Not meeting VAT return requirements, having compliance issues, or missing deadlines could lead to your company being audited and investigated by SARS. VAT non-compliance is a serious criminal offence in some countries; thus, companies need to be certain they can quickly and easily prove their VAT compliance, otherwise they will face these consequences.
The consequences of VAT non-compliance
- Administrative fines: Companies need to be able to prove VAT compliance easily.
- Sanctions Under Criminal Law: In some countries, non-compliance is equated to tax evasion (criminal law).
- Protracted Audits: Audits should only take a few days. The longer it takes the higher potential for flawed or lacking documentation.
- Spill over Effects: Non-compliance can undermine company credibility.
- Trading Partner Audits: Tax authorities may be forced to audit the company’s trading partners. This in turn can negatively impact business relationships.
- Mutual Assistance Procedures: Auditors may need to call on their counterparts from other countries to obtain evidence about certain company operations.
- Loss of Right to Deduct VAT: Insufficient evidence of compliance and fraudulent invoices can lead to payment of Input VAT.
- CTCs: Introduction of Continuous Transaction Controls allows tax authorities to analyse vast volumes of transactional data. Non-compliance with CTCs is going to become much tougher and far reaching than VAT non-compliance.
What common mistakes to avoid VAT non-compliance?
- All sales need to be disclosed: When completing VAT returns, many business owners make the mistake of not disclosing zero rated sales. According to tax regulations, zero rated sales need to be disclosed on the VAT201 return in block number 2 if the sale took place locally, or in block number 2A if the sale relates to exported goods.
- Not declaring output VAT on insurance claims: VAT output on receiving an insurance claim, along with the sale of the asset should be reflected under 1A of the VAT201 return. Any insurance claim received by your company is considered a supply from the insurance company to the enterprise, which means that the money received is deemed to be inclusive of VAT.
- Reconciliation of accounting records to the VAT returns: Many businesses preparing their own accounts and VAT returns fail to reconcile their accounting records to the actual VAT return that they submit, and SARS will immediately identify this discrepancy and flag it.
- Failure to obtain or retain tax invoices: Failure to obtain or retain binding tax invoices will result in the VAT input being rejected by SARS and penalties on the disallowed VAT claim amount will follow. This can be prevented by ensuring that all your suppliers issue you with valid tax invoices that contain the required information.
Be VAT Compliant with Smart Technology
Streamlining the compliance burden and reducing the time needed by business is important for the efficient working of VAT systems.
Our user-friendly VAT module provides all the intelligence, analytics, and integrity to populate VAT201s with accurate and transparent VAT reporting, management checks and enquiries, giving companies the confidence to know they are paying the correct VAT and reduce the risk of non-compliance.
The functionality allows organisations to automate VAT analysis and calculation and is aligned to VAT201 submissions and requirements, as dictated by SARS. All current and historical records are stored securely and accessible at the click of a button. Compliance and Risk Current and historical data is always accessible. This enables quick access and interrogation of data using predefined compliance and risk checks and pivots.
Watch our VAT201 Module Videos HERE
With cash as a key indicator of the financial health of a company, optimising cash flow and ensuring the correct cash position is reported each month, is critical. VAT over or under-payments and late submissions can severely impact cash flow and influence business decisions. Large South African corporates using VATSolve Cash Flow Benefit save between R20 Million to over 150 million Rand per month! VATSolve’s Cash Flow Benefit enables organisations to optimise cash flow by ensuring the accurate allocation of input and output VAT to the correct period. VATSolve is a complete VAT management solution for leading ERP systems that offers the benefit of submitting a single VAT return for multiple entities. It provides finance departments with increased productivity, it drives efficiencies, optimises cash positions, and reduces risk. VATSolve, a South African-developed solution designed to address specific challenges associated with VAT regulation, complexity and compliance offers a VAT solution for leading ERP systems that automates and consolidates VAT returns timeously and accurately with increased cash flow and improved business efficiencies. VATSolve is so confident that their solution delivers exceptional service and achieves what it sets out to do, that they offer a free demo or proof of concept for qualifying clients. If you would like to know more, get in touch with us at info@vatsolve.co.za
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