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Thread: VAT input and payment of creditors

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    VAT input and payment of creditors

    Good day

    I have just been told by SARS that there is a new ruling that we have to submit proof of payments to creditors on the input VAT claimed before a refund will be paid out. I wonder if anybody else has heard of this. My understanding is that all VAT is based on invoice basis.

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    Platinum Member Neville Bailey's Avatar
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    The first I've heard of that!

    As you say, most VAT vendors are registered on the Invoice Basis - only those that are registered on the Payments Basis can claim on submission of payments.

    If the ruling is fact, then surely we need not pay VAT based on customer invoice date, but only on the date when we get paid?

    They can't have their cake and eat it! But then we are talking about SARS...
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    Site Caretaker Dave A's Avatar
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    This may just apply to situations where there is a refund payment due from SARS, which is the area where SARS has been heavily stung by fraudsters.
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    The moment you request a refund from SARS, then they start dishing out the hoops for you to jump through.
    They deal with most refund requests individually and start off with a standard set of document requests and then ask for more depending on how you answer.

    If you have not yet paid a creditor, then it will set off a red flag. I would imagine that in most cases its not significant, but if you have a single big creditor entry and no proportional sales increase, then they will have reason to become suspicious. They are not necessarily saying they won't pay the refund ... they are just using a prudent delay tactic to make sure you are not trying to scam them.

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    Diamond Member Justloadit's Avatar
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    My experience has been on small refunds, no questions, but as soon as it a substantial amount, they request a transaction record for the period in question, and will request a random number of creditor invoices. If they happy they refund, however if they are unhappy for what ever reason, they request more invoices to verify. In some instances they question the reason that there is a request for a refund. In other words they want to know if you are not going under, or pulling a fast one.

    They definitely look into your past history, and may actually do a physical audit if they are not happy with what they see.
    I remember some years back when I had a substantial amount of refund, they requested that I submit my transaction record for the respective period, along with a copy of every creditor invoice.
    I actually made a book and bound it for them and presented it to SARS in chronological order to match the transaction sequence. I actually got a phone call from a SARS official complimenting the way I presented the data requested and promptly refunded me.

    Now a days you have to upload the information via the website. I leave this in the hands of my auditor.
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    I do not have the relevant legislation with me, but I remember at a seminar they informed us that if a creditor has not been repaid within a certain time, the input must be written back. Will read up and let you know.

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    It is section 22(3) of the VAT Act:

    (3) Subject to subsection (3A), where a vendor who is required to account for tax payable on an invoice basis in terms of section 15—
    (a) has made a deduction of input tax in terms of section 16(3) in respect of a taxable supply of goods or services made to him; and
    (b) has, within a period of 12 months after the expiry of the tax period within which such deduction was made, not paid the full consideration in respect of such supply,

    an amount equal to the tax fraction, as applicable at the time of such deduction, of that portion of the consideration which has not been paid shall be deemed to be tax charged in respect of a taxable supply made in the tax period following the expiry of the period of 12 months: Provided that—
    (i) the period of 12 months shall, if any contract in writing in terms of which such supply was made provides for the payment of consideration or any portion thereof to take place after the expiry of the tax period within which such deduction was made, in respect of such consideration or portion be calculated as from the end of the month within which such consideration or portion was payable in terms of that contract;
    (ii) where—
    (aa) the estate of a vendor is sequestrated, whether voluntarily or compulsorily;
    (bb) the vendor is declared insolvent;
    (cc) the vendor has entered into a compromise in terms of section 155 of the Companies Act, 2008 (Act No. 71 of 2008), or a similar arrangement with creditors; or
    (dd) the vendor ceases to be a vendor as contemplated in section 8(2),

    within 12 months after the expiry of the tax period within which that deduction was made, not paid the full consideration, the vendor must account for output tax in terms of this section equal to that portion of the consideration which has not been paid—
    (AA) at the time of sequestration, declaration of insolvency or the date on which the compromise or the arrangement or similar arrangement was entered into; or
    (BB) immediately before the vendor ceased to be a vendor as contemplated in section 8(2); or
    (iii) paragraph (ii) shall not be applicable where a vendor has already accounted for tax payable in accordance with this subsection.

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