Value Added Tax - Cost planning and minimisation

Not only direct taxes, but also VAT can, contrary to the VAT principles, be a cost to a business.

PwC has developed tools and methods

• for researching and discovering weaknesses in the VAT cycle
• for significantly improving the VAT structure
• for minimising VAT cost

In principle VAT is a tax that is borne by the ultimate consumer and should not constitute a cost for a business making VATable supplies. However we find that in practice businesses can incur a huge cost when their VAT liabilities are incorrectly managed. Reasons for such costs are:

• High output or input VAT balance
• Late debt collection
• Inappropriate computation of the pro-rata percentage
• Incorrect charging of VAT

Such costs can be avoided through appropriate VAT planning and coordination. The results of this entails:

• Improving the enterprise’s cash-flow balance and releasing capital tied-up unnecessarily
• Minimising costs associated with VAT by allowing better recoverability
• Improving the methodology of the VAT cycle and making more efficient operations
• Identifying areas of weakness to allow corrective actions