South Africa operates a VAT system whereby businesses (vendors) are allowed to deduct the VAT incurred on business expenses (input tax) from the VAT collected on the supplies made by the business (output tax). The most important document in such a system is the tax invoice. Without a proper tax invoice, a business cannot deduct input tax on business expenses.
The VAT Act prescribes that a tax invoice must contain certain details about the taxable supply made by the business as well as the parties to the transaction. The VAT Act also prescribes the time frame within which a tax invoice must be issued (i.e. 21 days from the time the supply was made).
A business is required to issue a full tax invoice when the price is more than R5 000 (referred to as consideration for the supply) and may issue an abridged tax invoice when the consideration for the supply is R 5 000 or less than R5 000. 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 deducted.
The following information must be reflected on a tax invoice for it to be considered valid:
- 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, the recipient’s VAT registration number
- Serial number and date of issue of invoice
- Accurate description of goods and /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)