A step by step guide to acing my VAT audit

Your VAT (value-added tax) return indicates a refund, but you have not received a notification from Inland Revenue that an audit is required.

What now?

The first step is to make an appointment with Inland Revenue and set up a date for an audit.

Once you have secured a date, submit your VAT summary to the officials so they can do a sample selection on invoices that they want to verify for the audit. The VAT summary must contain details of all sales and purchases in the same order in which your tax invoices were issued. The outline of your summary is very important and should contain the date, invoice number, client detail, sales amount excluding VAT, VAT amount and sales amount including VAT.

Prepare your supporting documentation in a file to take with to the audit. This should contain invoices, bank statements and any agreements related. If a transaction is on your VAT summary, details should be in your audit file.

During the audit, ensure that you know the source of all income and expenses on your bank statement.Make duplicate copies of the VAT summary and the return so you can follow the process with your own paperwork during the audit. Keep in mind that some officials may want to audit all your documentation, thus make sure all your invoices are valid tax invoices.

What is a valid tax invoice and what must be included on the document?

* The words “tax invoice” should be prominently displayed, the name, address and VAT registration number of the registered person making the supply;

* the name and address of the recipient of the supply;

* the individualised serial number and the date on which the tax invoice was issued;

* a description of the goods or services supplied;

* the quantity or volume of the goods or services supplied and the total amount of the tax charged; and

* the selling price of the supply, and the selling price including tax.

What happens if you include any claims that fall outside of your VAT period?

Have a copy of the VAT summary and return for the period to which the claim relates on hand, to prove that you did not submit the same claim in the previous period.

In addition you must know your business and be prepared to answer questions about what the business does, source of revenue and the accounting basis (i.e. whether you record your transactions based on the earlier of issuing an invoice or payment).

Make sure you are the right person or have permission to sign off on any claims that Inland Revenue may disagree with.

Inland Revenue may disagree with your claim if you do not have a valid tax invoice or the claim is not allowed in terms of the VAT Act (e.g. passenger vehicle or entertainment expenses). The official will make an amendment to your return and request you to sign as confirmation of agreement that the claim must be excluded.

Following the finalisation of your audit make sure to follow up on a continuous basis.

Remember that all your tax accounts should not have any outstanding returns, taxes, penalties or interest as this will create delays in the refund process. You also run the risk of losing your refund as it can be applied to settle the amounts showing as owing by you on any of your tax accounts.

Memory Mbai is the senior manager in VAT at PwC Namibia. This series on tax is published bi-monthly on a Monday in Market Watch.