VAT returns and VAT201 submissions

When VAT registration becomes compulsory

Registration is compulsory once the value of your taxable supplies exceeds R1 million in any consecutive twelve month period, or where you have entered a written contract that commits you to exceeding it within the next twelve months. The application must be made within 21 business days of crossing the threshold.

The word consecutive matters. It is not your financial year. A business that had a strong six months can cross the threshold on a rolling basis without noticing, and SARS can backdate the registration to the date it should have happened. That leaves you liable for output VAT on sales where you never charged VAT to the customer, which comes straight out of margin.

When voluntary registration is worth it, and when it is not

Voluntary registration is available once taxable supplies exceed R50,000 in the past twelve months. Whether it is a good idea depends almost entirely on who your customers are.

• Worth it where you sell mainly to VAT registered businesses. They claim the VAT back, so your price to them is unchanged, and you recover input VAT on your own costs. That is a real margin improvement.
• Usually not worth it where you sell to the public or to non registered customers. Registering adds 15 percent to your price to someone who cannot claim it, so you either absorb it or become more expensive than an unregistered competitor. You also take on a permanent filing obligation.

We work through that with you before you register, because deregistering afterwards involves an exit VAT charge on assets held.

Filing categories and deadlines

Most vendors fall into Category A or B, filing bi-monthly on alternating month ends. Vendors with taxable supplies above R30 million a year fall into Category C and file monthly. Category D covers certain farming enterprises on a six month cycle, and Category E covers specific letting and connected party arrangements on an annual cycle.

The VAT201 and the payment are due by the last business day of the month following the end of the tax period for eFiling users. Late submission or payment attracts a 10 percent penalty plus interest, applied automatically.

The part most providers skip

A VAT201 produced by pressing a button in accounting software is only as good as the underlying data. If expenses have been coded to the wrong VAT rate, if a supplier invoice is not a valid tax invoice, if a zero rated export has no supporting documentation, the return is wrong and the error compounds every period.

We reconcile the VAT control account in the general ledger to the return before submission, every period. Input VAT is checked against valid tax invoices, since SARS disallows claims where the document does not meet the section 20 requirements and that is the single most common finding in a VAT verification. Zero rated and exempt supplies are checked for the supporting evidence the Act requires. Where the return produces a refund, we know it will trigger a verification and we make sure the file is ready before it does.

SARS VAT verifications and audits

Refund returns are routinely selected for verification. It is normal and not an accusation, but it does come with a deadline and a document list. We respond as your registered representative, assemble the supporting invoices and reconciliations in the format SARS expects, and deal with the correspondence. Where an assessment is raised that we believe is wrong, we lodge a formal objection through the dispute process.

Common VAT problems we fix

1. Claiming input VAT on entertainment, most passenger vehicles and club subscriptions, where the Act specifically denies it
2. No valid tax invoice, or a tax invoice missing the vendor's VAT number or the words "tax invoice"
3. Failing to account for VAT on assets when deregistering, or on assets applied to private use
4. Treating a supply as zero rated without the export documentation to support it
5. Bad debts written off without claiming the input VAT relief available on them
6. Backlogs of unfiled returns, which block a Tax Compliance Status and therefore every tender