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Three questions to help you screen your company's debit and credit notes before submitting them to SARS

by , 27 October 2016
Three questions to help you screen your company's debit and credit notes before submitting them to SARSWatch out! It's easy to make a mistake with Vat when dealing with discounts and credits received from suppliers. If you do, you could underpay your Vat and face means hefty penalties and interest! But your company can avoid this. Use these three questions to screen your company's debit and credit notes before submitting them to SARS to ensure everything is above board.

Unfortunately for your company, SARS doesn't tolerate any mistakes where Vat is concerned.

And that means, if you underpay your company's Vat, you'll face hefty penalties.

So make sure you're extra vigilant when dealing with discounts and credits your company receives from suppliers.

What's the best to ensure your company is always compliant?

Ask yourself these three questions when dealing with discounts and credits received from suppliers

The Practical Vat Loose Leaf Service suggests you ask these three questions to screen your credit notes or discounts and keep your company out of the clutches of SARS' auditors.

Question #1: Did you phone your supplier to cancel your supply or order?

Example: Weddings & Things ordered a candelabra from India for an on-supply to Your Special Day, a wedding venue. The price was R25 000, including Vat.

When it's delivered to Your Special Day, with the invoice, they found the head piece broken. Since no other candelabras are available, Weddings & Things will have sent the broken item back to be replaced.

But because India is far away from South Africa and the replacement product will take a few months to arrive, Weddings & Things and Your Special Day decided to cancel the order completely. That means the supply is cancelled.

What to do now:

  • Weddings & Things must issue a credit note for the full R25 000. They must reduce the output tax amount they declared for the specific tax period in which the credit note is issued. The credit note must make reference to the original tax invoice too.
  • Your Special Day, as the recipient of the credit note, must reduce the input tax they claim in the tax period the credit note is received. As the supply of R25 000 (the Vat inclusive price) wasn't made, the input tax deduction has to be R3 070.18 (R25 000 x 14/114) less.

Question #2: Did you increase the price

Example: Bootcamp delivers ten pairs of hiking shoes to Big Sky Hiking and invoices them for R6 000, Vat included, subject to a possible price increase from the manufacturer in Taiwan.

Guess what? The price hike of 18% comes through in the same week as the shoes were delivered.

What to do now:

  • Bootcamp must issue a debit note showing the increase in price (R6 000 x 18% = R1 080). It must make reference to the original tax invoice. It must declare and pay the extra output tax too.
  • Big Sky Hiking must claim extra input tax in line with the debit note in the tax period they receive the note. This will amount to R132.63 (R1 080 x 14/114) and they must review the terms of their agreement with Bootcamp, going forward.

Question #3: Did you state a prompt payment discount on your invoice

Example: Smoker's Joy provides cigarettes to Rampersad Tobacco Shop for R300. The invoice states that 7% discount will apply when payment is made on a COD basis. Rampersad takes the cash out of the till to pay the courier at the discounted price, being R300 – 7% (R21)= R279. He gets a signature for the R 279 cash on the invoice.

What to do now:

  • Smoker's Joy must reduce his output tax payable.
  • Rampersad Tobacco Shop must only claim input tax on R279, not R300. He doesn't need a credit note.

Remember to keep your credit and debit notes for a minimum of five years should SARS ask to look at them. If you don't, SARS can slap you with penalties and interest just because the required proof isn't available.

You could be missing out on 19 input tax VAT savings...
You're a business finance savvy individual, so I'm sure you claim input tax credits back on goods and services you supply or buy...
But are you 100% sure you're claiming all the input tax credits back available to you?
For example, are you sure you've claimed input tax on these five office expenses?
  • Plants for the office
  • Flowers sent to sick staff
  • Medical bills
  • Promotional gifts
  • Stationary orders for the office
Let's say, last month you spent R2 000 on plants for the office, R329.25 on flowers sent to a sick member of staff, R25 000 on medical bills for your staff, R70 567 on promotional gifts and R3 000 on stationary orders for the office...
If you calculate all five these office expenses together, you could slash R12 390.84 off your VAT bill in one month alone!
Now imagine if you saved that much EVERY month!
And that's just the start!
There are 19 input tax claims you can use to your advantage...

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