South Africa operates a VAT system whereby businesses registered for VAT are allowed to deduct the VAT incurred on business expenses (the input tax) from the VAT collected on the sales made by the business (the output tax). The most important document in such a system is the tax invoice. Without a valid tax invoice a business cannot deduct input tax on business expenses.
In the past a tax invoice was only considered valid if it had the words “Tax Invoice’’ on it. However from 8 January 2016, section 20(4) of VAT act has been amended so that a valid tax invoice can now have the following words on it and still be a valid invoice to claim input VAT:
- TAX invoice, or VAT invoice, or Invoice.
There are other criteria that must be met in order to qualify as a valid tax invoice. All the criteria below must be met for an unabridged tax invoice (an unabridged tax invoice is one where the total value of the invoice is equal to or exceeds R5000).
- Contains the words “ Tax Invoice” , “VAT Invoice’’ or “Invoice’’
- Name, address and VAT registration number of the supplier
- Name, address and where the recipient is a vendor (customer), the recipient’s VAT registration number.
- Serial number and date of issue of invoice
- Accurate description of goods / or services (indicating where applicable that the goods are second hand goods)
- Quantity or volume of goods or services supplied
- Value of the supply, the amount of tax charged and the consideration of the supply (value and the tax)
For an abridged tax invoice (an abridged tax invoice is one where the total value of the invoice is between R50 and R5000), all criteria above must be satisfied except for points 3 and 6.
Contact all your suppliers and make sure they have all your details on their database. It’s in your best interest to help suppliers with this, otherwise you might have a problem with SARS disallowing your input tax claims. Also make sure that when you have first contact with a new supplier that you give them written confirmation of all your company details and contact them later to confirm they have them and don’t need anything else. Check your invoices when you receive them against the above criteria for any errors and follow up with the suppliers if you spot something missing, because once they’re paid it’s easy to forget about checking them.
There is a checklist on the SARS website which gives a very good summary of the criteria for valid tax invoices. It would be advisable to keep it on hand so that you can tick the criteria off as you check your invoices. We have included it below.