SARS wants to change VAT forever

[W@P]

Well but you hide the unpaid invoices on the vat control account until they are paid and keep rolling like that and sars does get it cash over time but it’s all about cashflow or you won’t be able to pay salaries or suppliers and have to close . This depends on the industries but I am talking for example a electrical company

You are operating on a thin line if you have to manage your cash flow like that.

 

[quovadis]

People are still going to load contract prices to pay nchoncho.

Yes. That's a very different problem.

but the extra burden imposed is not worth the VAT fraud they are going after.

Disagree with this.

Their proposed changes add a bunch of administration burden.

It adds an implementation burden, not necessarily an hugely ongoing administrative one unless you're hellbent on an invoice book.

 

[quovadis]

Well but you hide the unpaid invoices on the vat control account until they are paid and keep rolling like that and sars does get it cash over time but it’s all about cashflow or you won’t be able to pay salaries or suppliers and have to close . This depends on the industries but I am talking for example a electrical company

You can apply to SARS to pay VAT on a cash basis or amend your category for longer periods - but good luck with that. Personally the above is only leading to pain if you run into an audit.

 

[deweyzeph]

You can apply to SARS to pay VAT on a cash basis or amend your category for longer periods - but good luck with that. Personally the above is only leading to pain if you run into an audit.

Or one of your client's get VAT audited and SARS wants to verify their VAT input claims and starts sniffing around verifying supplier invoices. It happens all the time. People don't understand how vast and powerful SARS' auditing powers are. When they start auditing a company they can cast their net far and wide to anyone who has dealings with the company they're auditing - clients, suppliers, shareholders, directors, senior management. An audit that starts off with one company can easily expand into a multiple-entity audit across all tax types. And the burden of proof is on the taxpayer, generally SARS doesn't have to prove a thing. They can raise an assessment and it's up to you to prove otherwise.

 

[jambai]

Or one of your client's get VAT audited and SARS wants to verify their VAT input claims and starts sniffing around verifying supplier invoices. It happens all the time. People don't understand how vast and powerful SARS' auditing powers are. When they start auditing a company they can cast their net far and wide to anyone who has dealings with the company they're auditing - clients, suppliers, shareholders, directors, senior management. An audit that starts off with one company can easily expand into a multiple-entity audit across all tax types. And the burden of proof is on the taxpayer, generally SARS doesn't have to prove a thing. They can raise an assessment and it's up to you to prove otherwise.

I know but it still don’t help your cashflow if your clients don’t pay you for invoices that you raised the vat on . Until you have worked in an industry with this being a problem the theory don’t mean anything to me as we all know the law but the law can’t make you make your clients pay on time . If you had to follow the law you would most likely close as the vat would be paid before you could afford to pay your staff or suppliers and that is why you need to navigate around the issue .

 

[jambai]

You are operating on a thin line if you have to manage your cash flow like that.

Have you ever worked in an industry where client pay late as work is disputed ? Ie won’t pay until job is complete that can drag on ..in some industries this is a kown problem unlike say retail

 

[Swa]

In fairness it'd mostly be affecting people with an old accounting package they bought in 1992. The major benefactor here are software companies. SARS has less VAT fraud to investigate as a result so we benefit indirectly.

Fraud will still happen as it's about what you input into the system. Nothing will change that. Why can't people not just continue using whatever they're using? Sure the fancy account packages benefit large corporations but they only add a burden for small mom and pop shops.

 

[Swa]

Not sure you should be posting this out on the open internet.

I'm sure many people do this... but ja...

Sure you can do this if you want to land up in prison.

It's legal and easy to do. You simply issue a quote until it's paid and then issue a formal invoice. It does not change your legal standing in getting paid. This...

Accurate although its not uncommon for companies to issue a sales order or pro-forma invoice and then issue a tax invoice on receipt of payment/once items are delivered.

 

[Swa]

You are operating on a thin line if you have to manage your cash flow like that.

Many companies in the retail sector work on a margin of less than 10%. It's easy for a large or a few unpaid invoices to put you in the position where you may not be able to pay a staff member.

