A tax invoice is therefore an essential part of the audit trail of a vendor and its enterprise activities, and the failure to issue a tax invoice is a contravention of the VAT Act and an offence in terms of the Tax Administration Act, No 28 of 2011.
The VAT Act sets out the requirements for a valid tax invoice and provides that the document must contain the words ‘tax invoice’, ‘invoice’ or VAT invoice’; the name, address and VAT registration number of the supplier and the recipient; an individual serialised number and the date upon which the tax invoice was issued; a full and proper description of the goods or services supplied as well as the quantity thereof; and the value of the supply and the amount of VAT charged thereon.
A supplier will typically generate a tax invoice based on the information supplied to it by the recipient, and upon issuing such tax invoice, the supplier will have fulfilled its obligation of issuing a valid tax invoice in respect of a taxable supply made. However, to the extent that any information on the tax invoice (other than the information pertaining to the VAT, value or consideration of the supply) is incorrect, the document will technically not constitute a valid tax invoice, and the recipient vendor will not be entitled to rely on the document to support its claim for an input tax deduction. The recipient vendor will accordingly require the supplier to re-issue the tax invoice with the correct details. However, in terms of the VAT Act, it is unlawful and an offence for a supplier to issue more than one tax invoice for each taxable supply. In practice, where there is an error with the amount of VAT or the value or consideration reflected on a tax invoice, this does not invalidate a tax invoice and may simply be remedied by the issuing of a credit or debit note, as the case may be. However, until now, there was no mechanism to correct mistakes in respect of the other particulars required to be reflected on a tax invoice, for example, the recipient’s name, address or VAT registration number. Furthermore, on the basis that the VAT Act makes it unlawful to issue more than one tax invoice for each supply, this created a real problem for recipient vendors who wished to claim input tax deductions, but who were issued with tax invoices containing incorrect information.
This issue was identified by National Treasury, and an amendment to s20 of the VAT Act has now been introduced in the Tax Administration Laws Amendment Act, No 22 of 2018, which was promulgated on 17 January 2019, with effect from such date. In terms of the amendment to s20, where a tax invoice contains an error in the particulars required in terms of the VAT Act, and it would not be appropriate to issue a credit note or debit note in respect thereof, the supplier must correct that tax invoice with the correct particulars within 21 days from the date of the request to correct it. In terms of the amendment, the correction of the tax invoice will not constitute a contravention of the prohibition to issue more than one tax invoice for the same supply and will not affect the time of supply contemplated in s9 of the VAT Act. The amendment also requires the supplier to obtain and retain information sufficient to identify the transaction to which that tax invoice and the corrected tax invoice refers.
The amendment to s20 of the VAT Act which took effect on 17 January 2019, although seemingly quite insignificant, is a very welcome amendment and creates certainty regarding a supplier’s ability to correct a tax invoice that has already been issued, as well as provides a remedy to recipient vendors who previously had difficulty obtaining a corrected tax invoice from suppliers.
A practical consideration is, however, whether the supplier’s invoicing systems will allow for any particulars to be amended on an invoice already issued. It is also not clear as to whether the supplier will be allowed to issue a manual tax invoice reflecting the correct details, where its system does not allow for the particulars of an issued tax invoice to be amended. Hopefully SARS will clarify this aspect by way of an interpretation note in due course.