TAX ODDITIES AND VAT FRUSTRATIONSApril 7, 2021
IT’S HUNTING SEASON! ARE YOU READY?April 7, 2021
As a result of the specific nature of goods, it is common practice that certain recipients of goods and services “self-invoice” when they receive goods or services from their suppliers. In other words, they do not receive an invoice from the suppliers – instead, they invoice themselves. This scenario is typically found where the volume or quality of goods can only be determined by the recipient. An example of this is where a farmer (the supplier) takes produce to a co-operative which will only be sold at a later stage (once the quality and quantity of the produce has been determined). Since the price that will eventually be obtained for the goods depends on factors outside the farmer’s control, the farmer is not in a position to issue an invoice or tax invoice for the produce when it is delivered for sale. In such cases, the South African Revenue Service (SARS) may permit the co-operative (recipient) to issue the tax invoices and any debit and credit notes relating to supplies, rather than expecting it from the supplier. This is referred to as “recipient-created invoicing” or “self-invoicing”.
In terms of a binding general ruling, the Commissioner for SARS has provided approval to vendors to issue recipient-created tax invoices, where the recipient:
- determines the consideration for the supply of the goods or services; and
- is in control of determining the quantity or quality of the supply, or is responsible for measuring or testing the goods sold by the supplier.
The approval is, however, subject to certain conditions, mainly that the recipient (which is a VAT vendor):
- acquired and retained proof of the supplier’s VAT registration number;
- enters into an agreement with the supplier wherein the supplier shall not issue a tax invoice, credit or debit note in respect of any taxable supply to which the approval applies;
- issues a recipient-created tax invoice that complies with the provisions of section 20(4) or (5) of the Value-Added Tax Act, or a credit or debit note that complies with the provisions of section 21(1) and (3);
- provides the recipient-created tax invoice, credit-, or debit note to the supplier and retains a copy thereof;
- issues the recipient-created tax invoice within 21 days from the date of the supply being made; and
- retains a copy of the recipient-created tax invoice.
Approval for self-invoicing procedures will not be granted if the purpose is merely to facilitate the obtaining of a tax invoice, credit or debit note by the recipient. Approval will only be granted in industries and transactions where an effective self-invoicing system has traditionally been followed in the past.
This article is a general information sheet and should not be used or relied upon as 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 financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)