Aside from the regular income tax audits you’ll have to contend with, your chances of a Vat audit are virtually guaranteed.
Remember: Vat is a self-assessment tax and you act as a kind of unofficial collection agent for SARS. SARS relies on you to collect the tax, calculate your liability correctly and pay it over to them, so the risk area for them is huge. They minimise this risk by conducting regular audits to reduce error and fraud.
When the auditors commence your Vat audit, at the forefront of their minds will be a basic aim: to ensure that outputs aren’t understated and that inputs aren’t overstated.
SARS has a habit of reconciling the turnover, as reflected on the Vat returns that the company has submitted, with the turnover reflected in the annual financial statements of the business. If the financial statement figure is greater, it is indicative of sales not being declared for Vat purposes. It’s very important that this is checked by the business before signing the annual financial statements and you must be able to explain any differences there may be. This is why it’s so important to reflect all turnover items on the Vat returns, such as the exempt and zero-rated sales, and not just the taxable sales.
There are two rules to follow if SARS arranges a Vat inspection:
- Co-operate. Don’t be difficult or try to obstruct them in doing their job, or try to hide things you fear they will find.
- Be prepared!
And here’s what you can do to make the inspection a little easier:
- Determine the period they’re interested in reviewing.
- Prepare your records.
- Review your records.
- Obtain a full audit trail.
- Reconcile Vat returns and financial statements.
With The Practical Vat Loose Leaf at your side, you can rest assured that your Vat affairs are 100% in order, and you’ll ace the audit! Covering everything from registration, to assessments, to exports, and zero-rating, the Practical Vat Loose Leaf is every vendor’s best friend!
Use this smart report to arm yourself with the ammunition to survive your SARS audit:
- 22 checklists to use in assessing your risk
- What to expect from the audit
- 13 items SARS will check about your assets
- 4 expenses SARS will target during the audit
- 11 questions you’ll be asked about your cash flow statement
- What to do when an assessment is issued
- and much more.
Discover what to expect from the audit
The SARS tax audit differs from a statutory audit (which is the required annual audit for companies).
Auditing is essentially about verifying something and it is based on the principle that there will be sufficient appropriate evidence to support the transactions that have taken place!
- How does SARS select cases for audit – are you at risk?
- 6 ways SARS could target you for a tax audit
- What to expect from your audit: audit types and targets
- Field audits – know your rights and enforce them
- Know what risk areas the SARS auditor is interested in
- Sources of information relevant to the SARS auditor
If you'd like to know more about how to survive a SARS tax audit just start your Practical Vat Loose Leaf Service 14 day risk free trial now! As part of this service you’ll receive the Practical Vat Loose Leaf, three Bonus Reports, Regular updates, the Weekly Tax Bulletin, Online access to past Vat Updates and a Vat Helpdesk.
What else you’ll discover in the Practical Vat Loose Leaf, to help you take control of your Vat:
- 6 types of activity that don’t qualify for Vat registration
- Checklist: Documents to attach to your Vat101 application
- 4 instances where you can cancel your Vat registration
- How to complete your Vat return
- Check your input tax claims satisfy these 2 criteria
- 24 activities that qualify for the diesel refund scheme
- 4 alternative apportionment methods
- Checklist: zero-rated supplies
- Invoices: The key to smooth Vat operations
- 3 core principles that govern the Vat system
- How to claim Vat on debts written off
- Three basic steps to determine your Vat liability
- 5 circumstances where you may claim an input tax adjustment
- Ten exempt supplies
- Checklist: Essential documents to keep for direct exports
- Follow these rules to ensure you don’t make costly errors when you acquire fixed property
- 8 Vat-exempt financial services
