Use these three steps to do your Vat calculations correctly
Step # 1: Determine your output tax
There are two possible outcomes for your Vat calculation: Either you'll need to pay Vat to SARS, or it will owe you a Vat refund.
The first step to work this out is to calculate your total output tax. To do this, you need to know which accounting basis you use:
• The invoice basis: Add all the sales invoices you issued (cash and credit sales, including the Vat you charged) together. It doesn't matter if your client paid the invoices yet or not.
• The payments basis: Add together all the actual payments you received for your sales or services. Include the Vat you charged in this.
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Getting your VAT refund from SARS just got harder…
A small administrative mistake is all it takes for SARS to have the right to withhold your refund.
Put a simple zero in the wrong place on the new VAT return could and you can forget about getting even a cent of your money back.
Make sure this never happens to you by filling in the new VAT return 100% correctly every, single time.
Step # 2: Calculate your input tax
Work out how much Vat you paid if you bought fixed or movable assets.
Work out the Vat you paid on anything you imported as a business asset. You need to work this out separately because you have to put it on your return in a separate block.
Just remember you must hold a customs receipt to prove you paid Vat over to them.
Lastly, put together a list of all the purchases and business overhead expenses you paid Vat on.
If you work on the invoice basis, add up all the amounts of your business purchases and expenses you have valid tax invoices for. This doesn't matter if you've paid them yet or not. Then apply the tax fraction (14/114) to come to your input tax claim amount. You can find out more about the tax fraction in the Practical Vat Loose Leaf Service
If you work on the payments basis, add up all the valid tax invoices you paid for during the tax period. Apply the tax fraction to reach the final amount of input tax you can claim back.
Step # 3: Pay the difference or claim your refund!
Deduct your input tax from your output tax.
If your output tax is more than your input tax, the difference is the amount of Vat you must pay to SARS.
But, if your input tax is more than your output tax, the difference is the amount of Vat SARS must refund to you. (Check out the Vat Refund Accelerator
to find out how to get your refund back in record time.)
If you get this Vat calculation wrong and claim when you shouldn't or don't pay over what you owe SARS, it will penalise you.
It will reject any claims you make, charge you penalties and mark you as a regular target for audits. This is all because of one mistake.
Just remember to keep all the documents to support your amounts of input tax and output tax. Use these documents when you do your calculation to make sure you don't get any of the amounts wrong.