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Are these mistakes standing in the way of claiming input tax for your business?

by , 03 July 2013
As a Vat vendor, it's your duty to charge output tax and claim input tax as long as you can prove your claims and back them up with all the required documentation. But there are certain common input tax mistakes that vendors make again and again. Here are the obvious and most widespread errors that'll stand in the way of your claiming every input tax credit possible. And be warned: The Vat audit team will specifically look for these mistakes when they audit you!

Input tax is the Vat you pay your suppliers in the course of your business as well as Vat paid on goods you import. SARS allows you to claim the input tax for your relevant tax period when you complete your Vat return, says the Practical Vat Loose Leaf Service.

But, all it takes is just one mistake for SARS to deny your input tax claim and slap you with penalties and interest.

Watch out for these common input tax mistakes

#1: Claiming input tax deductions but not having a valid tax invoice to back up your claims.

#2: Claiming input tax on goods and services you bought for entertainment, for example, staff refreshments.

#3: Incorrectly claiming input tax for rental of cars, station wagons, combis or double-cab vehicles.

#4: SARS will punish you if you don't claim input tax upfront on goods you've bought under an installment credit agreement, but instead claim on the monthly payments. These monthly payments include interest, which is an exempt financial service, and is not deductible.

#5: Claiming input tax on subscriptions to social, sporting or recreational clubs, rugby or theatre tickets.

#6: Forgetting to claim input tax deductions on taxable supplies made to you where direct bank transfers are made. For example, Vat on bank charges, insurance premiums, cars and equipment rentals payable by debit orders.

#7: Claiming notional input tax deductions for secondhand goods but don't maintain a proper second-hand goods register. If you buy second-hand goods bought from a non-vendor costing more than R1 000, the seller must complete a VAT264 declaration.

Remember, the Vat audit team will look for these mistakes when they audit you.Make sure you steer clear of them to claim every input tax credit possible for your company.

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