Many new business owners are faced with something of a challenge when it comes time to issue their first batch of invoices. For VAT-registered businesses, issuing invoices correctly is of vital importance because it has an impact on the bottom line. Without proper tax invoicing, a small business could find itself out of pocket or on the wrong side of the taxman – two pitfalls that can easily be avoided.
Invoices vs. Tax Invoices
The concept of sending an invoice is very simple: whenever a business (or person acting as a sole proprietor) requires payment on a transaction, an invoice is issued to the person or business responsible for making the payment. The transaction may be the purchase of stock, goods or services such as accountant’s fees or a cleaning service. Whatever goods or services have been purchased, the invoice notifies the buyer that payment is due.
A tax invoice is a specific document, which must keep to the requirements laid out in the VAT Act of 1991, that allows a vendor (supplier of goods or services) to claim input tax on the total value of goods or services supplied to a customer. In order for a tax invoice to be valid, it must comply with several requirements:
- The invoice must be issued with 21 days of the goods being supplied. The invoice must be issued whether the customer requests it or not.
- A full tax invoice must be issued for all purchases exceeding a R3000 value. For items between R50 and R3000, an abridged tax invoice may be issued – this type of invoice contains fewer details about the goods supplied than the full tax invoice.
- All VAT invoices must state the rate of VAT charged – in South Africa the current rate is 14%
If you require an in-depth consultation on invoicing, don’t hesitate to contact one of our support staff who will gladly assist you with any queries.