If you claim input tax, your SARS VAT audit is impending
And when the SARS auditor comes knocking or sends a query, he'll check if:
· Your books and records comply with the requirements of Section 55 of the VAT Act;
· You didn't claim on exempt supplies;
· Any of your claims were for non-taxable supplies;
· You apportioned inputs correctly and at the right tax
rate (Sections 16, 17 and 20
of the VAT Act);
· And more!
But the truth is, even if you're entitled to your claim, but don't have the valid documentation, he'll still reverse your deduction!
Here's everything you need to secure every input tax claim you submit.
Take the following questionnaire to see if you're compliant…
Question#1: Did you register for VAT?
When your total commission, received within any 12-month period, exceeds R1 million, you have to register for VAT.
But if your commission exceeds R50 000, you can apply for voluntary VAT registration.
Question#2: Do you charge VAT on your commission?
The VAT which you earn on your commission is output tax
, and it's your duty to pay this over to SARS. So when you earn commission on a sale, you pay output tax
. It doesn't matter if the sale was at the standard rate, zero-rate or exempt VAT rate.
Question#3 Do you issue tax invoices?
You must issue tax
invoices to the businesses who pays you commission.
All VAT vendors must issue tax
invoices for sales exceeding R50.
It's considered an offence not to do so!
But you can have a self-invoicing arrangement, as shall be seen next…
Question#4: If the principal issues tax invoices to claim input tax (self-invoicing), does he give you a copy? And have both of you agreed, in writing, to this procedure?
: You mustn't also issue an invoice in this situation.
Question#5: Do you report to principals correctly?
As an agent, you're not required to give copies of tax
invoices relating to sales, on behalf of your principal, to him. But you must give him the details of all your income earned from these sales, with the VAT amount as well.
You can present these details in the form of a summary that includes the date, what you supplied and the price including the VAT. The reason for this is so that your principal can't see who your customers are and potentially bypass you in future.
*If you answered 'YES' to all of the questions, congratulations you're meeting your minimum obligations. *To learn more, page over to Chapter B 06: Brokers and Commission Agents in your Practical VAT Loose Leaf Service
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