VAT and the VAT201 return

Value added tax is charged at 15 percent. A business must register once its taxable turnover passes R1 million in any twelve month period, and may register voluntarily below that.

What the VAT201 is

A registered vendor submits a VAT201 to SARS for each tax period. Most small vendors file every two months. Larger vendors file monthly. It is submitted through SARS eFiling and is due shortly after the period ends, so check the current SARS calendar rather than a guide for the exact date.

Software can help in two ways. It can produce the VAT201 figures from your ledger. Some products can also transfer those figures into eFiling so nobody retypes them. The second saves the time and avoids the keying error, and it is the one the register is built to record.

Output tax and input tax

Output tax is the VAT you charge your customers. Input tax is the VAT your suppliers charge you. The return works out the difference: if your output tax is more, you pay SARS the difference, and if your input tax is more, SARS owes you a refund. You can only claim input tax on a valid tax invoice, so what you keep matters. See what a valid tax invoice needs.

Invoice basis and payments basis

The basis changes which period an invoice falls into, so your software has to use the one you are registered for. A product that handles only the invoice basis will give the wrong figures to a business on the payments basis.

Registering for VAT

Registration is compulsory once your taxable turnover passes R1 million in a twelve month period. You can register voluntarily if your taxable supplies have passed R50 000 in the last twelve months. A business that is registered must charge VAT on its taxable supplies and submit returns, even in a period in which it sold nothing. Registering voluntarily can make sense if your customers are VAT registered and you have large inputs to claim back, but it also adds a return every period, so ask your accountant first.

Standard rated, zero rated and exempt

Your software has to keep these separate. A zero rated sale and an exempt sale look the same on an invoice, because neither shows VAT, but they are treated differently on the return. Check that the product has distinct VAT codes for each, and that you can add your own.

What the register records

Where an accounting vendor's own page says its VAT201 report is prepared for SARS, the register records it, and the compliance matrix on the accounting sector page shows it.

Questions to ask before you buy

• Does the VAT201 it produces match the SARS form line by line?
• Can it submit to eFiling, or only export a file?
• Does it handle both the invoice basis and the payments basis?
• Does it keep an audit trail SARS will accept in a VAT review?
• Does it issue credit notes that point back to the invoice they correct?

Your first return

1. Make sure your VAT number, period and basis are set up in the software before you issue your first invoice.
2. Code every sale and purchase correctly as you enter it: standard, zero rated, exempt or no VAT.
3. At the end of the period, run the VAT report and compare it to your bank and your ledger.
4. Check that the VAT201 figures add up: output tax less input tax gives the amount due or refundable.
5. Submit on eFiling and pay by the date SARS gives. Keep the proof of both.

Keep the records

SARS expects you to keep your financial records for five years, including the invoices behind every return. Check that you can still reach them if you leave the product. See choosing accounting software in South Africa.