 

[deweyzeph]

It's legal and easy to do. You simply issue a quote until it's paid and then issue a formal invoice. It does not change your legal standing in getting paid. This...

If the service or goods have already been delivered then you are legally obliged to issue a tax invoice and account for output VAT regardless of whether you have been paid or not according to the VAT act. The illegal part of this is holding off on accounting for VAT until you are physically paid regardless of whether or not the service or goods have been delivered which is what the poster seems to be suggesting you do for cash flow purposes.

 

[warrenpridgeon]

It's legal and easy to do. You simply issue a quote until it's paid and then issue a formal invoice. It does not change your legal standing in getting paid. This...

That's different to "hiding the invoice" and not declaring it on a return. I know many places do pro forma's etc until the money is paid and issue a tax invoice afterwards. Even that is technically not allowed unless you are on "payment basis". And you have to apply for "payment basis".

 

[deweyzeph]

That's different to "hiding the invoice" and not declaring it on a return. I know many places do pro forma's etc until the money is paid and issue a tax invoice afterwards. Even that is technically not allowed unless you are on "payment basis". And you have to apply for "payment basis".

The VAT act is very clear. Output VAT has to be declared at the earlier of the date of the tax invoice or the date that payment is received. The problem then arises when a business, quite rightly, will not issue payment until a proper tax invoice is received. Pro-forma invoices become a massive problem when a seller won't issue a tax invoice until payment is made and a buyer won't pay until a tax invoice is issued. I see this all the time in my business. We flat out refuse to pay a pro-forma invoice because we've often had it when we make payment on a pro-forma invoice and then we have to fight to get the business we bought something from to issue the tax invoice so that we can claim the VAT back. We've been burnt a few times like this where we've basically had to forfeit our VAT input claim because once they've been paid we just simply can't get them to issue us a proper tax invoice.

 

[W@P]

Many companies in the retail sector work on a margin of less than 10%. It's easy for a large or a few unpaid invoices to put you in the position where you may not be able to pay a staff member.

I still stand by my thin-line argument.

Who do you all think should be paid first?

As much as I despise payroll, I feel it should be first in line. And your cash flow should be able to provide for that.
Rent, SARS, etc., kak, can be managed.

Salaries are non-negotiable.

 

[Swa]

The VAT act is very clear. Output VAT has to be declared at the earlier of the date of the tax invoice or the date that payment is received. The problem then arises when a business, quite rightly, will not issue payment until a proper tax invoice is received. Pro-forma invoices become a massive problem when a seller won't issue a tax invoice until payment is made and a buyer won't pay until a tax invoice is issued. I see this all the time in my business. We flat out refuse to pay a pro-forma invoice because we've often had it when we make payment on a pro-forma invoice and then we have to fight to get the business we bought something from to issue the tax invoice so that we can claim the VAT back. We've been burnt a few times like this where we've basically had to forfeit our VAT input claim because once they've been paid we just simply can't get them to issue us a proper tax invoice.

That itself doesn't say when an invoice should be issued.

 

[Swa]

I still stand by my thin-line argument.

Who do you all think should be paid first?

As much as I despise payroll, I feel it should be first in line. And your cash flow should be able to provide for that.
Rent, SARS, etc., kak, can be managed.

Salaries are non-negotiable.

I didn't say it shouldn't be first. Many companies already work on a 30 day schedule and that's your cash flow surplus. So you have the money to pay employees but then someone doesn't pay you "insisting on their legal right" to drag it to 90 days and then SARS also wants you to pay VAT on something you never received. No wonder a lot of small businesses don't make it in this country.

 

[W@P]

I didn't say it shouldn't be first. Many companies already work on a 30 day schedule and that's your cash flow surplus. So you have the money to pay employees but then someone doesn't pay you "insisting on their legal right" to drag it to 90 days and then SARS also wants you to pay VAT on something you never received. No wonder a lot of small businesses don't make it in this country.

Oh fsck bru, I totally get you.

I have a few friends in the civils, construction, and labor industries.
I know full well how a late payment on an invoice can fsck up your shiit.

