What are the VAT Invoice Requirements?

A VAT Invoice records Value Added Tax (VAT), which is an indirect tax charged on most goods and services sold for domestic consumption. It applies to every stage of the supply chain, from production to point of sale. Businesses are required to collect VAT from customers and pay it to the government.

To claim credit for VAT paid on purchases, businesses need a valid tax invoice that contains all the required information. VAT-registered companies must also issue tax invoices for the VAT collected from customers. Failure to issue proper VAT invoices can lead to penalties and the inability to claim input tax credits.

What is a VAT Invoice?

A VAT invoice is a bill issued by a business registered for VAT to its customer. It contains details of the supply, VAT charged and VAT registration numbers of supplier and recipient. VAT invoices serve as proof of purchase and allow the buyer to claim back input VAT paid.

Key requirements of a valid VAT invoice include:

1. It must contain the words ‘Tax Invoice’ – This clearly identifies it as a VAT invoice. Simply having VAT details is not enough.
2. Name, address and VAT registration number of supplier – This links the document to the supplying business and verifies they are VAT registered.
3. Name and address of the recipient – This identifies the customer who purchased the goods/services.
4. Invoice number and date of issue – A unique invoice number and issue date prove it is an original document.
5. Description of goods/services supplied – This should clearly describe what was sold, including quantity and type.
6. The amount payable excluding VAT – The total amount payable without VAT is calculated.
7. VAT rate applied – VAT rate charged on supply such as standard, reduced or zero rate.
8. Total VAT payable – Total VAT amount payable on invoice.
9. The total amount payable, including VAT is the final amount payable – net value + VAT amount.

How to Issue VAT Invoices

VAT-registered businesses must issue a valid tax invoice within 30 days of supplying goods or services over R5,000. Here are some guidelines on issuing compliant VAT invoices:

• Invoices can be issued either electronically or on paper. Both are acceptable if they contain all mandatory information.
• A VAT invoice must be issued for every taxable supply made, even if the customer is VAT registered or the supply is zero rated.
• For cash transactions, an invoice can be generated at the time of supply or within 30 days.
• For credit transactions, invoice should be issued either at the time of supply or within 21 days of receipt of payment.
• Supplies below R5,000 can be covered in an abridged tax invoice containing just the words “Tax Invoice”, VAT registration numbers, quantity and description of goods, VAT amount and total payable.
• The invoice date should match the actual supply date, not the date of generation of invoice.
• Invoices must be issued in South African Rands. Foreign currency invoices can be accepted if the VAT amount is converted to ZAR.
• Any corrections or adjustments made to invoices must be clearly indicated on the revised invoice.
• VAT invoices can be issued electronically provided they contain all information in the correct VAT invoice format and both parties agree to electronic invoicing. An advanced electronic signature or EDI are required.

Time Limits for Issuing VAT Invoices

VAT registered vendors must issue invoices within the stipulated time limits:

• Cash Transaction – Invoice can be generated at the time of supply or within 30 days of supply.
• Credit Transaction – Invoice should be issued either at the time of supply or within 21 days of receipt of full/partial payment.
• Continuous Supply – Invoice within 30 days from end of tax period in which supply was made or payment received.
• Export Supply – Invoice within 60 days from the date of supply.

Delayed invoices beyond the time limits will not be valid as proof of input tax credit.

Valid Tax Invoices for Input Tax Claims

To claim input VAT, businesses must hold a valid tax invoice containing all mandatory information. Here are some rules regarding input tax invoices:

• Input tax credit can only be claimed to the extent of VAT actually paid and only if a complete VAT invoice is held.
• Photocopies of invoices are acceptable but the onus is on taxpayer to prove it is a duplicate of the original.
• An abridged tax invoice is sufficient if the input invoice amount is less than R5,000.
• For expenses below R50, the vendor name, address and VAT number are not required. But a till slip or receipt is needed.
• Oral or written quotes cannot be used to claim input VAT. Only original invoices qualify.
• Input tax credit can only be claimed within 5 years from the date of supply.

Correcting VAT Invoices

Suppose any information on a VAT invoice is inaccurate. In that case, it must be corrected by issuing a new tax invoice clearly marked “Revised Invoice” along with reference to the original invoice number and date. Here are some important rules for correcting VAT invoices:

• Reissue invoice within 21 days from receipt of payment or within 30 days of issuing original invoice.
• Show full and accurate particulars clearly on the revised invoice.
• Maintain an audit trail linking the original and revised invoices.
• Do not make any changes on the original invoice which has already been issued.
• If an invoice is cancelled, write “Cancelled” across the original, issue credit note and link it to the cancelled invoice.
• Inform the customer of the revision and send a copy of revised invoice.
• Adjust VAT calculations in next return if invoice corrections change the output tax amount.

Record Keeping

VAT-registered vendors must maintain proper records of all VAT invoices issued and received. Here are some guidelines:

• Keep copies of all VAT invoices issued for both paper and electronic audit purposes.
• Retain issued invoices for five years from the end of tax period in which supply was made.
• Keep input tax invoices for five years from the end of tax period in which input credit was claimed.
• Store invoices in their original form in chronological order or numeric sequence.
• Keep invoices accessible and legible for easy retrieval during audits.
• Maintain invoice listings or use accounting software to track invoices.
• Keep invoices safe from damage or loss—store copies in a secondary location.

Proper record keeping ensures invoices are available as proof of tax credits and VAT charged during VAT audits.

FAQs on VAT Invoices

Q: Can invoices be numbered alphabetically?

A: Invoice numbers can be alpha, numeric or alphanumerical but must follow a logical and consistent numbering sequence.

Q: Is an abridged invoice valid for standard rated supplies above R5,000?

A: No, an abridged invoice is only applicable for supplies below R5,000. For higher amounts, a full tax invoice is required.

Q: Can a tax invoice be issued before a supply is made?

A: No, the invoice date must match the actual supply date and not issued in advance.

Q: Is a customer required to hold the original tax invoice?

A: No, a photocopy or electronic invoice is sufficient as long as it contains all the required particulars.

Q: Can a consolidated invoice be issued for multiple transactions?

A: Yes, as long as each supply is shown separately with the associated VAT details.

Conclusion

Issuing fully compliant VAT invoices is a legal requirement and essential for smooth VAT reporting and input tax claims. Businesses should ensure their invoicing processes and templates adhere to all VAT invoice regulations and content requirements. Proper invoicing discipline can help avoid VAT disputes and penalties. Maintaining complete and accurate VAT records also provides audit-proof documentation. By following the guidelines outlined in this article, businesses can ensure they meet all their VAT invoicing obligations.