The audits of Value-Added Tax (VAT) returns by the South African Revenue Service (SARS), have increased the focus on the validity of tax invoices for the purposes of VAT.
A VAT vendor submitting VAT returns is responsible for ensuring that all invoices included in the returns comply with the relevant legislation. 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.
The requirements
Section 20 of the Value-Added Tax Act, no 89 of 1991, together with the VAT404 Guide for Vendors as updated in March 2012, sets out the requirements for a valid tax invoice.
A VAT vendor must issue a tax invoice within 21 days of the supply having been made where the consideration for the supply exceeds R50, whether the purchaser has requested this or not. If the consideration for the supply is R50 or less, a tax invoice is not required. However, a document such as a till slip or sales docket indicating the VAT charged by the supplier, will be required to verify the input tax.
The requirements for tax invoices of which the consideration or taxable supply is more than R5 000 are:
- the words “tax invoice” should be displayed;
- name, physical address and VAT registration number of the supplier name, physical; address and VAT registration number of the recipient;
- original serial number of the tax invoice;
- the date of issue of the tax invoice;
- full and proper description of the goods sold and / or services rendered;
- quantity or volume of goods and / or services supplied; and
- total amount of the invoice and VAT amount in South African currency (except for certain zero-rated supplies).
The requirements for tax invoices of less than R5 000 are:
- the words “tax invoice” should be displayed;
- name, physical address and VAT registration number of the supplier;
- original serial number of the tax invoice;
- the date of issue of the tax invoice;
- full and proper description of the goods sold and / or services rendered;
- total amount of the invoice and VAT amount in South African currency (except for certain zero-rated supplies).
Second-hand goods
In the case of second-hand goods purchased from a non-vendor, the purchaser has to record the following information:
- name, address and identity number of the supplier, confirmed by the person’s identity document or passport. (If the value of the supply is equal to or greater than R1 000, a copy of this document must be retained by the purchaser. If the non-vendor is a juristic person, a letterhead or similar document stating the name and registration number of the juristic person is required);
- date of acquisition;
- quantity or volume of goods;
- description of the goods;
- total consideration paid for the supply; and
- declaration by the supplier stating that the supply is not a taxable supply.
Conclusion
If a vendor fails to deduct an input tax in respect of a particular tax period, that input tax may be deducted in a later tax period, but limited to a period of five years from the date that the particular supply was made. However, when a vendor becomes aware of an output tax not declared in the relevant period, a corrected VAT return for that specific period should be submitted. It is not acceptable to declare the output tax in the next period and SARS may impose penalties and interest on the output VAT omitted.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)