How I Purchased My Harley Davidson with SARS VAT Money

Before you judge me or SARS accuses me of VAT fraud, let me explain my method. This system has been successfully used by many clients. Remember, dealing with VAT or any other taxes related to SARS isn't about evasion; it's about proper management. VAT is relatively straightforward: you calculate all the vatable sales (output VAT) and deduct allowable VAT expenses (input VAT) from it. While it can get more complicated in some cases, this is generally how it works. VAT is a tax driven by management.

Now, let me share the process through which I saved enough to purchase my Harley Davidson.

Two Action Steps for You Today:

  1. Accept that you will most likely pay VAT bi-monthly. If you don’t pay (except for certain industries), you’re not making a profit.
  2. Contact another bank (away from your current main bank account) and ask the banker to open a new business current account and link a call account to it.
  3. Create a reminder to do the weekly VAT payment on all income received for the week. My note is highlighted in my diary every Monday morning.

Why Open Another Bank Account?

You want to keep the funds as far as possible from your active business bank account. This call account, a type of savings account, will earn you some interest each month. More importantly, it will safeguard your VAT funds from the rest of your business activities.

Weekly Process:

  1. Pull a statement of all the credits (income) transferred into your business current account. I do this on Mondays, covering the previous week from Monday to Sunday.
  2. Calculate the inclusive VAT amount on the total receipts from clients using the formula: Total Income x 15/115.
  3. Transfer the calculated VAT amount to the new current account and then to the call account (which serves as your VAT account).

By doing this consistently every week, you strip your business account of all maximum VAT payable before potential allowable deductions. When the time comes to pay the VAT every two months, you can easily cover the amount with a significant balance left in the


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Results

By consistently following this process every single month, I accumulated enough funds in a year to purchase my Harley Davidson.

Your dream might not be a Harley Davidson, but you could have your own plans for the saved funds. Here are some ideas from other clients:

  • Treat yourself to an amazing family vacation once a year.
  • Pay off a significant portion of your home loan annually.
  • Install solar energy equipment.
  • Have cash available to quickly jump on a good investment deal.
  • Allocate funds to a share portfolio to start building or growing an investment.
  • Contribute to a Tax-Free Savings account.
  • Make additional retirement annuity contributions beyond your current monthly contributions.
  • Yes, I know,  the first option still sound to the best to me too! 😊

An Alternative Option

You might say, "Jasper, I only want to make enough provision for the VAT payment every two months. I don’t care about surplus funds." That’s perfectly fine, as this approach ensures you never fall behind on VAT payments to SARS.

You will follow the same process outlined earlier, but with some additional calculations to ensure you transfer the correct amount to the call account.

1.      Calculate Average Input VAT: Request your accountant to assist you in determining the average input VAT (expenses) percentage on your income.

2.      Adjust for Input VAT: Once you have this percentage, you can deduct it from the VAT to be transferred to the call account.

For example, if the average input VAT portion is 6% of the income, you will calculate the inclusive amount of 9% (15% less 6%) using the same formula explained earlier:

Income × 9/109

This way, you ensure that you always have enough funds to cover your VAT payments without accumulating unnecessary surplus.


Conclusion

Managing VAT effectively can be a game-changer for your business finances. By implementing the steps outlined in this chapter, you not only ensure compliance with SARS regulations but also create opportunities for financial growth. Whether your goal is to save for a significant purchase, like a Harley Davidson, or simply to stay on top of your VAT payments, these strategies can help you achieve financial stability and flexibility.

Remember, VAT management isn't about evading taxes—it's about optimizing your cash flow and making informed financial decisions. Consistency and discipline in following these processes can lead to substantial benefits over time. Whether you choose to use surplus funds for personal goals or to reinvest in your business, the principles of effective VAT management will serve you well.

Embrace these strategies, stay proactive, and watch as your financial health improves, paving the way for achieving your dreams and ensuring your business thrives.


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