PART B – OUTPUT VAT

RECONCILIATION

Reconcile output VAT account as per financial system with SARS VAT201-returns

Reconcile 100%

Investigate reasons for not reconciling

Print summary of reconciliation

VAT LINK
Link the vote numbers that Client is using to the income and expenditure votes

Reconcile VAT link with system VAT account and VAT201-returns

AUDIT

Perform audit

Obtain copies of Annual Financial Statements for period of review (COMPULSORY)

Investigate Types of Supplies

Standard Rated Supplies (14%)

Zero Rated Supplies

Exempt Supplies

Out of Scope Supplies

Investigate Standard Rated Supplies

Supply of water, sewer, electricity, refuse

Enterprise activities listed in VAT 419

If not listed, refer to requirements of sections 1 of the VAT Act

Certain deemed supplies

Payment to / on behalf of designated entities: 8(5)

Grant payments: 8(5A)

Re-organisation of municipalities: 8(6)

Disposal of a going concern: 8(7)

Insurance proceeds: 8(8)

Supply of goods where input tax was denied: 8(14)

Composite supplies (standard and zero-rated supplies): 8(15)

Supply of goods and services for mixed use: 8(16)

Proceeds on the expropriation of land: 8(21)

Low cost housing subsidies: 8(23)

Excess consideration received: 8(27)

Supply of fringe benefits: 18(3)

Imported services – S1, S14(3)

Investigate VAT on Indigents: obtain a sample of an invoice where the Indigent is relevant, determine how the system allocates it. Various reports can be used, e.g. Venus - BP602, BP641, BP651

If the data is not sufficient to determine how tax was calculated, additional receipt reports must be pulled - ensure that receipt reports can be tied back to the General Ledger

Investigate Zero Standard Rated Supplies

Rates in terms of section 11(2)(w)

Grants received - section 11(2)(t): Draft Note 39

Sale of going concern – section 11(1)(e) and SARS interpretation Note 57

Investigate Exempt Supplies

Interest earned on bank accounts: S12(a)

Interest earned on investments: S12(a)

Rental income earned on the supply of a dwelling under a rental agreement: S12(c)

Supply of public passenger transport services in the Republic by bus or train: S12(g)

Expenses directly related to this cannot be claimed

Be aware that where financial services qualify for zero-rated in terms of section 11 of the VAT Act, the exemption will not apply, i.e. the application of section 11 (zero-rating) takes precedent over section 12(a) exemption, e.g. foreign interest earned

Investigate Out of Scope Supplies

Supplies neither exempt nor taxable

Example fines, e.g. traffic fines, library fines

Donations received from individuals, charities

Grants received to make exempt supplies

Expenses directly linked to these supplies cannot ne claimed, e.g. the rental of traffic cameras

Identify possible section 16(3)(h) deductions – sale of mixed goods

Identify possible going concern issues, 16(3)(h) deductions

If municipality declared tax from bank statements, ensure that output VAT was not declared on VAT refunds, interest on debtors, inter-bank transfers.

REPORT

Create claim sheets specifying claim numbers and indicating audit findings

Write the Reconciliation and Reducing of the Value Added Tax Liability Report

Reference numbers on the report MUST refer back to the claim schedules

Send report to Deidre for proof reading and formatting

Sign off report

Arrange meeting with Chief Financial Officer to discuss findings

Confirm that claim has been submitted by Client – must include copy of VAT201-return

Obtain SoA to determine if captured on SARS system

ADDITIONAL COMMENTS

Team Leader

Signature

Date

Audit Analyst

Signature

Date