WITHOUT A PROPER TAX INVOICE, A BUSINESS CANNOT CLAIM INPUT TAX ON BUSINESS EXPENSES

WITHOUT A PROPER TAX INVOICE, A BUSINESS CANNOT CLAIM INPUT TAX ON BUSINESS EXPENSES

SARS VAT Invoice Requirements

Let us look at all the SARS VAT invoice requirements to ensure you have all the correct information on your tax invoices as well as what to do if the supplier made an error on the tax invoice.

A tax invoice is an essential part of the audit trail of a vendor and the failure to issue a tax invoice is a contravention of the Value-Added Tax Act No.89 of 1991 (the VAT Act) and an offence in terms of Administration Act, No 28 of 2011 (the Admin Act).

Requirements for a valid tax invoice

Section 20 of the VAT Act deals with tax invoices and prescribes that:

      1. A tax invoice must be issued within 21 days of making a taxable supply by a vendor to the recipient.
      2. Only one tax invoice can be issued per taxable supply.
      3. If a tax invoice contains an error such that it is not a valid tax invoice the supplier must issue a correct (replacement) invoice within 21 days from the date of the request to correct it (section 20(1B) of the VAT Act).
      4. Details that must be on a valid tax invoice.
        Section 20(4) of the VAT Act states that a tax invoice (a full tax invoice) must contain the following information:

        • The words ‘tax invoice’, ‘VAT invoice’ or ‘invoice’.
        • The name, address and VAT registration number of the supplier.
        • The name, address and VAT registration number of the recipient (if applicable).
        • An individual serialized number.
        • The date upon which the invoice is issued.
        • A description of the goods or services supplied.
        • If the goods supplied are second hand, this Fact must be stated.
        • The quantity or volume of the goods or services supplied.
        • Either the value of the supply, plus the tax, and the consideration OR just the consideration for the supply (there must be an indication that the amount is VAT inclusive).
        • The tax invoice must be stated in South African currency unless it is a zero-rated supply.
      5. In terms of section 20(5) of the VAT Act if the invoice is for R5 000.00 or less (INCLUDING VAT) it is called an abridged tax invoice.
          The abridged tax invoice need NOT CONTAIN THE FOLLOWING:

        • The recipient vendor’s VAT number.
        • The name, or address of the recipient vendor.

For a quick tick list visit the SARS website:

https://www.sars.gov.za/wp-content/uploads/Docs/Government/Tax-Invoice-Checklist-Version-2-29032016.pdf

When a supplier makes an error on a tax invoice

Where there is an error with the amount of VAT or value or consideration on a tax invoice the error can be remedied by the issuing of a credit or debit note.

Until 16 January 2019 there was no way to correct mistakes in respect of the other particulars. This created real problems for the vendors who wished to claim input tax deductions, but who were issued with tax invoices containing incorrect information.

This issue was identified by National Treasury, and an amendment to section 20 of the VAT Act and was introduced in the Tax Administration Laws Amendment Act, No. 22 of 2018, which was promulgated on 17 January 2019, with effect from such date.

In terms of the amendment to section 20(1B) of the VAT Act, where a tax invoice contains an error in the particulars required in terms of the VAT Act, and it cannot be corrected with a credit or debit note, the supplier must correct that tax invoice with the correct particulars within 21 days from the date of the request to correct it.

In terms of section 20(1B) of the VAT Act the corrected invoice must reflect the same tax invoice date as the incorrect tax invoice. Therefore, the correct invoice will not affect the time of supply contemplated in section 9 of the VAT Act.

In terms of section 20(1B) of the VAT Act the supplier must obtain and retain information sufficient to identify the transaction to which that tax invoice and the corrected tax invoice refers.

It is important to note that the SARS system does not allow a request for correction on a VAT201 if the vendor wishes to claim a tax invoice (increase input tax) previously omitted from the VAT201. The “old” input tax (not older than 5 years) can only be claimed on the next VAT201 submitted.

Therefore, it is important that the vendor ensure the correctness of the tax invoice on the day of receipt and if there is an error to request a valid tax invoice a.s.a.p.

If you have any enquiries, please contact Adri Britz at abritz@fhbc.co.za

Source Reference:

Notes on South African Income Tax
https://www.sars.gov.za/wp-content/uploads/Ops/Guides/LAPD-VAT-G02-VAT-404-Guide-for-Vendors.pdf
https://www.sars.gov.za/businesses-and-employers/government/tax-invoices/
https://taxfaculty.ac.za/news/read/faq-vat-invoice-requirements-for-online-sales-commission#:~:text=Section%2020(1)%20of%20the,the%20date%20of%20the%20supply.