Accounting and Tax Club.co.za Q&A
The Company Car. An employee's favourite Perk.
An Accountant's Little time bomb.

"CASH BASIS vs INVOICE BASIS"

My client - sole proprietor's turnover is under R5mil. can she declare her income on the cash basis? Do I have to register her as cash basis or can we accept that she's on a cash basis. She is a industrial psychologist - writing reports for the road accident fund - these cases can take up to 9 months before she receives her money.

Added to
  • Vat basics
  • Voluntary vat registration

MERTZ
 User  MERTZ asked on 12 Jun. 2013

 

1 answer

Vote answer I appreciate this answer [0] I am unhappy with this answer [0]
Kallie Van Der Merwe
 Expert Kallie Van Der Merwe answered question on 18 Jun. 2013
Section 15 of the VAT Act provides the default position with regard accounting of VAT and provides that every vendor shall account for VAT on the invoice basis unless provided otherwise.

A vendor must apply in writing to SARS before being allowed to apply the payments basis (i.e. the cash basis), which, if approved, will only apply from a future tax period as specified by SARS. (Section 15(2) refers).

In terms of section 15(2)(b) of the VAT Act, the payments basis is only available to vendors who are natural persons (or partnerships consisting only of natural persons) whose total taxable supplies at the end of a tax period have not exceeded R2.5 million in the previous 12 months, and are not likely to exceed R2.5 million in the next 12 months. The payment basis is also available to certain other entities, none of which are relevant in this instance.

If the vendor is already registered on the invoice basis, and assuming she qualiies to be registered on the payment basis, the vendor can apply to change the basis of accounting by completing form VAT 117 (available from the SARS website www.sars.gov.za).

If your client’s total taxable income exceeds R2.5 million in a 12 month period, she will not be entitled to account for VAT on the payments basis.



Other questions about Vat basics

 


RSS Facebook Share the experience
Accounting and Tax Club.co.za

Topics
  • Accounting
  • Allowances and deductions
  • Audit/Assessment
  • Capital gains tax
  • Dividends
  • Donations Tax
  • Exports and imports
  • Fringe benefits
  • Input tax
  • Provisional tax
  • Sars
  • Tax basics
  • Tax invoices
  • Tax returns
  • Vat basics
  • Vat registrations
  • Vat return
Premium Services
  • Company Registration
  • Objections
  • PAYE
  • Trusts
  • Turnover Tax
  • UIF
  • Wear and Tear
TOP ANSWERS 2016
VAT is payable on a commercial rental and directly associated charges. Is VAT chargeable on related charges such as...[read more]
Published on 08 Apr. 2016 3 answers
I am aware that there are requirements to make an invoice a valid tax invoice such as having the Company name,...[read more]
Published on 09 Apr. 2016 1 answer
Good Day Is there VAT output to be declared on winnings from Horse Bettings.. IE our client owns horses, races...[read more]
Published on 25 Apr. 2016 1 answer
Some VAT Vendors use a postal address on their Tax Invoices. Surely this defeats the object of the exercise of ensuring...[read more]
Published on 25 Apr. 2016 1 answer
Client expect an insurance claim pay-out for fire damage on farm for damage on residence on farm (R1m) and field...[read more]
Published on 10 May. 2016 1 answer
Are you allowed to claim "deemed vat" on items that were purchased from a non registered vendor? And will you end up...[read more]
Published on 08 Apr. 2016 1 answer
Video Archive Video club

Your library of Free eReports
View full library
What do I do if i disagree with SARS assessment?

Section 42 of the Tax Administration Act says you have the right to object to SARS in these 8 situations...Download your 
FREE report now