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VALID TAX INVOICE REQUIREMENTS FOR VAT VENDORS

VALID TAX INVOICE REQUIREMENTS FOR VAT VENDORS

28 May 2018

Over the past few years we have notice a substantial increase in the audits of VAT returns by the South African Revenue Service (SARS), focusing on the validity of tax invoices for purposes of VAT It is therefore imperative for a VAT vendor to ensure all invoice comply with the relevant legislation before submitting VAT.

If valid tax invoices cannot be provided at the time of a VAT audit, the vendor may lose up to 100% of the input tax being claimed on the invoice, even if an amended valid invoice can be provided subsequent to the audit.

Furthermore, serious penalties, interest and other consequences may be imposed on the VAT vendor for errors, intentional omissions and fraud.

This article aims to provide crucial information to overcome the challenges that may be encountered by VAT vendors as a result of SARS scrutinising the validity of VAT invoices.

A vendor is entitled to deduct input tax equal to the tax charged to that vendor on goods or services acquired for purposes of its enterprise that makes taxable supplies.  The most crucial document in such a system is the tax invoice. Without a valid tax invoice, a business cannot deduct input tax paid on business expenses.

The VAT Act prescribes that a tax invoice must contain certain details about the taxable supply made by the business as well as the parties to the transaction. The VAT Act also prescribes the timeframe within which a tax invoice must be issued (i.e. 21 days from the time the supply was made).

A business is required to issue a full tax invoice when the price is more than R5 000 and may issue an abridged tax invoice when the consideration for the supply is R 5 000 or less than R5 000. No tax invoice is needed for a supply of R50 or less. However, a document such as a till slip or sales docket indicating the VAT charged by the supplier will still be required to verify the tax deducted.

With the change in the VAT rate from 14% to 15%, VAT vendors are faced with the transitional challenges as a result of the change in rate.  As from 1 April 2018, the following criteria must apply to determine the applicable VAT rate:  

  • Supplies where goods are delivered, or services fully rendered before 1 April 2018 but the triggers for the time of supply (normally the issue of an invoice or payment of consideration) only occur on or after 1 April 2018 would in most instances attract VAT at 14%. Apportionment of transactions may be required where the supply spans a period starting before but ending after 1 April 2018;
  • Where an invoice is issued or payment is made before 1 April 2018 however the goods and/or services are only provided subsequent to 1 April 2018 but before 22 April 2018, the lower rate of 14% can be applied. If this criteria is not met, the transaction is subject to VAT at 15%;
  • Specific transitional rules apply to transactions involving fixed property, lay-by sales and certain supplies made with regular payment or invoicing arrangements.

The following criteria must be met on a full tax invoice (this is required where the supply (including VAT) exceeds R5 000):

  1. Contains the words “Tax Invoice”, “VAT Invoice” or “Invoice”;
  2. Name, address and VAT registration number of the supplier;
  3. Name, address and where the recipient is a vendor, the recipient’s VAT registration number;
  4. Serial number and date of issue of invoice;
  5. Accurate description of goods and /or services (indicating where the applicable goods are second hand);
  6. Quantity or volume of goods or services supplied; and
  7. Value of the supply, the amount of tax charged and the consideration of the supply.

Note: all seven criteria must be met for the invoice to meet the requirements of a Tax Invoice.

The following criteria must be met on an abridged tax invoice (this is required where the supply (including VAT) does not exceed R5000):

  1. Contains the words “Tax Invoice”, “VAT Invoice” or “Invoice”;
  2. Name, address and VAT registration number of the supplier;
  3. Serial number and date of issue of invoice;
  4. Accurate description of goods and /or services (indicating where the applicable goods are second hand); and
  5. Value of the supply, the amount of tax charged and the consideration of the supply. 

Note: all five criteria must be met for the invoice to meet the requirements of an abridged Tax Invoice

 

How can we assist:

Contact us directly if you are unsure whether an invoice constitute valid VAT invoice or let us review, complete and submit your VAT return on your behalf.

 


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