There are a few steps you need to comply with when it comes to Vat in your everyday business life. You need to follow each step carefully to get it right and avoid SARS penalties.
To help you with this process, there are three steps you must take.
This will help you get started and enable you to comply with Vat rules from day one.
Let's start right at the beginning...
The first step you must take when it comes to Vat is to register
Not everyone has to register for Vat, but for those who do, there are two types of registration:
• Compulsory registration
If you have a business and your total taxable turnover exceeds (or is likely to exceed) R1 million in any 12-month period, you have no option, you MUST register for Vat.
• Voluntary registration
Even if your taxable turnover doesn't exceed the threshold, you can register for Vat if your taxable income is over R50 000 in the same 12-month period.
That's step one so ensure you register if you need to.
The next step is to get accurate tax invoices
Next you must get tax invoices from all your suppliers. This enables you to claim input tax back from SARS. That's the tax you paid when you bought the supplies.
The last step is probably the most important.
*********** Reader's choice ***************
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.
This is the last step in your day-to-day Vat process and it's the most important
Your last step is to account for your Vat correctly. SARS has two methods you can use to account for Vat:
1. On the payments basis; and
2. On the invoice basis.
If you account for Vat on the payments basis, it means you must account for output tax (the Vat you charge to your customers) as you receive payment. Similarly, you only claim your input tax when you have actually paid your suppliers.
All other Vat registrations are according to the invoice basis. This means that you must account for Vat:
• At the time you get your invoice; or
• At the time you receive payment for the supply. Whichever happens first.
Following these steps will help you work with Vat in your everyday business life without a problem.