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Must you deduct Vat on legal expenses when you calculate your income?

by , 18 March 2015
Here's something you should know about the deduction of legal expenses. You can deduct legal expenses that relate to the production of income.

Today, I'm going to show you the following lesser-known legal expenses you can deduct and exactly how to do it.

Seven little-known legal expenses that classify for Vat too

1. Legal practitioners' fees
2. Expenses incurred in procuring evidence or expert advice
3. Court fees
4. Witness fees and expenses
5. Taxing fees
6. Fees and expenses of sheriffs or messengers of the court
7. Other litigation expenses (similar to those mentioned above).

Just make sure the expense isn't of a capital nature (e.g. legal fees associated with drafting a contract for an employee).

To qualify for a deduction, they must relate to your revenues (e.g. hiring lawyers to chase up bad debts). And, they must be related to an actual legal dispute.

If they do, follow these process to get your money back...

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Here's how to do claim Vat on these expenses

To claim this deduction, include the legal expense in your income statements and attach the invoice from the lawyers if SARS calls on you to prove the expense

Just make sure you don't have outstanding Vat returns. SARS won't make a refund if any returns are outstanding. And make sure SARS has your correct postal address and correct banking details. If not, any notification or query won't reach you, nor will your refund.

If SARS doesn't have your correct bank details, your refund will bounce and sit with them until you give them proof of your correct banking details.

It's that easy!

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