Version 1.0
Prepared by: @Lorraine Sebata
Approved by: @Name
Reviewed date: 2024-07-24
Next review date: 2025-07-24
This Standard Operating Procedure (SOP) for Value Added Tax (VAT) filing is essential to establish a structured approach and consistency in the process. The SOP outlines step-by-step procedures for preparing, documenting, and submitting VAT returns, ensuring accuracy and adherence to legal requirements.
This SOP applies to the Accountant, or a member of the Finance Department in their absence, who performs VAT filing at the end of each month. This process involves using data processed in the Accounting software recorded during the month and entering the information online with Inland Revenue to determine what is due to them or the company.
Inland Revenue Regulations: Filing and payment of taxes owed are due by the 21st day of the month following the end of the month.
Accountant: Primarily responsible for preparing, documenting, and submitting VAT returns, ensuring accuracy and adherence to legal requirements.
Finance Department Staff: Responsible for VAT filing in the absence of the Accountant.
Inland Revenue: The governmental body responsible for receiving VAT returns and payments.
5.1.1 After monthly Management Reports are completed, log into the Accounting Software (Xero).
5.1.2 Navigate to the 'Accounting' Tab.
5.1.3 Select 'Sales Tax Report' from the menu.
5.1.4 Export the 'Sales Tax Report' by choosing 'Excel' from the Export Menu located at the bottom right of the screen. Save the report to the designated shared drive.
5.2.1 Access the Inland Revenue's official website: Department of Inland Revenue.
5.2.2 Log in using the company's credentials.
5.2.3 From the 'Returns' Tab, select 'File a Return'.
5.2.4 Choose 'Value Added Tax' from the 'Tax Type' drop-down menu.
5.2.5 Select the correct tax year corresponding to the reporting period.
5.2.6 Click on the 'Action' option for the appropriate file, then select 'Next'.
5.2.7 Carefully enter the following details into the VAT return form, cross-referencing with the exported Sales Tax Report from Xero:
Total Sales (inclusive and exclusive of VAT where applicable).
Total Purchases (inclusive and exclusive of VAT where applicable).
VAT Payable or Refundable.
5.2.8 Crucial Verification: Ensure that the 'Total Tax Payable' amount displayed on the Inland Revenue website's form precisely matches the 'VAT Payable' amount in the exported Sales Tax Report from the Accounting Software (Xero).
5.2.9 Attach any necessary supporting documents (e.g., specific invoices, receipts, reconciliation statements) as required by Inland Revenue.
5.3.1 Conduct a thorough review of all entered data on the Inland Revenue's website for accuracy, completeness, and consistency with the Xero report.
5.3.2 If any discrepancies or adjustments are identified, correct them immediately before proceeding.
5.3.3 To save the progress and review at a later time, click 'Save Draft'.
5.3.4 Once fully satisfied that all details are verified and accurate, click 'Save & Continue'.
5.3.5 Submit the VAT return.
5.4.1 If the VAT return indicates an amount payable to Inland Revenue, proceed to process the payment through the designated payment channels provided on the Inland Revenue's website.
5.4.2 Obtain and save proof of payment (e.g., transaction confirmation, receipt) immediately after the payment is processed.
5.4.3 Update internal financial records and the Accounting Software (Xero) to reflect the VAT payment made.
5.5.1 If the VAT return indicates a refund is due from Inland Revenue, regularly monitor the status of the refund.
5.5.2 Follow up with Inland Revenue if the refund is not received within the expected timeframe.
5.6.1 Print or save a digital copy of the VAT return confirmation and the payment receipt (if applicable). Store these in the designated VAT filing folder (physical and/or digital).
5.6.2 Update internal financial records and the Accounting Software (Xero) to accurately reflect the VAT submission and payment/refund status.
5.6.3 Retain all VAT filings and supporting documents for the legally required period for audit and compliance purposes.
5.6.4 Conduct periodic reconciliations of VAT accounts to ensure accurate reporting across financial periods and to identify any potential discrepancies proactively.
Sales Tax Report (from Xero)
Inland Revenue VAT Return Confirmation
VAT Payment Receipt (if applicable)
Supporting Invoices and Receipts
Internal Financial Records/Ledgers
All Accountants and relevant Staff involved in VAT filing will receive mandatory training on this SOP and related policies annually or upon significant revisions.
This SOP will be reviewed annually by the Finance Department to ensure its continued effectiveness, compliance with Inland Revenue regulations, and alignment with the company's financial objectives.