The Vat you collect is never part of your turnover. Rather, it belongs to the government!
The Vat Act states that the tax levied – in other words the Vat – is for the benefit of the National Revenue Fund (Section 7 (1)
). Which means that there're heavy penalties for paying Vat incorrectly or late as this translates into interest lost for the government.
What happens if crisis hits and you can't pay the Vat you owe to SARS?
Where you've calculated your Vat return and you must pay SARS, but you simply can't afford to, follow these steps as recommended by SARS.
Six steps to follow when you can't pay SARS
Are there any inaccuracies in your tax invoices? You could be liable for penalties, interest and even prosecution!+++
Are you sure that the tax invoices you receive are issued properly? Are all the SARS requirements on the tax invoice? Have you ever thought about it?
What if something is omitted from a tax invoice on which you've already claimed input tax?
Anyone who has ever experienced a SARS Vat audit will tell you the first thing the auditors check are your tax invoices!
Errors in Vat invoices could cost you a fortune or even result in your company going bankrupt. It's too late to have doubts when the SARS auditors visit your office.
What errors must not be made?
If you are not sure, check here
Step #1: Don't forget your Vat return
Carry on submitting your Vat return(s)! This is a good idea because Vat Law has a provision in Section 58(d)
that says if you don't submit your returns, you're guilty of an offence and liable on conviction to a fine or a jail sentence. The payment of the Vat return is a separate incident, which is dealt with separately under Vat law.
Step #2: Visit your SARS office
Go to the SARS client office – preferably the one in the area where you're registered for Vat.
Take your bank statement along when you visit SARS.
Step #3: Provide a detailed explanation of your circumstances
Set out the circumstances, in writing, explaining why you can't pay the Vat and propose how you'll be able to settle the amount.
Step #4: Provide SARS with up-to-date financials
Prepare a statement of your income and expenditure, and an up-to-date statement of your assets and liabilities.
Step #5: Get your paperwork in order
Make a copy of your latest bank statement and take it along when you visit SARS.
P.S. Use this ten-step action plan to ensure you get your Vat refund from SARS on time, every time
Don't let SARS make you wait for your Vat refund.
Claim your ten-step action plan now! And get your Vat refund within the allocated 21 days.
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Step #6: In consultation with SARS
When you meet with SARS, explain your situation and submit your circumstances in writing, together with your statements of income and expenditure, assets and liabilities, and latest bank statements. Discuss yourproposal for settling your account with the SARS official.
SARS will allow you a set period to settle your Vat account. This period depends on your circumstances.
Remember: Where you pay off your Vat account in instalments, SARS will levy a penalty and interest. It's doubtful whether this penalty and interest will be waived or reduced, but you can always plead your case once you've paid the Vat that's due.
I'm sure these tips will help you when you have to explain to SARS why you can't afford to pay the Vat you owe.
Until next time...
Managing Editor, Practical Vat Loose Leaf Service