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"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.
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.
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