This article is to reiterate the fact that if you do not have the appropriate / valid documentation at the time of completing a VAT201 return you may not, according to the VAT Act, claim the input tax in that specific tax period.
The VAT charged by a vendor to another vendor on any goods or services acquired for the business will qualify as input tax in the hands of the recipient vendor.
To qualify as input tax, 3 requirements must be met, namely-
- The goods or services supplied must be acquired by the vendor wholly or partly for consumption, use or supply in the course of making taxable supplies;
- VAT at the standard rate must have been charged on the taxable supply;
- The appropriate / valid documentation must be held by the vendor at the time that the return is completed and submitted.
Point 1 and 2 above are generally complied with, but we have noted that point 3 is a major concern for accounting firms / tax consultants etc whom deals with the completing of VAT201 returns from information provided by their clients in the form of only VAT tax type reports, Excel spread sheets, bank statement and or invalid tax invoices.
Section 16(2)(a) of the VAT Act provide that no deduction of input tax shall be claimed in respect of a supply, unless:
- A tax invoice or debt note or credit note is held by the vendor claiming the input deduction at the time that the return is furnished; or…
As from 8 January 2016, the following information must be reflected on a tax invoice (consideration of R5 000.00 or more) for it to be considered valid in terms of section 20(4) of the VAT Act:
- Contains the words “Tax Invoice”, “VAT Invoice” or “Invoice”
- Name, address and VAT registration number of the supplier
- Name, address and where the recipient is a vendor, the recipient’s VAT registration number
- 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)
- Quantity or volume of goods or services supplied
- Value of the supply, the amount of tax charged and the consideration of the supply (value and the tax)
As from 8 January 2016, the following information must be reflected on a tax invoice (consideration of less than R5 000.00) for it to be considered valid in terms of section 20(5) of the VAT Act: (Abridge tax in voices):
- 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 (value and the tax)
Section 16(2)(a) of the VAT Act specifically states that you can only claim input tax if you are already in possession of the valid tax invoice.
In short, an input tax amount cannot be claimed if you are only in possession of a bank statement reflecting the amount paid to a supplier or an invoice that does not meet the requirements as set out in section 20(4) and (5) of the VAT Act. These amounts MUST BE excluded from the VAT201 return for that specific period as SARS can levy heavy penalties and interest on a false / incorrect declaration due to claiming amounts for which the appropriate / valid documents were not in the vendors possession when filing the VAT201 return.
Yes section16(3) of the VAT Act requires a deduction of input tax in the period the supplies were made. Fortunately, there is however proviso (i) to this section that allows a vendor whom is in the possession of the appropriate / valid documentation to claim the input tax in a following period as long as it is within 5 years after the tax invoice for the supply was issued.
We request all vendors to first ensure that they are in possession of all the appropriate / valid documentation as required by the VAT Act before they
- submit their VAT201 returns; OR
- supply the relevant documentation to their accountants / tax consultants to submit their VAT201 returns on their behalf.
If you have any enquiries, please contact Adri Britz at abritz@fhbc.co.za
Source Reference
Value Added Tax Act, No 89 of 1991 (VAT Act)
VAT404 Guide for Vendors – SARS
Notes on South African Income Tax – Phillip Haupt