I’m sure you are all dealing with incessant VAT audits from the South African Revenue Service (SARS) and they are delaying in paying out your VAT refunds due to you. Sound familiar? Here’s what you can do to prevent this as much as possible.

When SARS conducts an audit/review of a Vendor’s VAT return, this will be indicated to the vendor by means of a letter which should be emailed to the email address completed on the VAT return. It is wise however, to check for this letter on e-filing yourself by clicking on “Returns History”, “VAT”, opening the most recent period submitted, and checking in the top right hand corner under “SARS Notifications”, whether any letters have been issued. SARS allows the taxpayer 21 days[1] in which to submit the relevant documentation.

A review / audit of a VAT return will most likely be triggered due to significant variances in Output VAT, whether it be Standard Rate, Zero-rated or Exempt supplies in relation to the previous VAT period/s. A review / audit will even more likely be triggered due to a significant increase in Input VAT claimed in relation to a previous VAT period/s, whether it be Capital of nature or not. Any claim in Bad Debts on a VAT return could easily give rise to a VAT review / audit.

Make sure of the following when submitting supporting documents to SARS in respect of VAT. Reconcile the VAT report / tax report carefully with all amounts completed on the VAT return and request a correction should any errors have been made. Provide SARS with copies of your Valid tax invoices[2] for your five largest input VAT claims. Should there be any substantial increase or decrease in respect of any Output VAT, Input VAT or Bad Debts, it is recommended that your supporting documents are accompanied by a letter explaining what had taken place in that specific VAT period.

Should a taxpayer submit a VAT claim of any kind to SARS without being able to corroborate such a claim with the relevant supporting documentation, SARS will most likely impose significant penalties and interest. There are no guarantees that these charges can be waived. In the unlikely event that such penalties and interest levied are waived, the costs incurred in order to achieve a successful outcome could be significant.

We are more than equipped to assist you with this nightmare one faces in order to make sure that the correct supporting documents are supplied to SARS first time round. We also have extensive experience in SARS’s objection process and we will gladly and easily assist you in receiving your VAT refunds timeously.

[1] In terms of the Tax Administration Act, ‘days’ means business days, but it would seem that in practice SARS refers to calendar days.

[2] A valid tax invoice must contain the following: The words “tax invoice”, “VAT invoice” or “invoice” in a prominent place; the name, address and VAT registration number of the supplier and customer; individual serialized number; the date upon which the invoice is issued; a description of the goods or services supplied, including the quantity and volume, and it must be stated in South African currency unless it is zero-rated supply.

Please contact Adrian de Geus (adrian@asl.co.za) or Jaco van Straaten (jaco@asl.co.za) should you require any further assistance with a VAT audit from SARS.

SARS: VAT Audits and the importance of supporting documentation
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