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How to avoid penalties in VAT

It is very important to note that at Tax, any kind of fines and penalties do not benefit the business in any way. Penalties are counter-productive and will only drain the business of the much needed cash. One way of safeguarding your business against unnecessary wastage of resources is by avoiding penalties. It is with this in mind that we thought it appropriate to share with you some of the very basic information on how to avoid penalties, especially VAT penalties. Before we get into that, just a reminder that there are basically two types of penalties that can be imposed on a VAT return, and these are as follows:

  1. Penalty on late payment – 100% of the amount payable on the return
  2. Penalty on Late submission - $30.00 per day for a maximum of 181 days (or a maximum of $5,430.00).

In order to avoid these penalties, you will need to:

  1. Avoid last-minute calculation of the VAT Payable / Refundable – No matter which category you are in, ZIMRA gives you a full 25 days period from the day that you close your books for the period, to the due date. Always try to prepare your VAT return as soon as you close your books for the period. This will give you plenty of time to plan for the payment since you will be in a position to know exactly what the shortfall is long before the due date. With the VAT return prepared before the due date, you will also be in a position to submit on time and avoid the $30.00 per day penalty on late submission.
  2. Know the features that are required on a proper Tax Invoice – Claiming VAT input using an improper tax invoice is not allowed, and can result in the input claim being disallowed and penalties being imposed. Please note that even if an invoice clearly shows that VAT was charged, it can still be disqualified as a proper Tax Invoice if it does not have the other features that are required to be in a proper tax invoice. You therefore need to ensure that your VAT return is prepared by competent people who know the relevant information required. Something as simple as a missing Invoice Date or a missing Invoice number can end up costing you in penalties.

C&J Accounting and Secretarial (Pvt) Ltd - We Strive for Perfection.

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