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Why does SARS audit Vat?

by , 13 September 2013
You already know no company is immune from a SARS audit. But do you know why SARS actually conducts these audits and how it selects who to audit? Read on to find out so you're never caught off guard.

It's crucial you understand why SARS conducts Vat audits. This understanding goes a long way in ensuring you comply and know what's expected of you.

Here's why SARS conducts Vat audits

The Practical Vat Loose Leaf Service explains that Vat is a self-assessment system.

This means when you complete your Vat returns, it's up to you to calculate whether you have to pay in or get a refund.

Because you assess yourself, there are countless opportunities for mistakes to be made, so SARS checks your honesty as well as non-compliant behavior by carrying out audits.

So who gets audited and how are they selected?

If SARS believes something on your Vat returns isn't correct, your company could face an audit.

'If a single item in your records doesn't match up to what you've claimed in your Vat return or if you don't have a record of the claim, you'll end up being penalised, audited more often, or, at the worst, going to court,' warns the Practical Vat Loose Leaf Service.

What's more, a number of questions are asked on the Vat registration form. These help SARS identify high risk vendors.

Some of the information on the Vat registration form which helps SARS identify risk includes:

  • If the business is foreign based
  • The ownership of the business – is it a sole trader, a partnership, a company
  • The type of business
  • Where the business is situated, for instance, are you working from home?
  • Compliance to other taxes by owners/directors

SARS is also always on the lookout for high risk behaviour

In fact, the following behaviour is seen as 'high risk' by SARS and likely to trigger an audit:

  • Repeatedly making your payment late
  • Repeatedly submitting your returns late
  • Failing to submit or make payments at all
  • A sudden drop in gross profit
  • Constant refunds
  • When your Vat claims just don't add up

These are all treated harshly now that the Tax admin Act is in place.

'The Act is there to simplify tax admin laws and balance SARS' powers and duties with taxpayers' rights and obligations,' says the Practical Vat Loose Leaf Service.

Ultimately, SARS audits are selected on a random basis. Because you can never be sure when it'll come knocking at your door, always make sure your documents are at hand and your books in order. That way, you need never fear the arrival of SARS.

Now that you know why SARS conducts Vat audits, make sure you comply.

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