All I am saying is. You need to have the cash flow to carry you through 30-, 60-, 90 day fsckups.
Because that's how it works out there. I know not everyone can be in that kind of positive cash flow.

Also,

Jy gooi nooit goeie geld agter slegte geld aan nie.

 

[warrenpridgeon]

That itself doesn't say when an invoice should be issued.

Tax Invoices | South African Revenue Service

South Africa operates a VAT system whereby businesses (vendors) are allowed to deduct the VAT incurred on business expenses (input tax) from the VAT collected

www.sars.gov.za

Many people are acting outside the act. Many get away with it. I personally don't know how many people get fined/slapped on the wrist for doctoring dates/playing outside the act.

I'm not going to say it's right or wrong to do that, BUT I can understand why companies would take those chances.

Running a business in ZA is harsh, I've been doing it for 10 years... So I've felt the pain.

Big companies bully smaller ones, they often basically use small companies to manage THEIR cashflow.
Mines/big corps will say "shut yer gob, we pay 60/90/120 days... tough tekkie".

By default you are liable for the VAT in the month you generate your invoice. So if do a big deal or send through a large invoice you have to carry 15% of it until the client pays.

My business does software development, sometimes I build once of solutions, other times I have retainer agreements. I have eaten ass a number of times. Work for a month on a project, send the invoice through on the 1st of the next month - VAT is payable that month... get dragged along for 3 months because the other company either decides to pay later or simply cannot pay.

 

[quovadis]

That's different to "hiding the invoice" and not declaring it on a return. I know many places do pro forma's etc until the money is paid and issue a tax invoice afterwards. Even that is technically not allowed unless you are on "payment basis". And you have to apply for "payment basis".

You're conflating VAT submission on accrual vs cash basis? Cash basis is very rare. I applied for it once and was denied. As already stated - it's probably better to seek an alternative VAT201 submission category to submit every other month or 6 months if you qualify.

It's perfectly acceptable to issue a pro-forma or sales order for payment with tax invoice to follow HOWEVER it's up to your customer to decide if they will pay on that basis or not. It's usually covered as part of agreed terms though.

then SARS also wants you to pay VAT on something you never received. No wonder a lot of small businesses don't make it in this country.

Or don't register for VAT / amend your VAT category to A,B,D,E.

 

[Swa]

You're conflating VAT submission on accrual vs cash basis? Cash basis is very rare. I applied for it once and was denied. As already stated - it's probably better to seek an alternative VAT201 submission category to submit every other month or 6 months if you qualify.

It's perfectly acceptable to issue a pro-forma or sales order for payment with tax invoice to follow HOWEVER it's up to your customer to decide if they will pay on that basis or not. It's usually covered as part of agreed terms though.


Or don't register for VAT / amend your VAT category to A,B,D,E.

But if your revenue is like R2.4m a year you have to register? Also if you don't register you can't deduct input VAT and you just pass VAT along in any case. Two of those categories don't seem to really be available and the other two don't solve the problem.

 

[warrenpridgeon]

You're conflating VAT submission on accrual vs cash basis? Cash basis is very rare. I applied for it once and was denied. As already stated - it's probably better to seek an alternative VAT201 submission category to submit every other month or 6 months if you qualify.

I was referring to when VAT is due, i.e. which period you are supposed to submit the VAT and pay it over. The "cash basis" is supposed to be based on when the money lands and as you've said "is very rare" and you have to apply for it.

Technically you are liable for the VAT the earliest of the invoice or receipt of the payment which is why companies do the proforma/quote thing so they can try shift the VAT burden to when they actually receive the money, so like "on payment lite". However also technically you have 21 days after delivering the goods or services to actually invoice.

So when people deliver goods or services during October and deliver a proforma/quote on 1 Nov they SHOULD be (according to the letter of the law) invoicing no later than 21/22 Nov...

BUT if you deliver goods/services and issue an Invoice on 1 Nov you are supposed to declare and pay the VAT during your next VAT cycle (which could be every second month or every month if you are unlucky like me).