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Seven things you need to know about Vat and bad debt so SARS can't slap you with 200% penalties

by , 07 November 2014
If you're a Vat vendor, you have to pay SARS Vat on any sale of goods or services you make. This applies even if your client bought the goods or services on credit.

The trouble, with credit is the debt may go bad and you've already paid the Vat on it.

Thankfully, you can get that money back. But you need to know these seven things about Vat and bad debt, so you don't land up with penalties for trying to recover money that isn't legally yours.

Read on to find out what they are...

 

You need to know these seven things about dealing with Vat and bad debts

 
1. If your Vat registration is on the invoice basis, you can claim the bad debt Vat as input tax! If not, you can't.
 
2. You can only do this if you paid the Vat on the sale over in a previous tax period.
 
3. You need to write off the bad debt in your financial records before you can even consider claiming the Vat as input tax.
 
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4. You also need to have exhausted all methods of trying to recover the debt before trying to claim the Vat.
 
5. To claim the relevant Vat back, complete block 17 on the Vat return, in the tax period where you finally wrote off the debt as irrecoverable.
 
6. In the unlikely event that the debtor pays his debt later on, pay the Vat back to SARS! 
 
7. To pay the Vat back as output tax, complete block 12 on your Vat return for the period you recovered the money.
 
Now that you know these seven things, claim Vat on bad debt back correctly so SARS doesn't charge you 200% penalties for any mistakes. 
 
Check out the Practical Vat Loose Leaf Service for more on Vat and bad debt. 
 

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