VAT And The Importance Of Your VAT Number
The SARS VAT invoice requirements
Registering as a VAT vendor with SARS may seem daunting as it brings about new regulations that an entity needs to comply with. Let’s look at the SARS VAT Invoice Requirements to ensure you have all the correct information on your Tax Invoices.
VAT is an abbreviation for the term Value-Added Tax. It is an indirect tax on the consumption of goods and services in the economy. Revenue is raised for government by requiring certain traders (vendors), that carry on an enterprise to register for VAT.
VAT vendor invoice should contain the following:
- The word(s) “Invoice”, “Tax Invoice” or “VAT Invoice”
- The name, address, and VAT registration number of the supplier
- Name, address and, where the recipient is a registered vendor, the VAT registration number of the recipient;
- An individualised serial number (or invoice number) and the date on which the invoice is issued
- A description of the goods or services being supplied. If the goods being supplied are second hand it should be clearly indicated as such in the description.
- Quantity or volume of the goods or services supplied; and
- Value of the goods or services supplied, the amount of tax charged, and the consideration for the supply.
Any invoice not containing all of the above requirements may be excluded by SARS. The amount excluded will then become due and payable by the VAT vendor.
VAT invoice requirements – what SARS wants you to know
It is important to know why adhering to these requirements is beneficial to a business. VAT registered businesses are obligated to file a VAT return (most commonly bi-monthly) with the Receiver of Revenue. VAT raised on sales invoices constitutes monies owed to SARS and often these amounts can seem excessive, especially to small to medium-sized enterprises (or SME’s). In order to reduce this amount, the VAT Act allows for the VAT portion of expenses incurred in the course of running the business to be set off against the VAT on sales invoices.
Subject to certain conditions, the vendor must then charge VAT on supplies of goods and services made by it (output tax). VAT is only charged on taxable supplies made. Taxable supplies are supplies for which VAT is charged at either the standard rate (currently 15%) or zero rate (0%). There is a limited range of goods and services which are subject to VAT at the zero rate or exempt from VAT.
The vendor will also be entitled to deduct VAT charged to it (input tax) when incurred for making taxable supplies. Under limited circumstances a vendor may claim a deduction (notional input tax) on a supply made to it by a business that is not registered for VAT.
VAT is non-cumulative, meaning that a credit/deduction is allowed for VAT paid in previous stages, within the production and distribution chain. The vendor is required to pay the difference between the output tax and the input tax or claim a VAT refund where the input tax exceeds the output tax.
VAT is therefore, charged at each stage of the production and distribution process and it is proportional to the price charged for the goods and services. VAT is also payable on the importation of goods and on imported services.
South Africa operates a value-added tax (VAT) system whereby the VAT charged by suppliers is subtracted from the VAT charged to customers to calculate the VAT payable or refundable. This system was established to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities.
SARS may randomly decide to do a VAT Audit for the VAT201 submission.
It is very important to adhere to the VAT invoice specifications as mentioned earlier.
For a VAT audit you need the following, but is not limited to:
- The letter from SARS requesting supporting documentation for the VAT201 submission.
- A summary of the VAT transactions for the period reviewed by SARS.
- Select a sample of supplier invoices (normally the highest ten supplier invoices) and cross reference these on the summary of the VAT transactions for the relevant period.
- Select a sample of customer invoices (normally the highest 5 customer invoices) and cross reference these on the summary of the VAT transactions.
- Prepare a letter to SARS confirming the information that you have submitted.
SARS may accept the above without further information. However, they can request more information to support your VAT201 submission.
Submit the documents either on eFiling or on the SARS home page, using the case reference number as provided on the SARS request letter.
Find out more by attending our Facebook Live event.
- Friday, 20 October 2023
- Access the Facebook Live recording
- Presenter Annarien Nel
In the event that you have more complex VAT matters, or any other queries related to VAT, please contact our offices for assistance.
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Kindly note this article is intended for general information purposes only and does not constitute accounting, tax, nor regulatory related advice. Should you need advice, please contact one of our practitioners.