IFRS vs IFRS for SMEs
May 22, 2019RENDERING OF TRANSPORT SERVICES BY EMPLOYERS
May 23, 2019
VAT
is an integral part of our economic society and is something that influences everyone,
especially businesses in South Africa. In
this article, we will discuss a few do’s and don’ts regarding VAT.
- Valid tax invoices
In
South Africa’s current tax system, vendors that are registered for VAT are
allowed a deduction for the tax they pay on eligible goods or services (input
tax) from the tax you collect on the sales made (output tax). Tax invoices are
therefore very important to vendors as failure to provide valid documentation
during VAT audits will cause the vendor to lose all the input tax being claimed
on the invoice. The following requirements will overcome the challenges that
may be encountered because of SARS scrutinising the validity of VAT invoices.
When
the tax invoices exceed R5 000, a full tax invoice needs to be provided. For
invoices of R5 000 or below they may issue an abridged
tax invoice. There will be no tax invoice needed if the consideration is R50 or
less. However, documents such as a sales docket or till slip will be necessary
to verify the input tax deducted.
As
from 8 January 2016, 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
- 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)
- Value of the supply,
the amount of tax charged and the consideration of the supply
- Name, address and
where the recipient is a vendor, the recipient’s VAT registration number
- Quantity or volume of
goods or services supplied
Note
that an abridged tax invoice will only need to meet criteria 1 to 5, whereas
the full tax invoice (tax invoices exceeding R5 000) must meet all
criteria.
- When to declare
output VAT/claim input VAT
The date on which VAT becomes due on a transaction is the earliest of
either the payment date or the invoice date. For example, if a payment is
received in advance of the invoice issued for the supply, the VAT will be due
on the date of receipt of payment. It is important to note that output VAT
should be declared in the period in which the invoice has been issued or the
payment has been received. With regards to input VAT, here the 5-year rule
applies.
This rule provides that any amount of input tax which was deductible and
has not yet been deducted can be claimed in a following period but is limited
to a tax period 5 years after which the tax invoice should have been issued.
- Overpayments by the customer
When
a vendor receives an overpayment from a customer, that vendor will not declare
VAT on the overpayment. If a vendor fails to refund the overpayment within 4
months of the date of the invoice, the excess amount is deemed to be a consideration
and therefore output VAT should be declared on the last day of the VAT period
during which the 4-month period ends at a tax fraction of 15/115.
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) |
