Sage, the market leader in cloud business management solutions, has updated its portfolio of enterprise management and accounting solutions to ensure its South African customers are compliant with the new VAT rate, which comes into effect on April 1.
The rate will increase from 14 to 15% – the first time it has gone up in 25 years.
Sage’s cloud-based automated accounting solutions, such as Accounting (Sage One) and Financials (Sage Live), will be updated, without customers needing to do anything on their side.
Users of Sage’s server-based and desktop accounting solutions. Like Sage Pastel and Sage Evolution will receive a free software update to the new VAT rate, provided they have an active support contract with Sage.
Customers that do not want to download the upgrade will need to manually adjust their software to the new rate.
“Businesses that use the latest version of the Sage software will be able to easily comply with the new VAT rate,” said Pieter Bensch, Executive Vice President, Africa & Middle East at Sage.
“Their invoices will automatically reflect the 15% VAT rate from April 1, but they will also be able to process historical transactions at the 14% rate.
“This will enable them to quickly and easily file their VAT201 returns at the end of the tax year.”
According to the ‘Time of Supply’ rules stipulated in Section 9 of the VAT Act, transactions that occur on or after April 1 will be subject to the new 15% rate.
Any purchases that are completed before April 1 but refunded after that date should be refunded at the 14% rate, which should be reflected in the credit note.
For contracts that came into effect before April 1 but will continue after that date, an apportionment must be applied.
The correct VAT to apply will be the one that’s in place on the date the invoice was issued or when payment is received – whichever happens first.
For example, if you invoice for a sale on March 31 but are only paid on 2 April, the VAT rate of 14% will apply. If you receive payment on 1 April but have not yet invoiced, then VAT should be charged at 15%.
“For most businesses, the increase comes towards the end of their financial year, meaning different VAT rates will apply,” added Bensch.
“This might complicate the accounting and reporting process – especially for businesses that still use spreadsheets to calculate their VAT payments.
“The chance of inaccurate calculations and human error are eliminated with compliant, cloud-based software like Sage – another reason for small businesses that run on manual processes to consider automation.”
Businesses that do not comply and do not increase the VAT they charge their customers from April 1, will be liable for the additional 1% VAT and may incur penalties and interest if their output tax is under-declared.
Sage customers will not need to worry about any of this because their software will be compliant.
