Why SARS Flags Certain VAT Returns

Many businesses only realise something is wrong when SARS delays a refund or sends a verification notice. In many cases the reason is that the VAT return has been flagged by SARS’s risk assessment systems.

SARS uses automated systems and data matching to identify VAT returns that may require closer review. When a return is flagged it does not automatically mean there is wrongdoing. It simply means the return falls outside of what SARS considers normal patterns.

Here are some of the most common reasons why SARS flags VAT returns.

Large or Unusual Refund Claims

Refunds that are significantly higher than previous periods often trigger a review. SARS may request supporting documentation to confirm that the input VAT claimed is valid and correctly supported.

Sudden Changes in Turnover

If a business reports a sharp increase or decrease in turnover compared to previous VAT periods, the system may flag the return for verification. SARS checks whether the figures align with historical patterns and third party data.

High Input VAT Compared to Output VAT

Where the input VAT claimed is unusually high relative to output VAT, SARS may want to confirm that the purchases relate to legitimate business expenses and that the VAT invoices meet compliance requirements.

Industry Risk Profiling

Certain industries are monitored more closely due to historic abuse of the VAT system. Businesses operating in these sectors may experience more frequent verifications or requests for supporting documents.

Incomplete or Inconsistent Information

Differences between VAT submissions and other filings such as income tax returns, payroll declarations or third party reporting can also trigger a flag.

What This Means for Your Business

A flagged VAT return can delay refunds and may lead to a verification or audit process. The key is to ensure that your VAT submissions are accurate, well supported and consistent with your other tax filings.

Where SARS requests documentation or raises questions, it is important to respond correctly and within the required timeframes.

TDM assists businesses with VAT compliance, SARS verifications and professional engagement with SARS to ensure that matters are resolved efficiently.

If your VAT return has been flagged or a refund has been delayed, speak to the TDM team for professional guidance.

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