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Thread: I registered my small business for VAT

  1. #1
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    I registered my small business for VAT

    Hi all,

    As the heading says, I registered my small business for VAT. I now have to start recording transactions with VAT and I have asked my accountants about it and she has not responded in two days. So I thougt I might just ask here and see if there is a better response.

    I received a letter from SARS on 11 Feb 2020 stating, inter alia that: "… a 12 month tax period with the following catagory has been allocated:
    The last day of each of the twelve months of the calandar year.”

    I’m not quite sure what that means. Does it mean I have to pay VAT every month (not every two months)? My accounting software (Quickbooks) wants me to enter a “Start of VAT period”. So do I enter that as January, since SARS says the catagory allocated is “The last day of each of the twelve months of the calandar year.”

    Two further general questions:

    In my accounting software, must I now register each shop/outlet seperately as a “Supplier” with its own VAT number for every expense purchase? For example, up to now, I have in my Chart of Accounts and expense account called “Electricity” and all pre paid electricity purchases go through this single account, notwithstanding the fact that I purchase prepaid electricity from diffirent vendors. Another example is I buy diesel from different garages but all go through “Travel Expenses” account. Must I register each garage separately in Quickbooks, each with its own VAT number and record each purchase as a VAT expense under that supplier?

    Must I print out and keep hard copies of all VAT invoices from vendors?

    Any input (no pun intended) will be appreciated.

    Thanks,

    Andre

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    Hi Andre

    It actually means you pay VAT one every 12 months. That could of course be a nightmare!

    My accounting software (Quickbooks) wants me to enter a “Start of VAT period”. So do I enter that as January, since SARS says the catagory allocated is “The last day of each of the twelve months of the calendar year.”
    Under Suppliers, edit your VAT Vendor, normally SARS or South African Revenue Service or whatever. Click on the VAT Settings Tab. Set reporting period to Annual. Set Period Ending to December ("The last day of each of the twelve months of the calendar year.")

    In my accounting software, must I now register each shop/outlet seperately as a “Supplier” with its own VAT number for every expense purchase? For example, up to now, I have in my Chart of Accounts and expense account called “Electricity” and all pre paid electricity purchases go through this single account, notwithstanding the fact that I purchase prepaid electricity from diffirent vendors. Another example is I buy diesel from different garages but all go through “Travel Expenses” account. Must I register each garage separately in Quickbooks, each with its own VAT number and record each purchase as a VAT expense under that supplier?
    The easiest is to edit all of your expense accounts and enter the VAT code that it should default to. So when you enter a bill it will automatically suggest a correct VAT code. This works for all expenses but you can't do it for cost of sales. To do it for cost of sales, firs edit the account and change it to an expense, then edit it again and set the VAT code, then edit again and change it back to cost of sales.

    Must I print out and keep hard copies of all VAT invoices from vendors?
    Yes. That is required by multiple laws anyway.

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    Thank you so much, Andromeda. That really helped.

    I'll call SARS and ask them if they can change the tax period to one month or two months.

    Regards,

    Andre

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    Actually Andre, I would appreciate you keeping me informed, even if by private message. The more I think about the more I don't know. A monthly regime is normally only applied or granted when:

    A vendor will fall within this category if :
    the total value of taxable supplies made by the vendor has exceeded or is likely to exceed R30 million in any consecutive period of 12 months,
    the vendor has applied in writing to be placed in this category, or
    the vendor repeatedly failed to perform any obligations as required by the VAT legislation.

    On the other hand, a 12 monthly regime usually only applies, according to Vat Vendor Guide:
    Under this category you are required to submit one return every 12 calendar months. This category is for vendors who want their tax periods to align with their “year of assessment” as defined in section 1(1) of the Income Tax Act. The vendor must submit a written application in the prescribed form for registration under this category and must comply with the following:
    • The vendor must be a company or a trust fund.
    • The supplies by the vendor applying for Category E must be made to a connected person in relation to that vendor and consist solely of –
     the letting of fixed properties; or
     the renting of movable goods; or
     the administration or management of such companies.
    • The connected person who receives the supply must be registered for VAT and must be entitled to deduct the full amount of input tax in respect of those supplies.
    • The vendor must agree with the recipients that tax invoices are issued only once a year at the end of the year of assessment of the vendor making the supplies.

    Definitely clarify the thing with them.

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    Hi guys,

    As far as I understand, you do not need to keep hard copies of every invoice, electronic versions are accepted as well.


    Sent from my iPhone using Tapatalk

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    Hi Andre

    "I have asked my accountants about it and she has not responded in two days" (Get new Accountants, unless it is a friend or family member working for Free)

    "… a 12 month tax period " (Pro's if you think you are going to pay a lot of VAT to SARS then you can take the money you would have paid them every month and put it into a Fixed deposit account and earn Interest on their money)
    (Cons - If you think you are going to claim substantial amounts back from SARS then you will only be claiming once a year and they will be earning Interest on your money)

    "must I now register each shop/outlet seperately as a “Supplier” with its own VAT number" (just the initial setup will take time, only need to do this if they have different VAT numbers, and this will make auditing easier. When SARS comes knocking, and your accountants don't respond, you want to make it as easy as possible for them to do their job, and be in a out (pun intended) as fast as possible; you don't want to irritate them so they start looking into every little thing just because you could have made it easier for them.)
    "I buy diesel from different garages" (Diesel does not have any VAT charged on it, There is a Diesel Refund System with SARS, but that is an answer for a different question)

    "Must I print out and keep hard copies of all VAT invoices from vendors?" (No, you can actually scan any physical documents you do receive, into electronic format as well. It is easier to have 1 external harddrive in a safe than 1 garage full of paper. Just make sure you label it properly and know where to find it when SARS wants you to give them physical copies)

    Note: If you don't have a document (physical/electronic) that meets the SARS requirements for VAT, then you can't claim anything back from SARS

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