Legislation that requires foreign suppliers of electronic services to register as VAT vendors in South Africa has recently been introduced, and local business owners should be aware of changes such as this in order to alleviate any impact.
The good news is that, under the new regulations, business owners who are VAT registered no longer carry the burden of proof so, whereas before, it was up to you, as a local business owner, to declare the VAT on electronic services provided, this responsibility now lies with the supplier providing the services.
Furthermore, VAT registered companies can claim the supplier VAT back.
For those of you who are not yet VAT registered, this could be an opportunity to consider voluntarily registering to become a VAT vendor.
According to SARS, VAT registration becomes compulsory when you have reached the point where you are recording over R1-million in business transactions per year. Voluntary registration was introduced for companies who are not yet earning as much but want to offer and receive the benefits associated.
New VAT registration regulations have relaxed somewhat and today there are more options open to business owners wishing to voluntarily register, including scenarios that see you earning R50 000 over the past year or offering proof that you will earn at least that in the forthcoming year. Businesses regularly operating in agriculture, mining, property development and other industries listed on the SARS site are also invited to register as VAT vendors, regardless as to their earning potential.
Although registration requires some administration, the benefits can outweigh the time investment, depending on the type of business you’re running. These include:
So, the world of VAT empowered business is not as closed as it once was. If, as a small business, you feel you’re ready to take advantage of the benefits proffered by being VAT registered, including the rebates you can expect in dealing with foreign suppliers of electronic services, simply visit the SARS site, fill in the relevant documentation, and ensure you have all the required proof with you when visiting your nearest branch.
VAT registered or not, now is always the best time to consider finding ways to keep money in the bank for as long as possible.
Here are four ideas to help you achieve just that:
1. Look at negotiating better payment terms with suppliers. Most suppliers would prefer to have your business on your terms than lose it to a more flexible competitor so test the waters. There’s no harm in asking.
2. In much the same way, if you offer products or services that require hefty investment of time or money, request a deposit from your clients. This will keep the bank balance looking healthy with more access to cash when it’s needed.
3. Another way to manage your cash flow more tightly is to use online accounting packages such as QuickBooks, which allows you to receive real-time updates on your cash reserves, debtor’s books and pipeline revenue.
4. Lastly, and I say this understanding the current economic situation in South Africa, businesses must do what they can to create a reserve. One idea would be to put money away on a monthly basis, which is only used on really rainy days.
Cash flow management is a key focus area for all businesses, regardless as to the new VAT legislation, but taking steps to cover your business now will go miles to helping you better manage unexpected costs in the future.
About Intuit: Intuit Inc. is a top financial software company developing and offering financial and accounting software, including QuickBooks – a leading online accounting software, with over 5.6 million subscribers worldwide, tailored to suit all kinds of businesses from start-ups to medium-sized and growing organisations. More than 50,000 South African businesses use QuickBooks today and enjoy the solution that simplifies the financial side of business.