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Know these 4 rules of VAT refunds and avoid unnecessary penalties

by , 26 November 2015
VAT refunds form an important facet of your business in that they ease your cash flow. And if you're tax-smart, you'll make use of every allowable input tax deduction you're entitled to in order to maximise your refunds and, in so doing, claim back every legal cent you can.

But the new TAX Administration Act has changed the VAT refund process though, with SARS willing to hit you very hard if you don't claim VAT refunds correctly.

These penalties include massive fines and even up to two years imprisonment. On top of that, you could even receive as many as six years in prison for evasion!

So avoid making any mistakes and know these 4 important ground rules regarding VAT refunds:


If your input tax exceeds your output tax, then you're entitled to a VAT refund.


If your output tax exceeds your input tax, then the difference shows the VAT liability you'll have to pay over to SARS.

Keep reading to find out the other 2 ground rules for VAT refunds…


If you claim input tax, your SARS VAT audit is impending
And when the SARS auditor comes knocking or sends a query, he'll check if:
·        Your books and records comply with the requirements of Section 55 of the VAT Act;
·        You didn't claim on exempt supplies;
·        Any of your claims were for non-taxable supplies;
·        You apportioned inputs correctly and at the right tax rate (Sections 16, 17 and 20 of the VAT Act);
·        And more!
But the truth is, even if you're entitled to your claim, but don't have the valid documentation, he'll still reverse your deduction!
Here's everything you need to secure every input tax claim you submit.


You can't off-set a VAT refund for one tax period against the VAT payable for another tax period. But SARS can do this!


You must have documentary proof for every item you claim input tax. If you can't prove it, or if your records are incomplete or invalid, then don't even attempt the claim at all!

SARS carries out periodic audits, in order to verify claims, and you'll end up paying a hefty penalty if you attempt to postpone or evade paying tax.
*Those were 4 ground rules you should always know about VAT refunds. To learn more on VAT refunds, subscribe to the Practical VAT Loose Leaf Service today. 

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