VAT Control Account SA | What is it & Its Significance?

A VAT control account is indeed one of the most useful tools that businesses in South Africa should definitely benefit from. It helps count the VAT with every business transaction made. Hence, you won’t have to manually calculate the VAT every time a new transaction is made.

Tax evasion is a serious crime and many companies end up getting themselves into expensive lawsuits mainly due to late payment or non-compliance of VAT laws. Businesses lose their goodwill within days and their share price drops if word gets out that it does not comply with tax laws.

What is a VAT Control Account?

A VAT control account is a kind of central repository for all activities and transactions related to taxation. It helps ensure that all the tax liabilities and refund claims are effectively and accurately recorded on a timely basis.

For small businesses, keeping track of tax transactions could be very easy, however, for larger businesses with more complex business transactions and capital ventures, calculating VAT can be very hard. Hence, a VAT control account is used as a record-keeping tool. It helps monitor business transactions and comply with VAT regulations.

Significance of a VAT Control Account

1. Accurate VAT Reporting

With the help of a VAT control account, you can ensure that VAT is accurately recorded and that too on a timely basis. This feature helps avoid unnecessary tax-related contingencies that might arise due to non-compliance with tax laws in South Africa.

2. Tracking VAT Transactions

A business undergoes thousands of transactions every day thus keeping track of VAT of all these transactions physically can be a very confusing task. However, a VAT control account bridges the gap and automatically caters to the taxation impact of every transaction immediately.

3. Effective Cash Flow Management

A VAT control account also helps with effective cash flow management as it helps reconcile VAT payments and refunds. So, it means that the business would know how much tax is due and how a refund is claimable at all times.

The Bottom Line

So, it is safe to say that the VAT control account is indeed a very useful tool that helps businesses avoid needless tax contingencies. The business would have accurate figures of its VAT dues and claims at all times. Every transaction would be considered for this VAT calculation without any exclusions.