclude the value of your exempt supplies; but show the zero-rated supplies in the correct boxes on the VAT201 return.

VAT Tip#13: Pay over your output tax regardless of the state of your account

Even if you’re still waiting for a customer to settle his account and pay in full for his goods, if you’ve issued a tax invoice and you’re on the invoice basis, you must pay the output tax over to SARS in your tax period. This has serious implications for your cash flow, especially if you have slow or late payers.

VAT Tip#14: Claim your input tax even if you haven’t paid the invoice

If you are on the invoice basis, you’re entitled to claim input tax credit as soon as you have a valid tax invoice for a supply – even if you haven’t yet paid the invoice.
However, if you haven’t paid an invoice within 12 months, you must account to SARS for output tax on that portion of the payment not yet made.

VAT Tip#15: Make sure SARS meets deadlines

Have you received your VAT refund within 21 business days of SARS receiving your VAT201 return?
No?
SARS must pay you interest at the prescribed rate. However, they don’t pay it automatically. Write them a letter and ask for it.

VAT Tip#16: Claim input tax on vehicle maintenance

Claim as input tax the VAT on vehicle insurance premiums, tyres, oil, repairs, services and toll fees.
However, there is no VAT charged on licenses and traffic fines so don’t claim input tax for these.

Also don’t claim input tax on petrol and diesel because these fuels are zero-rated when you buy them.

VAT Tip#17: Charge VAT on your commission

Charge VAT on your commission. This VAR will be known as output tax and you must pay this over to SARS on your VAT return.
You must issue tax invoices to those companies or businesses which are paying you commission, but often they will have permission to issue tax invoices on behalf of their agents – this is known as self-invoicing.

VAT Tip#18: Claim a deduction when buying a building

Claim an input tax deduction on the purchase of a building if you plan to use the building in your business. You can use the building for your core business purposes, as a factory or to rent out.
Remember that if you’re going to use the building only partly in your business, or partly for taxable use, then you’re only entitled to claim a part of the input tax.

VAT Tip#19: Business Travel – Employees must spend a minimum time away

There is an essential condition to meet before even considering whether inputs can be claimed for employee accommodation and meals. That is, your employee must have spent at least one night away from his usual residence and place of business, in the line of his duties. If he hasn’t you can’t claim input tax on staff meals.

VAT Tip#20: Verify vendor status

Only pay VAT to a vendor, i.e. a person or business that is registered for VAT and has a valid VAT registration number.
Verify whether any person is a vendor or check the validity of a VAT registration number by contacting SARS. Better still, do this using the VAT vendor search facility on the SARS website – www.sars.gov.za.

VAT Tip#21: Submit returns regardless

If you calculate that you have no VAT liability and no VAT payment due to SARS, as a registered vendor you must still submit your returns – so called ‘’NIL’’ returns.

VAT Tip#22: Claim input tax for up to five years back

Maximise your claims and increase your refund as much as you can. Where you do input tax adjustments, you’re entitled to do these adjustments for up to five years back. Just make sure that you’re in possession of valid tax invoices.

VAT Tip#23: Issue a credit note for cancelled invoices

Cancel a tax invoice and you must be able to show SARS your records reflecting that a credit note was issued. If you don’t issue a credit note, you can’t reduce the output tax you declared on that sale.

VAT Tip#24: Educational services provided by institutions are exempt

If an institution provides extracurricular lessons, and its charge is part of one for the education service, then exemption applies.
However, where a private individual provides extra lessons, he is liable for VAT registration if his turnover exceeds R 1 million in a 12-month period.

VAT Tip#25: Only incidental boarding fees are exempt

Where schools, universities, technikons or colleges provide hostel (boarding) facilities to their students, learners or pupils, and they receive payment in the form of boarding fees, these fees are exempt from VAT.
Importantly, the boarding must be incidental to the provision of education for the exemption to apply. In other words, it must only be available to the pupils of the specific institution that operates the hostel.
As soon as a hostel lets out its rooms to other people, e.g. holiday makers, it’s liable to charge and pay over VAT for the rental.

VAT Tip#26: Always keep your direct export documents

Where you levy VAT at 0% on a direct export, keep a pile of documents to satisfy SARS of the zero-rating. Without the necessary documents, your application of VAT will be considered incorrect and you’ll face penalties, interest and additional tax.

VAT Tip#27: Strict time lines apply to exports

Ensure you stay within these appointed limits:

  • The goods must be exported from South Africa within ONE month of the date of the invoice;
  • Get all your supporting documents within THREE months of the date of the invoice;
  • If you receive these documents after more than three months, but within one year of the date of the invoice, claim an amount of input tax equal to the output tax you paid.
  • If you don’t receive your documents in the required time frame, include that invoice in your standard-rated supplies. Calculate and pay over to SARS the output tax.
  • If you are unable to recover the VAT from your claim in an export country, you may claim a bad debt credit equal to the tax fraction of the VAT you had to pay.

VAT Tip#28: Don’t ignore VAT on fringe benefits

VAT on fringe benefits is commonly overlooked and rakes in thousands of rands of revenue in additional VAT, fines and penalties for SARS audit teams every year.
Don’t become part of the statistic! Make sure your payroll administrator is aware of the VAT provisions that relate to fringe benefits. Declare your employees’ VAT correctly.

VAT Tip #29: Lodge your objections timeously

Lodge your objections within 30 business days from the date your assessment is issued. Before the 30-day period expires you should ask for an extension, giving reasons for your request. If you file your objection late you must state why it is late and ask SARS to condone the late filing of your objection.

VAT Tip#30: e-Filing is easy and user-friendly

Make use of e-filing. Through the e-filing system you can submit your VAT201 return and payment electronically up to and including the last business day of the month in which they are due, without incurring any interest or penalties.

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