When submitting your VAT return, according to certain parameters, SARS now has the discretion to audit the calculation of the return, whereby the vendor is required to submit to the receiver proof of the turnover declared as well as the expenses claimed.
We recently experienced that the input tax of a large number of VAT vendors was disallowed during their SARS VAT audit.
The 5 most common reasons we picked up on are as follows:
Employers fail to pay over Vat Output on company car fringe benefits
This mistake can be easily detected with the introduction of the compulsory completion of IT14SD, or a review of the IRP5 certificates for the relevant period.
Output tax on the short-term insurance compensation
Vendors must account for output tax on the short-term insurance compensation received (including 3rd party claims), especially if the vendors have claimed the input tax on the premiums paid for the cost of the short-term insurance
Tax Invoices submitted in respect of expenses claimed do not meet the required criteria as laid down by the SARS.
The following are requirements for all Tax Invoices of R3,000 or more, or a zero-rated supply:
– The words “TAX INVOICE” in a prominent place
– Name, address, and VAT registration number of the supplier
– Name, address, and VAT registration number of the recipient
– Serial number and date of issue
– Description of goods and/or services (also indicating where applicable that the goods are second-hand goods)
– Quantity or volume of goods or services supplied
– Price & VAT
Input tax is claimed when a fixed property is purchased
Input tax is claimed when a fixed property is purchased and used for the purpose of producing taxable supplies.
The Vat Act is explicit that claims for input tax in such situations can only be processed if the claimant of the input tax deduction is also the owner of the property. This implies that the property must already have been transferred to the name of the claimant before the input tax deduction can be claimed, and that evidence is available that the property will be used in making taxable supplies. If the sequence for claiming the input tax deduction is not closely observed, this implies that the claimant of the input tax deduction is not the owner of the property.
Vendors must not claim input tax for non-qualifying items
Vendors must not claim input tax for non-qualifying items such as motor cars and entertainment (which includes meals and refreshments), as such were not used or consumed for the purpose of making taxable supplies.
[quote]Do have any input tax items that have been disallowed on a regular basis? Please share them with our audience.[/quote]