Value-added Tax Return

Background

Value-Added Tax (VAT) is an indirect tax on the consumption of goods and services. VAT-registered businesses (vendors) must periodically submit a VAT 201 declaration to the South African Revenue Service (SARS).

The Value-added Tax Return feature in this application is designed to streamline this process. It automatically fetches all VAT-related transactions within a specified period, classifies them according to the official VAT 201 categories, and presents them in a format that mirrors the SARS return, making it easy to review, verify, and file.

1. Setup

Before you can create a VAT Return, you need to configure the system to correctly identify and classify your VAT transactions. This is a one-time setup.

1.1. Value-added Tax Return Settings

First, create a Value-added Tax Return Settings document for each Company in your system.

1. In the Awesome Bar, search for "Value-added Tax Return Settings" and go to the list view.
2. Click Add Value-added Tax Return Settings.
3. Select the Company these settings will apply to.

4. Tax Accounts: In this table, add all the G/L accounts that you use for VAT processing. These are typically your VAT control accounts. The system will fetch all transactions from these accounts when generating a return. You can click the "auto_set_tax_accounts" button to automatically populate this table with all accounts of type "Tax".

5. Map Classifications: This is the most critical step for automating your VAT return. Here, you will map your existing Taxes and Charges Templates to the official SARS VAT classifications.

   • For each Output Tax category (e.g., "Standard rate (excl capital goods)"), select the corresponding Sales Taxes and Charges Template you use for such sales.
   • For each Input Tax category, select the corresponding Purchase Taxes and Charges Template.

   This mapping allows the system to automatically classify any transaction originating from a Sales Invoice or Purchase Invoice.

1.2. Account Settings for Manual Journal Entries

Transactions from Sales and Purchase Invoices are classified using the settings above. However, for manual Journal Entries (e.g., bank charges, fuel expenses, write-offs), the system uses settings on the individual G/L accounts to determine the classification.

For each relevant expense or income account, you need to set the default VAT classification:

1. Navigate to the Chart of Accounts and select an account (e.g., "Bank Charges").
2. In the account's settings, find the VAT Return Classification section.
3. Set the appropriate classification for debit and credit entries. For an expense account like "Bank Charges," you would typically set the Classify Debit entries as: Input - C Other goods supplied to you (excl capital goods).
4. Save the account. Repeat this for all accounts that you use in manual VAT-related journal entries.

2. Creating a VAT Return

Once the setup is complete, you can generate your VAT return.

1. In the Awesome Bar, search for Value-added Tax Return and create a new document.
2. Set the Company, Tax Period (in CCYYMM format, e.g., 202508), and the Date From and Date To for the return period.
3. Save the document.

2.1. Fetching Transactions

Click the Get transactions for period button. The system will:

• Fetch all GL entries from your specified Tax Accounts within the date range.
• Fetch related Sales Invoices and Purchase Invoices to find zero-rated transactions.
• Attempt to classify each transaction based on the setup you completed.
• Populate the Transactions table at the bottom of the form with the results.

2.2. Classifying and Reviewing Transactions

After fetching, the system will indicate if there are any unclassified transactions.

• Automatically Classified: Transactions from Invoices or well-defined Journal Entries will be classified automatically.
• Unclassified: Some complex or unusual Journal Entries may remain unclassified. You must manually review these.

Go to the Transactions tab to review the fetched entries. For any unclassified row, select the correct Classification from the dropdown menu.

2.3. Reviewing the VAT 201 Form

As you classify transactions, the Calculation of Output Tax and Calculation of Input Tax tabs are automatically updated. These tabs are structured to look exactly like the SARS VAT 201 form, with each field corresponding to a box on the official return.

To verify the amount in any field, click the magnifying glass icon (🔍) next to it. This will open the Value-added Tax Return Linked Transactions report, pre-filtered to show you exactly which transactions make up that total.

2.4. Submitting the Return

Once you have classified all transactions and are satisfied with the totals on the form, you can Submit the document. This will lock the return and prevent further changes. You can now use the information on this form to complete your official VAT 201 filing with SARS.