Dear Reader

Welcome to this week’s Vat Bulletin.

With the Vat threshold at a whopping R1 million as of next week, many current vendors will be looking to deregister. If this is you, follow these three easy steps and you’ll be Vat free!

Caution! Before you deregister, you should consider whether deregistering will increase your cost price (if you're a trader) as you’ll have to absorb any Vat costs charged by your suppliers as the input tax cushion will be gone. This could force you to hike your prices or take a cut in your profits!

Step 1: Download a copy of the VAT 123 form from the SARS website (www.sars.org.za), complete and submit it to the SARS branch office where you’re registered.

Remember to keep a copy for your own records.

Step 2: Settle any Vat you owe SARS, including your exit tax.

Here's a tip! If you apply to deregister by 30 June 2009, you can pay the exit tax over a six-month period, without paying SARS interest.

Remember: SARS will do a full audit before it approves your deregistration. It can also disallow the cancellation of registration at its discretion and it will use this discretion if, for example, you have old Vat returns or payments outstanding.

Step 3: SARS will notify you once it's approved your application, which will be effective from the last day of the tax period in which you submitted your application to deregister (SARS will indicate this date).

Mailbox
Answered by Christo Augustyn of KPMG Services Pty Ltd

Should settlement discounts be deducted from output tax or input tax?
 
Dear Christo,

We have implemented a new computerised accounting package and there seems to be a dispute regarding the settlement discount offered on payment against the debtors invoice on 30 day terms.

In proper accounting terms, should this discount be deducted from the output tax (which would then reduce your turnover) or should this be expensed which would take the transaction against the input tax?

Answer

As a vendor, you’re given the option to either reduce your input tax or to increase your output tax with the Vat on a settlement discount received. The choice is yours!

Until next time,

Nothando Hlatshwayo

Managing Editor
The Practical Vat Handbook