was introduced, certain goods and services were considered so essential that it was decided they should be subject to no tax
, says The BBC.
This was done in two ways: zero-rating and exemption.
And it's this zero rating that causes the most confusion among local businesses.
Because many ask why include a Vat
component at all if the amount is 0%?
It's simple – it counts as proof to SARS that you comply with the Vat Act.
Here's why you need to keep all financial records as proof that you were entitled to charge Vat at the zero rate…
If you don't have your documents correct, SARS'll see the zero-rated invoice as a standard-rated one.
And you don't want this to happen, as it'll then deem the amount to include Vat
at 14% – even though none was added.
SARS'll also charge you additional penalties and interest.
So you'll end up losing money, as you are out of pocket by the 14% Vat
and now need to pay SARS extra.
At the very least, you'll need to keep your copy of the zero-rated tax
You'll need to keep all financial records like tax
invoices for at least five years in case of a tax audit
, says FSP Business
Just remember that all tax
invoices must clearly state 'tax invoice' and not 'Vat invoice', or they won't be seen as valid proof!
Another way 'zero' can get you in trouble with SARS…
Then be careful how you fill in your Vat
return, as putting a zero in the wrong place on your Vat
return is now all it takes to trigger the Vat
audit process that could cost your business thousands, says FSP Business
So keep all financial records, especially tax
invoices if you charge Vat
at the zero-rate, and you'll be able to satisfy SARS that you're charging Vat
at the zero rate correctly.