According to the TAA, your Vat records must fulfill these two functions

Simangele Mzizi, Fsp Business, 20 Nov. 2014

Tags: vat records, sars, taa, record-keeping, tax administration act

Record-keeping is the most important aspect of your Vat management strategy.

Your records are essentially the proof you need to back up your claims and returns to SARS.

But it’s not just about keeping records for the sake of it.

Your records must match up to what the Tax Administration Act (TAA) wants.

According to the Act, your Vat records must fulfill two functions. Read on to find out what these are so you can comply and avoid serious penalties.

Before we get to the functions your records must fulfill, let’s take a look at who exactly must keep records

According to the TAA, the following must keep records:
  • Those who have given in a return;
  • Those who were required to give in a return, but haven’t; and
  • Those who didn’t have to submit a return, but have, during a certain tax period received income, had a CGT gain or loss or engaged in any other activity that would have been subject to tax.
Now let’s look at the functions your records must fulfill…

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Your records must fulfill these two functions, says the TAA

The Practical Vat Loose Leaf Service explains that when you decide which records to keep, remember that they must serve a specific purpose and help SARS auditors with the following two functions:
#1: Establishing the nature, time and value of all taxable supplies relating to your business; and
#2: Reconciling your accounting records with the Vat returns you submitted.
Basically, you must keep your records to benefit your company by meeting the laws’ specific record-keeping requirements and so SARS can satisfy itself that you’ve kept to the law.
You must keep your records for five years in their original form or in a manner authorised by SARS. And also ensure they’re available for inspection by SARS – they must be open and available for SARS if it comes knocking.
So what kind of records must you keep?
You can keep physical books, paper-based source documents, electronic records and details of your accounting system like charts and codes.
If you think keeping records is a trivial issue, you’re mistaken.

If you dont keep your records in the correct format, you could face these consequences

  • SARS can impose a fixed amount penalty on you (known as an “administrative non-compliance penalty). This amount is proportional to the amount of the assessed loss and the fixed amount will automatically increase every month until you can satisfy SARS or remedy the situation; and
  • You’ll be committing a criminal offence. If proven guilty, you’ll get an extra fine or go to jail for up to two years.
We’ll remind you once again: Keeping your records is the most important aspect of your Vat management strategy. Now that you know the two functions your records must fulfill, comply with the TAA.
PS: For more information on record-keeping, check out the Practical Vat Loose Leaf Service.

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