A Pocket Prep Guide on VAT Modernisation

It’s finally time to bite the bullet and wrap your head around this “VAT Modernisation” topic. Perhaps you’ve been putting it off because you simply don’t have the time to dive head-first into legislative updates. Frankly speaking, we don’t blame you. 

So, to ease the process and ensure you’re in the loop and up to date with how VAT modernisation impacts you and your business, we’ve compiled a brief cheat sheet. Below is a guide on VAT modernisation in South Africa, together with the critical touch points.

Welcome to VAT modernisation; it’s not as scary as it sounds

In September 2023, SARS announced its plans to modernise South Africa’s VAT reporting framework. This means that we’re outgrowing our current framework and starting to fall behind other countries that have already modernised their own VAT frameworks to accommodate the changing digital landscape. How?

As stated in its discussion paper, SARS notes that “the future of VAT modernisation is to receive “digitally transmitted VAT data”. The typical method for achieving this is by promoting or requiring the use of electronic invoicing, also known as e-invoicing. An e-invoice is a digital document stored in specific data formats like XML, enabling seamless information exchange. Such formats allow the data within the document to be automatically processed by a computer.

 

VAT Modernisation and your business: What’s the connection?

The most important takeaway here is that the plans for VAT modernisation are fundamentally based on better accommodating businesses while accounting for the need for real-time insights into the VAT process.

The key drivers of VAT Modernisation include reducing VAT collection gaps,  business efficiency and cost savings, globalisation and cross-border trade. For South African businesses, in particular, this means implementing a system that will ultimately streamline the VAT return process. In practicality, this means businesses can expect the following improvements:

• • Quicker and improved VAT refund processing

• • Increased accuracy of VAT returns

• • Fewer manual verifications or audits

• • Fewer disputes

• • The option to enable auto registration and deregistration

• • Fewer errors while simplifying the burden of traditional VAT reporting for vendors

That sounds great in theory, but you’ve got a business to run. So, what do you need to do to ensure you’re compliant?

 

Laying the groundwork: VAT Modernisation Prep

We’ll be honest. This is where things get tricky – especially if you plan on taking a DIY approach. Firstly, to prepare for VAT modernisation, you must assess your current VAT systems and processes to understand their strengths and weaknesses. This also means that you’ll need to identify gaps and areas needing improvement to ensure compliance and efficiency. Alternatively, you can assemble a dedicated project team. And then? Well, they’ll have some work cut out for them.

Here’s what you’ll need to do.

• • Planning and strategy development

• • Understand exact data requirements, formats

• • Selecting and integrating technology solutions

• • Ensure you have systems in place to facilitate data transmission to SARS – in the necessary volumes and at the required time intervals

• • Data migration and management

• • Staff training and capacity building

• • Testing and refining the system

• • Go-live and post-implementation review

• • Track/document changes made to the implementation solutions

 

Common Challenges and How to Overcome Them

While the process of VAT modernisation may seem daunting, you’re not alone.

There’s support available to guide you through this transition. At VAT Modernisation SA, we understand the challenges and complexities of VAT modernisation. We’re here to help you navigate this process, ensuring that all your systems and processes align with the latest VAT requirements.

In the meantime, if you’d like a closer look at VAT modernisation, here’s the nitty-gritty: Unpacking SARS VAT Modernisation plans and how to prepare.