Preparing VAT returns and records

How to Prepare VAT Returns and Keep Accurate Records

Preparing VAT returns and records is an important task for businesses registered for Value Added Tax (VAT) in South Africa. It helps you comply with the South African Revenue Service (SARS) and avoid penalties. Understanding what to include and how to organise your documents makes the process easier and faster.

VAT is a tax charged on the sale of goods and services. Businesses that earn more than R1 million a year must register for VAT. Once registered, you must submit VAT returns every two months. The VAT return shows how much VAT you collected from customers and how much VAT you paid on business purchases.

Steps to Prepare VAT Returns

1. Gather all sales invoices: Collect all invoices where VAT was charged on goods and services you sold. These show the output VAT you owe.
2. Collect purchase invoices: Find all invoices from suppliers that show the VAT you paid on business expenses. This is your input VAT and reduces the VAT you owe.
3. Calculate total output VAT: Add up the VAT amounts from sales invoices for the VAT period.
4. Calculate total input VAT: Add all VAT amounts from purchase invoices for the same period.
5. Work out VAT due or refund: Subtract total input VAT from output VAT. If output VAT is more, you pay SARS. If input VAT is more, you may get a refund.
6. Complete the VAT return form: Fill in the requested information on the official VAT201 form or submit electronically via SARS eFiling.
7. Submit the return and pay VAT: Send your return on time and make payment if you owe VAT.

It is important to keep accurate VAT records. SARS requires you to retain these for at least five years. Good records help you prepare accurate returns and support your calculations if SARS audits your business.

What Records to Keep

• Copies of all sales and purchase invoices
• Credit and debit notes related to VAT
• Bank statements showing VAT payments or receipts
• Written records of any VAT adjustments made
• VAT payment receipts and SARS correspondence

Use simple bookkeeping software or spreadsheets to organise your VAT records. This reduces errors and speeds up your VAT return preparation.

Remember, VAT returns are due usually within 25 days after the end of each VAT period. Late submissions or payments can lead to interest and penalties. Always double-check your calculations and records before sending your VAT return.

By preparing VAT returns and records carefully, you keep your business compliant, save time, and avoid unnecessary costs. Learning this skill is essential for anyone managing business finances in South Africa.