Never use these nine strategies to reduce your Vat liability
The Vat system is based on a self-assessment basis. SARS relies on you to account for Vat correctly and be honest with your Vat affairs.
Because SARS knows the Vat system holds significant risks, it depends on the audit process to ensure compliance.
So, when SARS conducts audits, it focuses on strategies that Vat vendors use to reduce their Vat liability.
Read on to find out what these strategies are so you can avoid them at all costs because they're illegal and SARS will catch you out and make you pay.
Easy VAT Calculations in 3 steps!
Are you aware that thanks to the self-assessment Vat system, you're an unofficial SARS agent?
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That's why you must
Get your basic VAT calculations right the first time!
No matter how great your turnover, or how confusing your mix of exempt, deemed, notional or standard-rated supplies, there are still three basic steps to determine your Vat liability
Avoid these nine risky strategies used to reduce Vat liability
According to the Practical Vat Loose Leaf Service
, generally, every Vat vendor wants to reduce his Vat liability
. To do so, many undertake heavy risk through the use of the following nine strategies:
They understate sales;
They suppress income (e.g. skimming);
They defer income;
They understate stock and work in progress;
They overstate purchases and expenses;
They accelerate purchases, expenses and write-offs such as depreciation;
They overstate liabilities and provisions;
They may understate drawings and fringe benefits; and
They declare erroneous allocations and valuations.
SARS is very much aware of these kinds of strategies and will aggressively audit your business looking for them. If it finds that you aren't complying with the Vat Act
, it could hit you with:
Fixed-amount administrative/non-compliance penalties;
A percentage based penalty;
An understatement penalty; and
So never use any of these strategies to reduce your Vat liability, be honest with your Vat affairs.
For more information regarding Vat, check out the Practical Vat Loose Leaf Service
. Alternatively, direct your Vat questions to our experts at the Accounting & Tax Club.
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