In 2021, new tax updates have emphasized ownership of tax affairs, this means there is a higher standard of personal accountability. These updates, along with the Covid-19 pandemic, have undoubtedly placed a heavy strain on small business owners, but it has led to innovative conversations around solutions for finance and tax relief.
As a result, tax relief measures have been proposed, to qualify there is one main requirement, taxpayers have to be compliant.
Compliance simply means that as a business owner, you adhere to and conform with the rules and show confidence in your ability to comply with the relevant laws. Responsible business owners can practice compliance by keeping abreast of new tax updates, they may also remove the fuss altogether and outsource these services to a reliable tax practitioner.
Non-compliance can then be viewed as acts that do not align with tax laws. SARS does provide business owners with time to resolve non-compliance, for example, an accidental late payment, your account will be labeled as non-compliant as per SARS procedure which can be easily remedied by providing the correct information or paying in the owed amount.
For many business owners, the risk of a costly audit by SARS is enough motivation to maintain financial transparency, however, for non-compliant business owners, there are perceived benefits to avoiding full disclosure of their revenue and/or profit, this usually happens when VAT items are concerned.
Zero-rated VAT is a term given when the government does not tax the sale of the good but allows credits for the value-added tax paid on inputs, for example, certain grants from the government or exports.
This is different from an exempt good or business, as the government doesn’t tax the sale of the good but producers/suppliers cannot claim their input VAT such as non-fee related financial services or educational services provided by an approved educational institution.
Examples of non-compliance with VAT are when business owners try to claim VAT on items that aren’t permissible by SARS, when vendors charge or quote prices that don’t include VAT at the applicable rate or when business owners try to deduct any VAT that should be charged on produced goods.