At the end of the current financial year I have invoiced clients approximately R400K which will only be paid to me in the new financial year. Do I still pay taxes on the unpaid invoices at the end of the current financial year or do I carry the ex vat value over to income in the new financial year and pay taxes only in the new financial year?
It would depend on your VAT cycle - when does it end? If it coincides with the financial year then you still have to pay it over regardless of whether you received the cash or not. Unfortunately VAT works on what the call the earlier of Receipt or Accrual - so payment doesn't matter. If your VAT cycle ends the month after the financial year then you can pay it then. However you are responsible for VAT as soon as you have earned income and received cash.
Marcosays: 26 February 2013 at 16:46
Thank you, maybe I was not too clear, its not the VAT I am worried about, its the Income Tax on the invoiced but as yet unpaid invoices at year end.
Am I committed to paying income tax on monies not received because the invoice is dated in the previous financial year?
TaxTimsays: 26 February 2013 at 18:21
If it is income earned and invoiced for then yes you will have to include this as income for the year and pay the tax on it in the current financial year regardless of receipt of payment.
Marcosays: 27 February 2013 at 9:18
TaxTimsays: 1 March 2013 at 11:41
Only a pleasure!
Get SARS Tax Deadlines in your Inbox
We'll tell you when you need to file, along with tax tips and updates.