Is VAT eating away at your cash flows?

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Is VAT eating away at your cash flows?

• 02 April 2026
• VAT
• Christo Theron

The structure of the VAT Act allows input tax to be offset against output tax in respect of each tax period. This means that the actual amount payable to SARS is effectively only the VAT levied on the profit margin—or in technical terms, the value added.

Unfortunately, different rules apply to when output tax must be paid on sales versus when input tax may be claimed. This may result in a mismatch, either benefitting the VAT vendor or requiring a shortfall to be financed.

Output Tax

Output tax must be paid to SARS in the tax period when an invoice is issued for supplies of goods or services, or any part of the consideration for the supply is received, whichever event occurs first. The fact that a debtor has not settled an invoice by the time that the output tax must be paid to SARS is irrelevant.

The rules determining in which tax period output tax must be declared must be carefully considered to ensure it is not paid too early. For example:

• A vendor could consider issuing tax invoices on the first day of a month as opposed to the last day of the previous month.
• This may defer the liability for output tax into a subsequent tax period, by which time debtors may have settled their accounts.
• Special time of supply rules should also be considered, such as those for fixed property or rental agreements.

The goal is to defer the liability for output tax as much as possible without contravening the law or disrupting business processes.

Input Tax

As a general principle, input tax may be claimed in the tax period in which the date reflected on a tax invoice falls, rather than the date the invoice was physically issued. In practice, invoices are sometimes issued after the end of a tax period but reflect a date within that period.

Under these circumstances, the input tax deduction may be claimed in the period matching the date on the invoice. The only requirement is that the vendor must be in possession of the tax invoice by the time the VAT return is submitted. Most businesses are ignorant of this, resulting in them claiming deductions later than necessary, which negatively impacts cash flow.

Summary

This article only touches briefly on some of the issues regarding VAT cash flows. In our upcoming webinar, we will deal with these and other issues in more detail, as well as how to manage your refunds should input tax claims result in a VAT refund due to you.

Do you wish to know more about this topic?

Click here to join our upcoming webinar to learn more about managing your VAT obligations and protecting your cash flow.

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