The Importance of Documentary Requirements and Accurate VAT Reporting.
After ensuring that your ERP has been set up correctly, to capture and control the end-to-end VAT accounting processes, the second step in VAT compliance is to ensure that the business complies with the documentary requirements of the VAT law. This is the basis upon which the business will ensure that VAT has been accounted for correctly in the relevant tax periods.
It is crucial to understand that the documentary requirements have a direct impact on VAT Reporting as this is the basis upon which a transaction is assessed by the Taxpayer to determine the correct VAT treatment. Documents which are not compliant with tax law may result in substantial penalties and/or understatement penalties.
To ensure compliance with documentary requirements, Taxpayers must stay abreast of constantly changing legislation and follow any changes in SARS’s interpretations, guidelines, and other media releases which has a direct impact on a business’s VAT compliance. It is advisable to ensure that monthly compliance reviews and sample testing of documents are performed.
Taxpayers must also keep a record of all relevant documentary proof as well as any other relevant records of transactions for at least five years. Failure to comply can lead to substantial penalties and interest.
Effective ERP implementations together with regular documentary reviews will ensure VAT compliance and will lead to hassle-free audit processes should the Taxpayer be selected by SARS for audits/verifications. This will also expedite VAT refunds due from SARS.
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Article by:
Claudia Steyn
Tax Compliance Manager