All value-added tax (VAT) vendors that have gone through a VAT verification from the South African Revenue Service know how frustrating the delays on input VAT refunds can be when supporting documents do not meet the requirements for a valid tax invoice. Below, we revisit some of the necessary key elements to ensure proper compliance in this regard.
The VAT Act identifies different transactions that each requires different types of tax invoices:
- If the consideration for the supply is more than R5 000 (including tax), a full tax invoice must be issued.
- If the consideration for the supply is more than R50 but not less than R5 000 (including tax), an abridged tax invoice may be issued, except when that supply is a zero-rated supply.
- If the consideration for the supply is less than R50, a tax invoice does not have to be issued.
- If the Commissioner is satisfied that it is impractical to issue a full tax invoice in respect of a particular transaction and that there are sufficient other records available, the Commissioner may direct that a tax invoice does not need to be issued or certain particulars need not be reflected on the tax invoice.
Commercial invoice versus VAT invoice: The differences
Commercial invoice / Tax Invoice
This can be any document, notifying the purchaser to make payment in respect of a transaction. The normal document required by a vendor to deduct input tax. Can be issued for a transaction concerning taxable and non-taxable supplies. Issued in respect of a transaction for a taxable supply only. It can trigger the time of supply for a transaction. Must contain all of the details prescribed in the VAT Act. Under certain circumstances can support a deduction for input tax. Can be used to support a vendor’s deduction for input tax.
Full tax invoice
A full tax invoice must contain the following particulars:
- The words “tax invoice” or “invoice” or “VAT invoice” may be reflected in on the document;
- Name, address and VAT registration number of the supplier;
- Name, address and VAT registration number of the recipient
- Serial number and date of issue
- Full and proper description of the goods and/or services;
- Quantity or volume of goods or services supplied;
- Price and VAT.
Recently, SARS auditors have focused their attention on the “full and proper description of the goods and/or services” element of tax invoices. This is particularly apparent when invoices only contain information such as “service rendered” or “goods supplied”. These descriptions lack a proper description, and SARS would be well within their rights to regard such invoices as not meeting requirements. Vendors must be cautious on this aspect where invoicing systems merely pull through stock codes or data fields onto tax invoices. Such inadvertent matters could result in a vendor not issuing valid tax invoices.
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 adviser for specific and detailed advice. Errors and omissions excepted (E&OE).