There's a way you can avoid being under SARS' radar when it comes to your credit and debit notes.
The Practical Vat Loose Leaf Service suggests you ask these three questions below to screen your credit notes or discounts that you get to keep you out of the clutches of SARS' auditors.
Use these three questions to screen your credit and debit notes
Question #1: Did you phone your supplier to cancel your supply or order?
Here's an example of how you can do this: Let's say Weddings & Things ordered a candelabra from India for an on-supply to Your Special Day, a wedding venue. The price was R25 000, including Vat. When it's delivered to Your Special Day, with the invoice, they find the head piece broken.
As no other candelabras are available, Weddings & Things sends the broken item back to be replaced. India is far away from South Africa, so the replacement product will take a few months to arrive. Weddings & Things and Your Special Day cancelled the order completely. That means the supply is cancelled.
What to do now?
Question #2: Did you change the nature of your supply?
Let's say Johan's Restaurant has a Ferrari 456 GT as a courtesy car. Unfortunately, Johan Junior has an accident. He hit a gutter with the right front wheel, damaging the wheel beyond repair.
Juliano's Sports Equipe orders a replacement wheel from overseas and invoices Johan's Restaurant for R25 000, including Vat. Unfortunately, the wrong wheel was ordered and it must be sent back. Juliano's Sports Equipe orders the correct wheel the next day, but it's now at a higher price of R28 000, including Vat.
Question #3: Did you increase the price?
For example, Bootcamp delivers ten pairs of hiking shoes to Big Sky Hiking and invoices them for R6 000, Vat included, subject to a possible price increase from the manufacturer in Taiwan.
Guess what? The price hike of 18% comes through in the same week as the shoes were delivered.
What to do now?
Remember to keep your credit and debit notes for a minimum of five years should SARS ask for them. If you don't, SARS can slap you with penalties and interest just because the required proof isn't available.
In addition, make sure you use these questions screen your credit and debit notes before you hand them over to SARS.