Claim refunds correctly or prepare to face these two harsh penalties
When your input tax exceeds your output tax, you're due a refund! While this is a great opportunity for you to put some money back in your company's pocket, one wrong move could get you into serious trouble with SARS. In fact, these are two harsh penalties you could face...
It's important that you claim refunds correctly. If you get this wrong, SARS will hit you with the following penalties:
Claim refunds incorrectly and you'll face the following penalties
#1: If you claim refunds incorrectly, SARS can hit you with a hefty fine. The taxman can also levy interest at the prescribed rate, says the Practical Vat Loose Leaf Service.
#2: You could also face two years in jail if you don't comply or five years for tax evasion.
Basically, you'll end up in a great deal of trouble with SARS if you:
Claim non-existent amounts of input tax;
Claim input tax that you can't verify; or
Make a claim that you don't have complete documentation for.
Keep these four ground rules in mind to claim back a refund legally
If your input tax exceeds your output tax, you're entitled to a refund.
If your output tax exceeds your input tax, the difference shows the Vat liability you'll have to pay over to SARS.
You can't off-set a refund for one tax period against Vat payable for another tax period, but SARS can!
You must have documentary proof for every item you claim input tax for. If you can't prove it, or if your records are incomplete or invalid, don't even attempt the claim.
Knowing the types of penalties you could face if you claim refunds incorrectly will help ensure you comply.