To register or not to register for Vat - that is the question!
As a consultant, I come across many small business owners who face the dilemma of if they should register as a Vat vendor.
Having a Vat number gives your business credibility and makes it look professional.
But, being a Vat vendor brings with it, a host of responsibilities that could easily become a burden.
So read on for my four top tips to deal with your Vat responsibilities that will help you decide if you should or shouldn't register for Vat.
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Get your tax invoices right the first time!
Do you know:
• What a valid Tax Invoice looks like;
• What information it must have; or
• When you need a full tax invoice?
When you're liable to register for Vat
Before I give you my top tips, let's look at when you can register for Vat.
If you run an enterprise and have a turnover of R50 000 in the past twelve months, you can voluntarily apply for Vat.
But if your turnover exceeds R1 million in a 12-month period, (or you project to exceed R1 million), by law, you're liable to register for Vat. You must register on the VAT101 form.
Read on for four top tips you can use to meet your Vat responsibilities.
Tip #1: Account for Vat correctly
As soon as you register for Vat make sure your sales invoices and/or receipts meet the requirements of the Vat Act.
The tax invoices you issue and receive must be valid. This is so you can charge output tax and claim input tax. This is the same for your credit notes. If they're not valid, SARS will slap you with hefty fines and penalties.
Tip #2: Calculate and submit your Vat return
Using accounting software and/or an Excel spreadsheet, compile a tax report showing the output tax you've charged on sales and the input tax your suppliers charge you.
This report will show the net amount either payable to SARS or refundable to you. Use this report to file your Vat return.
For the comprehensive guide to completing your Vat return correctly, click here…
Tip #3: Keep your records!
Keep records of all your financial transactions for a period of five years.
In this time, SARS may conduct a verification exercise, such as a Vat audit and will want to see your documents. Here's how to pass your Vat audit…
Tip #4: Manage your cash flow
Payment of any tax including Vat, can contribute to cash flow problems, if you don't manage your small business correctly. Don't forget, that the additional cash isn't yours. The Vat belongs to SARS!
So if you can meet the above minimum top tips, why not register for Vat and claim back the Vat you pay as input tax? It's worth it if you can comply.
But if you can't manage with my top tips, it might be a good idea to register later when you can comply. But remember, if your enterprise already exceeds R1 million in any 12 month period, you have to register as Vat vendor.