Accounting for VAT on the payments basis

Which South African vendors may use the VAT payments basis, how it differs from the invoice basis, and working out output tax from receipts.

By Achekam · 11 October 2026 · 5 min read · For Running a business businesses in South Africa

A sole proprietor in a service trade invoices a client at the end of the month. The client pays two months later. On the invoice basis, the VAT on that invoice goes to SARS with the return for the month it was issued, long before the money arrives. For a small business with slow-paying clients, that gap can hurt.

The payments basis, sometimes called the cash basis, closes the gap: output tax is accounted for when the customer pays. But it is not open to everyone, it has to be applied for, and it changes how the books must be read when the VAT return is prepared. This article explains who may use it, how to get onto it, what does not change, and how a payments-basis vendor works out its VAT from books that post VAT when an invoice is issued.

Who qualifies

SARS's VAT 404 guide for vendors says the payments basis is only available to:

• vendors who are natural persons, or partnerships of natural persons, whose taxable supplies have not exceeded and are not likely to exceed the limit set out in the guide over 12 months; and
• certain public authorities, municipalities and associations not for gain.

Note what is missing from that list: companies and close corporations, unless they fall among the public bodies or associations not for gain the guide names. A small business trading through a company does not qualify simply because it is small.

The guide quoted is issue 15, up to date as at 17 December 2024. Its turnover limit for natural persons predates the April 2026 changes to VAT thresholds, so confirm the current figure with SARS before relying on it.

Applying in writing before you switch

The payments basis is not something you simply start using. The VAT 404 guide says a vendor must apply to SARS in writing before using it.

Until SARS has agreed, you remain on the invoice basis, and your returns must be prepared that way. Keep SARS's response with your VAT records, so anyone checking a later return can see when and why the basis changed.

Tax invoices are still due within 21 days

The payments basis changes when output tax is accounted for. It does not change your duty to invoice.

The VAT 404 guide says a vendor on the payments basis must still issue a tax invoice within 21 days of making a taxable supply, but only accounts for output tax to the extent that payment has been received.

So a payments-basis vendor invoices exactly as an invoice-basis vendor does. The difference appears only on the VAT return: the output tax declared for a period is the VAT contained in the payments received in that period, not the VAT on the invoices issued in it. A customer who pays half an invoice brings half its VAT into the return.

Why bad-debt relief works differently

That last row matters. SARS's guide to the VAT201 says the bad debts field, field 17, only applies to vendors registered on the invoice basis, and covers only VAT on irrecoverable debts on which VAT was charged at the time of sale. The VAT 404 guide describes the invoice-basis relief: a vendor may deduct input tax on debts that have become irrecoverable, provided the supply was already accounted for in a VAT return.

On the payments basis, the VAT on an unpaid invoice was never paid to SARS in the first place, so there is nothing to claim back. That is one of the attractions of the basis for a business with unreliable payers. How the relief works for invoice-basis vendors is covered in claiming back VAT on a debt that will not be paid.

SARS's VAT 404 guide for vendors sets out both bases, who qualifies, and how returns, tax invoices and records work under each.

Achekam posts output VAT on the invoice

It is important to know how your books treat VAT before you rely on them for a payments-basis return.

In Achekam, a business creates customer invoices as drafts it can change or delete. Issuing one takes the next number in its sequence and posts it to the ledger as debtors, sales and output VAT. That is the invoice basis: output VAT is in the ledger from the day the invoice is issued, whether or not the customer has paid.

For a payments-basis vendor, the ledger's output VAT therefore runs ahead of what is due on the return. And the VAT screen does not yet read a business's own VAT; the books overview shows only a single output-less-input VAT figure from the ledger. So a payments-basis vendor cannot take its output tax straight from the ledger's VAT account. It needs to work it out from receipts.

Working out output tax from recorded receipts

The receipts are in the books. Achekam records customer payments against one invoice or spread across a customer's invoices; a part payment leaves the invoice part-paid, and any extra is held on the customer's account. A receipt can be re-allocated, and administrators can refund or reverse it.

That gives a payments-basis vendor what it needs for each return:

1. List the customer receipts recorded in the VAT period.
2. For each, identify the invoice or invoices it was allocated to.
3. Work out the VAT contained in the amount received, in proportion to each invoice's VAT.
4. Agree with your accountant how amounts held on a customer's account, not yet allocated to an invoice, are treated.
5. Total the result: that is the period's output tax on the payments basis.

An accountant looking after the business can also see the client's monthly output and input VAT from the client's ledger and download it as CSV, which helps when reconciling the two bases. Preparing the return itself is covered in preparing your VAT201 when your books are in Achekam.

Deciding whether to apply

If you are a sole proprietor or a partnership of individuals, your customers are slow to pay, and you are comfortable working out output tax from receipts each period, the payments basis may suit you. Apply in writing, keep invoicing within 21 days, and set up the receipts routine before the first payments-basis return is due.

General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.