Claiming a Vat refund? Make sure you stick to these four rules
'Vat refunds play an important part to ease the cash flows in your business. If you're tax-smart, you'll use every allowable input tax deduction you're entitled to, to maximise your refunds and claim back every legal cent you can,' says the Practical Vat Loose Leaf Service. But before you claim your Vat refund, keep these four rules in mind to ensure you're compliant.
While the Tax Admin Act allows you to claim a Vat refund for your business, you have to follow certain rules before SARS gives you any Vat that's due to you.
Here are the four ground rules you need to keep in mind to claim back a refund:
Vat rule#1: If your input tax exceeds your output tax, you're entitled to a refund.
Vat rule#2: If your output tax exceeds your input tax, the difference shows the Vat liability you'll have to pay over to SARS.
Vat rule#3: You can't off-set a refund for one tax period against Vat payable for another tax period – but SARS can!
Vat rule#4: '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,' says the Practical Vat Loose Leaf Service. SARS conducts periodic audits to verify claims and you'll pay 200% additional tax if you try and evade or postpone paying tax.
There you have it. Sticking to these rules will ensure you comply when claiming a Vat refund.