SARS provides two methods to account for Vat - find out what they are so you can adhere to your Vat duties
You know that you must register for Vat if you qualify and that you must account for Vat correctly to avoid penalties.
But do you know how to go about accounting for Vat? What methods are available for you to do this?
Keep reading to discover the two methods SARS provides for you to account for Vat so you can comply with your Vat duties.
You can account for Vat on either the payments basis or the invoice basis
According to the Practical Vat Loose Leaf Service
, SARS provides two methods for you to account for Vat
: The payments basis and the invoice basis.
If you account for Vat on the payments basis, it means that you must account for output tax (the Vat you charge to your customers) as you receive payment. Similarly, you only claim your input tax when you've actually paid your suppliers.
The payments basis is ONLY for individuals (sole traders) and partnerships where the partners are natural persons. Their total income in a 12-month period mustn't have exceeded R2.5 million.
Public authorities, municipalities and associations not for gain may also account for Vat on the payments basis, but the turnover limit of R2.5 million doesn't apply to them.
Let's look at the invoice basis…
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Here's what you need to know about accounting for Vat on the invoice basis
All other Vat registrations are done according to the invoice basis. This means you must account for Vat either:
At the time you issue an invoice; or
At the time you receive payment for the supply, whichever occurs earlier.
The consequence here is that if you've issued a tax invoice, you still have to pay the output tax over to SARS in your tax period even if you're still waiting for your customer to settle his account with you and pay for his goods in full.
Now that you know the two methods you can use to account for Vat, comply with your Vat duties and avoid penalties.
Confidential: The 13 Vat secrets SARS doesn't want us to publish
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