THE IMPORTANCE OF HAVING VALID VAT INVOICES

 

Article by: Bryanston Accountant: Tamryn Dicks

Too many small business owners are unaware of SARS’s requirements for their documentation! If you are registered for VAT, and don’t want to incur a surprise penalty bill, then you need to know the details in this article – both when issuing invoices and when accepting them!

Since the 1st of March 2005, the South African Revenue Service requires that all VAT vendors adhere to a set of regulations regarding valid VAT invoices:

A tax invoice must within 21 days of the date of that supply be issued to the recipient, whether requested to do so or not;

Where the total sale is R50 or less, a tax invoice is not required (however, a document such as a till slip will still be required to verify the input tax claimed);

Where the total sale value is greater than R50 but does not exceed R3 000, an abridged tax invoice may be issued;

A full tax invoice must be issued on transactions where the total sales are R3 000 or more - whether the recipient has requested this or not!

What is a “Full tax invoice”?

A valid tax invoice must reflect the following information:

• The words “TAX INVOICE” in a prominent place (not just “invoice” and not “VAT Invoice”)
• Full Legal Name, address and VAT registration number of the supplier (if the trading name differs from the legal name, both names must appear)
• Full Legal Name, address and VAT registration number of the recipient
• Serial number and date of issue
• Description of goods and/or services (also indicating where applicable that the goods are second hand goods)
• Quantity or volume of goods or services supplied
• Price & VAT (please note the requirements below for stating the VAT)

What is an “abridged tax invoice”?

An abridged tax invoice may reflect only the following information:

• The words “TAX INVOICE” in a prominent place
• Name, address and VAT registration number of the supplier
• Serial number and date of issue
• Accurate description of goods and/or services
• Price & VAT (please note the requirements below for stating the VAT)

How should the VAT be shown on the invoice?

The price and VAT can be reflected in one of three ways. We will consider the purchase of one product for R500 excluding VAT:

• The individual amounts and the % of VAT can be stated:
  Price R500
  VAT @ 15% R75
  Total: R575
  
• The total consideration and the % of VAT can be stated:
  Total: R575
  VAT included at 15%
  
• The total consideration and the amount of VAT can be stated:
  Total: R575
  VAT included: R75
  

A document will not constitute a valid tax invoice for a standard rated supply if it does not state the actual amount of VAT charged or contain a statement that VAT at the standard rate of 15% is included.

What happens if my invoices do not comply with these requirements?

If the invoices you issue do not comply, your customer will not be allowed to claim their VAT input on your invoices and can report you to SARS who will then flag you for audit.

If the invoices you have received do not comply, then you are not allowed to claim the VAT input on these invoices. If you do and you are subject to a VAT audit, SARS will reverse all claims based on invalid invoices and charge interest and penalties on the erroneous claims.

Rather just make sure that your documents comply!

If you are unsure, ask your accountant to check them all for you – rather be safe than sorry.

Tamryn Dicks is a Business Accountant registered with SAIBA and a Tax Practitioner registered with SAIT. Her company, Pharsyde Accounting, offers payroll, bookkeeping, accounting and tax services to small business owners in South Africa. She is passionate about her subject to the point that she tends to give away advice for free – so if you have something worrying you, send an email to info@thepharsyde.com!

To contact Tamryn email her on: info@thepharsyde.com or call her tel:010 140 6641