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It sometimes occurs that the result of the calculation for the tax period is a refund instead of an amount payable to SARS. This happens for example, where the vendor has incurred more VAT on expenses than the VAT due on any taxable supplies made during the tax period, or where the vendor has mainly zero-rated supplies (for example, an exporter, or a business which sells only fresh fruit and vegetables). However, most vendors will not normally be in a refund situation, and should be paying VAT to SARS at the end of each tax period. Refunds must be paid by SARS within 21 business days of receiving the correctly completed refund return, otherwise interest at the prescribed rate is payable by SARS to the vendor. However, interest is only paid if certain conditions are met as a refund may be subject to the finalisation of the verification, inspection or audit of the refund.The fact that there are often refunds under the VAT system and that it is self-assessed, makes it tempting for vendors to overstate input tax or to understate output tax. SARS therefore places great importance on identifying high risk cases, conducting regular compliance visits and promoting a high level of visibility of auditors in the field. See Chapters 10 and 16for more details.Example 1 – Mechanism of the VAT system A VAT registered paper manufacturer sells 2 rolls of uncoated print paper sheets to a VAT registered stationery distributor for R45,60 each (including 14% VAT). The paper manufacturer recycled waste paper for which it paid R45,60 (including 14% VAT) to a waste management company, to manufacture the paper rolls. The paper manufacturer must declare output tax of R5,60 per roll sold. 2
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