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  1. #1
    just me duncan drennan's Avatar
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    VAT and deposits

    If a deposit is paid, and then a VAT date occurs between the deposit being paid and final invoicing is any VAT due on that date?
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    Site Caretaker Dave A's Avatar
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    For smaller vendors, VAT can be calculated based on one of two methods:

    Accrual method: This is based on when the transaction takes place regardless of when it is paid. Essentially, this is the date of invoice.

    Payment date method: This is based on the date of payment!

    If you go for the cash basis, this has to be requested and approved by SARS first when making application to become a vendor. The default is the accrual method.

    Under the accrual method, this means the liability for VAT is incurred at the time of the invoice. Thus deposits received are not considered VAT events.

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    just me duncan drennan's Avatar
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    Thanks Dave, so why would anyone prefer the payment date method? Surely from a cash flow perspective the accural is better? (unless you are a compulsive spender )
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    Site Caretaker Dave A's Avatar
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    We aren't all so lucky to get our money in advance of the invoice!!!

    The scenario that illustrates the advantage of the payment date basis is where you get paid by your clients at 60 to 90 days, but you pay your suppliers COD. Your money is coming in only after you would have to pay SARS under the accrual system.

    The cash basis does come with its challenges, particularly in terms of record keeping to the satisfaction of SARS. Also, accounting systems work on the accrual basis in all other aspects.

    I know Quickbooks can handle the cash basis for VAT as an option, but I don't know about other accounting software.

    I also vaguely recall there was talk of doing away with the option.... And I'd hate to try and convert from one system to the other.

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    just me duncan drennan's Avatar
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    Quote Originally Posted by Dave A View Post
    I also vaguely recall there was talk of doing away with the option.... And I'd hate to try and convert from one system to the other.
    I assume you mean the cash basis option?

    I actually wasn't thinking clearly - obviously the cash basis is better! Then you only have to pay once the money is in the bank If in invoice is payed late on the accrual system then cash flow is an issue.

    I assume with the accrual system you can claim input VAT as soon as you have the invoice (invoice payable that is), and on the cash basis you can only claim the input VAT once it is actually paid?
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    just me duncan drennan's Avatar
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    Quote Originally Posted by dsd View Post
    I assume with the accrual system you can claim input VAT as soon as you have the invoice (invoice payable that is), and on the cash basis you can only claim the input VAT once it is actually paid?
    Just to go back to this, is the above correct?
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    Platinum Member Marq's Avatar
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    As far as I know the cash option has been removed and will only be accepted in special cases - which means effectively no more cash basis unless you run a government department and contemplating looking for excuses for qualified audit reports.

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    Site Caretaker Dave A's Avatar
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    Marq's certainly right about it being difficult to get registered on the cash basis.

    Actually, it's not all that much fun trying to get registered full stop. I recall submitting a tome of about 150 pages for each company with all their documentary requirements. But then I've got trusts and (Pty) Ltds, so that was part of the problem.

    You should have seen the look on the face of the Commisioner of Oaths that had to certify the copies of that little lot. He disappeared after about 5 minutes and I had to run around to find another one to finish the job.

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