Here's how a valid tax invoice can help you avoid a Vat audit
SARS doesn't mess around when it comes to Vat. If it thinks you haven't done something correctly, it will audit your business.
One of the most common mistakes that leads to Vat audits is incorrect Vat documents, particularly tax invoices.
But if your tax invoice is up to scratch, it will help you avoid that dreaded audit.
To avoid a Vat audit always ensure your tax invoices are valid and correct
Make sure tax
invoices relating to big purchases are valid. They must give details of the seller and the name, address and Vat registration
number of your business. SARS will be looking at all big purchases for errors and, in 50% of audits, it finds them!
If you don't have this document, SARS will be quick to punish you.
Here's an example of how not having a valid tax
invoice will earn you an audit and a hefty penalty.
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Here's how not having a tax invoice will land you in serious trouble
Happy Go Lucky buys a second-hand tipper truck from Careless Koos and pays Koos R450 000 for the truck. Koos gives him the registration papers and a receipt for the purchase, but not a tax certificate (they are both Vat vendors).
Happy claims R55 263 (R450 000 x 14/114) input tax in the July 2013 tax period. In December 2013, a SARS auditor phones Happy and asks for the tax invoice. Happy commits to getting one.
The auditor disallows the input tax claim of R55 263 claimed in the July 2013 tax period and adds R5 526 penalties and R3 454 interest. He, quite rightly, tells Happy he can claim the input tax only when he obtains a tax invoice.
Koos is on holiday and Happy will only receive the tax invoice in January 2014. He can claim the input tax, but has to pay the R8 980 penalties and interest. Worse still, if Koos has gone bankrupt, Happy may never get a tax invoice and would have lost R64 243 through his carelessness!
If Happy had had his invoice from the start, he could have proved his input tax claim was legitimate and the auditor would have moved on swiftly.
So ensure you have a valid tax
invoice so you don't trigger a SARS audit and penalties.