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The Importance of a valid VAT Invoice

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Section 20 of the Value Added Tax Act No 89 of 1991 (“the VAT Act”) sets out mandatory requirements for valid tax invoices. As of late, we have noticed an increasing number of cases where the South Africa Revenue Service (SARS) refused to allow the deduction of bona fide input VAT claims. SARS refused these claims on the basis that the documents supplied in support of the input VAT claims did not comply with Section 20 (“the VAT Act”). SARS conducted a VAT audit / review to support the above-mentioned claims.

The following is a summary of the required information that should be included on a valid tax invoice, in terms of Section 20 of the VAT Act:

  • The words “Tax Invoice” should be displayed in the document*
  • The name, address and VAT registration number of the supplier*
  • The name, address and VAT registration number of the recipient
  • A unique invoice number and the date on which the invoice was issued*
  • A description of the goods (indicating, where applicable, that the goods are second-hand goods)*
  • The quantity or volume of the goods or services supplied
  • The value of the supply, the amount of tax charged and the consideration for the supply*

For purchases amounting to less than R 5 000, an abridged version of the tax invoice is allowed where only requirements would be those marked with asterisk (*).

SARS will disallow any input VAT claims where the supporting documents do not meet the requirements as set out in the summary above. Furthermore, the input VAT claim will, in all probability, be deferred to a later tax period (provided the documents have been corrected), as SARS will deem that the correction of such documents cannot be backdated and that the VAT vendor was not in possession of valid tax invoices at the time that the claim was submitted. In addition to refusing these VAT input claims, SARS will also charge a penalty fee (at a rate of 10%) and interest on the claims that were non permissible.

It is therefore of utmost importance that the supporting documentation that is submitted to SARS during a VAT audit / review contains all of the relevant information.

Please contact Shana van der Merwe, shana@asl.co.za,  or Jaco van Straaten, jaco@asl.co.za, should you require further clarity regarding the requirements of Valid Tax Invoices. We are also proficient in resolving disputes of this nature with SARS.