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VAT Tips for Small Businesses

VAT Tips for Small Businesses

One of the many areas that your professional accountant is able to assist in includes VAT (Value Added Tax) for small businesses. While many small businesses assume that VAT does not apply to them as it would for larger businesses, every business in South Africa that provides goods or services is in fact required to register for VAT. Failure to comply could cause to serious problems - something that very few small businesses are able to recover from in the event of fines or other consequences.

To ensure that your VAT is in order, consider the following VAT tips for small businesses:

  • All invoices must reflect the correct VAT registration numbers - this will ensure that all invoices are correct and in order.
  • Ensure that your turnover and financial statements match - this is something that SARS checks often. If the financial statement figure is greater than your turnover, it's indicates that sales are not being declared for VAT purposes.
  • Never inflate your claim - another reason why it is best to have a professional accountant manage your tax needs, an inflated input claim could either incorrectly reduce your VAR liability, or result in a refund for an amount far greater than is legally due to you. This is also considered a criminal offence.
  • Claim back the VAT paid on bad debts - you have the right to claim back VAT paid on all your debts that have become irrecoverable. You will first need to write this debt off however - speak to your professional accountant to find out how this is done.
  • All quotes must include VAT - even if the VAT rate is 0%, you will need to include VAT on every quote that is sent out to your customers.
  • Keep documentary proof of zero-rating - if you do not charge VAT, you can still claim for VAT on the items supplied, however you must always keep proof that you are entitled to do so, or otherwise SARS will raise a red flag.
  • Make sure SARS meets deadlines - if you do not receive your VAT refund within 21 business days of SARS receiving your VAT201 return, then you can charge SARS interest at the prescribed rate.
  • Charge VAT on your commission - this is known as output tax and you must pay this to SARS on your VAT return. You can then issue tax invoices to the companies that are paying you commission.
  • Submit returns regardless - even if you calculate that you have no VAT liability and no VAT payment due to SARS, as a registered vendor you must still submit your returns. Your professional accountant can handle your returns on your behalf, allowing you to get everything in order to meet SARS compliancy.