Article by: Fourways Accountant: Annja Louca
Section 7 of the VAT Act states that VAT is imposed on the provision of goods or services by any vendor as part of their enterprise. The VAT Act enables a VAT vendor to levy VAT on the provision of goods or services.
When a VAT vendor purchases or obtains goods or services, and the price paid covers VAT, this VAT is referred to as input VAT and may be deducted from the output VAT charged on goods and services.
It's important to note that VAT does not belong to the business; rather, it belongs to SARS.
As a best practice, businesses should set aside the VAT portion of the funds received from customers. For VAT to be added in accordance with the VAT Act, there must be a supply of goods or services as part of an enterprise for consideration.
Companies with a turnover of R1000 000 or more must register for VAT, and those whose turnover exceeds R50 000 may also register voluntarily.
Reminder of the Principles for VAT
We would like to remind VAT-registered businesses about the principles of VAT to avoid any surprises. VAT claims can only be made on goods and services exclusively used in the course of making taxable supplies. In simpler terms, only business-related expenses can have VAT claimed.
If any portion of the expense is for personal or non-business use, the VAT portion must be apportioned accordingly. For example, if a business cellphone bill includes private calls, the personal percentage should not have VAT claimed.
It has recently come to our attention that SARS can reject a VAT input claim if the supplier is not registered for VAT or has outstanding VAT returns and liabilities. This may seem unfair, but SARS has the right to decline the input claim.
This is significant because you, as a VAT vendor, might include a supplier’s invoices as VAT deductible input claim, and SARS can decline the input and issue an additional assessment and force you to make sure that your supplier,s VAT affairs are in order before using them.
We want to encourage our clients to look up if a VAT vendor is VAT registered by following the link on SARS website VAT Vendor Search (sarsefiling.co.za).
If you are unsure if a supplier is VAT registered ask for the invoice and use the VAT details to verify the VAT registration. Also, please remember that a VAT number always starts with a 4 so if you see another number that doesn’t start with a 4 and isn’t 10 digits long, please re-confirm this with the supplier.
Please also remember that the VAT-registered vendor must not claim input tax for non-qualifying items such as motor cars and entertainment (which includes meals and refreshments), as such was not used, consumed, or on-supplied for the purpose of making taxable supplies.
We would like to encourage clients to send their VAT receipts and invoices to Hubdocs to ensure that proper documentation is kept of the transactions.
Ask one of lovely staff if you are unsure and want to find out more.
To contact Anlo Financial Solutions, email annja@anlofin.com or tel: 011-6581324
