Thursday, June 19, 2025
  • About
  • Advertise
  • Privacy Policy
  • Cookie Policy
  • Contact
  • Subscribe
  • E-edition
  • Login
  • Register
  • Home
  • News
  • Economy
  • E-Edition
  • Companies & Markets
  • In Business With
  • Lifestyle
    • Motoring
  • Sports
    Orebonye’s Defiant Rise Through North Africa’s Football Battleground

    Orebonye’s Defiant Rise Through North Africa’s Football Battleground

    Botswana Emerges as Sporting Powerhouse at 2025 RASA

    Botswana Emerges as Sporting Powerhouse at 2025 RASA

    With Eyes on Morocco, Botswana’s Mares Gear Up for WAFCON 2025 Amid Rising Hopes and Renewed Support

    With Eyes on Morocco, Botswana’s Mares Gear Up for WAFCON 2025 Amid Rising Hopes and Renewed Support

    Business Mind, Football Heart: Babitseng’s Journey to the COSAFA Executive

    Business Mind, Football Heart: Babitseng’s Journey to the COSAFA Executive

    Region 5 Empowers Optometrists for Inclusive Sport

    Region 5 Empowers Optometrists for Inclusive Sport

    Summer Kids Marathon Targets 1,500 Participants

    Absa promises “bigger and better” Kids Marathon

  • Subscribe
No Result
View All Result
  • Home
  • News
  • Economy
  • E-Edition
  • Companies & Markets
  • In Business With
  • Lifestyle
    • Motoring
  • Sports
    Orebonye’s Defiant Rise Through North Africa’s Football Battleground

    Orebonye’s Defiant Rise Through North Africa’s Football Battleground

    Botswana Emerges as Sporting Powerhouse at 2025 RASA

    Botswana Emerges as Sporting Powerhouse at 2025 RASA

    With Eyes on Morocco, Botswana’s Mares Gear Up for WAFCON 2025 Amid Rising Hopes and Renewed Support

    With Eyes on Morocco, Botswana’s Mares Gear Up for WAFCON 2025 Amid Rising Hopes and Renewed Support

    Business Mind, Football Heart: Babitseng’s Journey to the COSAFA Executive

    Business Mind, Football Heart: Babitseng’s Journey to the COSAFA Executive

    Region 5 Empowers Optometrists for Inclusive Sport

    Region 5 Empowers Optometrists for Inclusive Sport

    Summer Kids Marathon Targets 1,500 Participants

    Absa promises “bigger and better” Kids Marathon

  • Subscribe
No Result
View All Result
The Business Weekly & Review
No Result
View All Result
Home Columns Tax & Your Pockets

Request for deposits to avoid VAT squeeze

mm by Jonathan Hore & Gavin Mashiri Jonathan Hore & Gavin Mashiri
September 17, 2022
in Tax & Your Pockets
Reading Time: 3 mins read
0
No VAT claims on private phone calls
Share on FacebookShare on Twitter

Basically, cash is considered as the life blood of every business.

Essentially, this means that a business needs to be generating enough cash to meet its operational obligations which include, inter alia, expenses, taxes, etc. In this regard, business operators strive to ensure that their cashflows are enough to meet their obligations. However, some business operators, tend to fall in a ‘catch 22’ position when it’s time to settle tax obligations, particularly Value Added Tax (VAT). Mostly, operators fund the VAT payments from other business sources due to the timing difference between late payments by customers and the VAT due date. This technically results in situation where businesses are pressured to finance the VAT payment from other sources, a situation technically described as a VAT squeeze.  In this article, words importing the masculine shall be deemed to include the feminine.

The squeeze

As alluded to above, the VAT squeeze is technically a result of the timing difference in the payments from debtors and VAT due dates. In most cases, business operators who sell products on credit generally depend on the promptness of customer payments to ensure they cash position fit to meet operational obligations. More often than not, small to medium businesses with limited cash resources usually struggle to meet VAT obligations on time. This is mainly due to late paying debtors. For example, if Tiro’s credit customers fail to pay before the 25th of the month following a sale, he will be required to fund the VAT obligation from his personal savings. However, Tiro may be able to escape the VAT squeeze if he asks customers for a deposit and the customers pay the remainder in accordance with the credit terms. Let us have a look at why a deposit may be the best bet.

Enter deposit

Generally, a deposit resembles a pledge to conclude a transaction at a later date or simply a reservation fee to secure a product or service. So how does a deposit solve the VAT squeeze when we all know that VAT is triggered on the earlier of either issuance of an invoice or receipt of any payment? To clarify this haze, it is of paramount importance that we understand the fact that in terms of the VAT laws, a deposit does not qualify as a payment for a product until the time it is applied or utilised towards the purchase price. In other words, a deposit is simply customer’s money held by the seller until the customer makes a purchase. Technically, this means a deposit changes character to become a payment of goods or services at the time the customer makes or confirms the purchase, and it is then applied to amortize the purchase price. Accordingly, VAT is triggered at the time the deposit is applied to the purchase and not on receipt.

Request for a deposit!

Having emphatically deciphered the VAT treatment of deposits, it is without a question that a business operator may actually prefund VAT obligations by simply requesting for deposits. Therefore, instead of issuing a tax invoice first and then chasing for payment, a business can avoid the VAT squeeze by requesting for deposits upfront. That will allow it to avoid the VAT squeeze. The VAT squeeze has to be avoided as BURS charges late payment interest of around 20 percent per annum or 1.5 percent per month, compounded monthly. In that regard, it is always best to avoid submitting returns without the cash with which to extinguish the VAT obligation to BURS.

Conclusion

Well folks, we hope that was insightful. As us the two Yours Truly say goodbye, remember to pay to Caesar what belongs to him. If you want to consult, join our free Tax WhatsApp group or to know about our 9 Tax e-books, send us a text on the cell number below. You can read more tax articles on our website, www.aupracontax.co.bw under the ‘Tax articles’ tab.

Tags: Value Added Tax (VAT)

Navigation

  • Home
  • News
  • Economy
  • E-Edition
  • Companies & Markets
  • In Business With
  • Lifestyle
    • Motoring
  • Sports
  • Subscribe

Recent News

  • Chema Chema, Thuo Letlotlo Hatched Surge in Small-Scale Poultry Farmers – Business Botswana
  • EMPIRICA Actuaries NHI Note 1
  • June 13th Edition
  • Orebonye’s Defiant Rise Through North Africa’s Football Battleground
  • Mining Sector Crisis Deepens … As hundreds face job losses

Site

  • About
  • Advertise
  • Privacy Policy
  • Cookie Policy
  • Contact
  • Subscribe
  • E-edition

© 2021 The Business Weekly & Review. All Rights Reserved.

Welcome Back!

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Fill the forms below to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
No Result
View All Result
  • Home
  • News
  • Economy
  • E-Edition
  • Companies & Markets
  • In Business With
  • Lifestyle
    • Motoring
  • Sports
  • Subscribe

© 2021 The Business Weekly & Review. All Rights Reserved.

This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
Are you sure want to unlock this post?
Unlock left : 0
Are you sure want to cancel subscription?