Preparing a client for a SARS VAT refund verification
How an accounting firm prepares a South African client's records when SARS verifies or audits a VAT refund: invoices, bank proof and the 21-day clock.
By Achekam · · 4 min read · For Accountants & audit firms in South Africa
A client that exports most of what it makes, or has just bought expensive equipment, files a VAT return showing a refund. Instead of the money, a letter arrives: SARS is verifying the return and wants supporting documents. The client forwards it to the firm with one line: "When will we get paid?"
The honest answer depends largely on how quickly the client can produce what SARS asks for. A refund under verification is a refund on hold, and every gap in the records extends the hold. This article explains why refunds are held, which documents matter most, and how a firm can assemble a clean pack quickly.
Why the refund is held
SARS says it may withhold a VAT refund until banking details are provided, all outstanding VAT returns are submitted, or a verification, inspection or audit of the refund is finalised.
The first two causes are within the client's control and should be cleared at once. The third is SARS's process, and the firm's job is to shorten it by giving SARS what it needs the first time.
What stops the clock
SARS says the 21-business-day period for paying a refund is suspended while SARS cannot get access to the vendor's books and records. It is recalculated if the return is incomplete, if banking details are incorrect or if returns are outstanding.
So delays in giving SARS access to the books and records do not only slow the review; while they last, the period itself is suspended. A client that cannot produce its records has, in effect, extended its own wait. How the timing works more generally is covered in when a VAT refund should arrive.
A tax invoice behind every input tax claim
Most refund verifications turn on input tax. SARS's VAT201 guide says a valid tax invoice or other prescribed document must be held before input tax on capital or other goods and services is claimed in fields 14 and 15 of the return.
The key word is "held". An invoice requested from a supplier after SARS has asked for it was not held when the claim was made. In assembling the pack, check for each claim:
- that the document is a valid tax invoice, not a quote, pro forma or statement;
- that it is addressed to the client, with the details a tax invoice requires;
- that its VAT amount agrees with what was claimed;
- that the claim falls in the right period.
Large or unusual claims deserve the most attention, because they are the ones that tend to draw questions.
Record-keeping and the long tail
SARS's VAT 404 guide says a vendor must keep documentary proof for input tax and other deductions, and records of transactions, for at least five years.
Where documents are not provided, SARS can act. Its VAT201 guide says that after SARS issues a section 95(1)(c) estimated assessment for failure to submit supporting documents, a vendor can request an extension to submit relevant material, but not later than 5 years and 40 business days after the original assessment, after which the estimate becomes final. An estimate is a poor substitute for the client's own figures, and the time to avoid one is during the verification.
Collecting what is missing from the client
The firm usually holds some of the records and the client holds the rest. In Achekam, staff can create, send and track requests to clients for documents, answers and confirmations in one RFI console, whichever screen the request was raised from.
For a refund verification, raise one request per item SARS asked for, quoting SARS's own wording, so the client sees exactly what is needed:
- Tax invoices for each input tax claim on SARS's list.
- Export documents for zero-rated sales, if SARS asked for them.
- Contracts or orders behind large purchases.
- Proof of payment for the largest claims.
- Confirmation of the banking details registered with SARS.
Tracking each item separately shows at a glance what has arrived and what is still holding up the pack.
Filing the evidence and proving the bank
As documents arrive, file them in the client's folder in the Document Centre, Achekam's vault with a folder per client, where staff upload files and folders, keep versions, tag, and search. A folder named for the verification, with each document tagged by the claim it supports, makes the submission straightforward and gives the firm a record of exactly what was sent.
Bank statements often form part of the pack, especially as proof of payment. Staff can import bank statements as PDF, CSV, Excel, OFX, QIF, MT940 or CAMT.053 files, and Achekam checks that the opening balance plus the movements equals the closing balance. Scanned or photographed statements are read by text recognition and checked against the running balance, and a person accepts each suggested bank match.
That balance check is worth doing before anything goes to SARS. A statement with a page missing, or a running balance that does not follow through, invites questions about the rest of the pack.
A pack SARS can follow
Put a short index at the front: SARS's request, item by item, with the document that answers each and where it sits in the pack. Submit through the channel SARS specified, and record the date. If the client's ongoing tax work is tracked alongside the verification, see exporting and tracking client tax work.
SARS's page on VAT refunds for vendors explains why refunds are withheld and how the refund period works. Read it with the client before the pack goes in, so they understand what the wait depends on.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
