VAT Taxpayers: New relief on correcting tax invoices

It has always been possible to issue credit or debit notes to correct calculable errors. But, because the VAT Act prohibits the issuing of more than one tax invoice per taxable supply until recently there was no way to correct other errors such as wrong names or VAT numbers.

Fortunately, that has now been remedied by a recent amendment to the Act. We set out the time limits and rules for correcting invoices, with a brief refresher on the legal requirements for tax invoices generally.

There has been an anomaly in VAT law which new legislation has now largely resolved.

The problem with the old position 

It has always been simple to correct calculable errors in tax invoices, such as price. A VAT debit or credit note would fix such mistakes. However, other errors such as an incorrect name or VAT number were legally insoluble. This is because the Act prohibits the issuing of more than one VAT invoice for a supply of a product or service. In terms of the law, a deduction for VAT is not allowed if there is an error (even a technical error) on the invoice.

The solution

An amendment to the VAT Act allows a corrected tax invoice to be issued. This needs to be done within twenty-one days after the customer has requested a correction.

In addition, the vendor must keep an audit trail of the correction in case of a SARS query.

What has also been welcomed is that there is no change to the date of the transaction i.e. if the invoice was issued in January but corrected in February, the date the transaction is to be accounted for is still January.

An outstanding question and a checklist for you

This change to the VAT Act has brought certainty to an issue that has bedeviled business. One aspect that is still not clear is whether a business can issue a manual correction if its systems do not allow for an invoice to be electronically altered?

It is also worth remembering the legal requirements of a VAT invoice. They are that the invoice must contain:  

• 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

• An 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). 

NOTE FOR ACCOUNTANTS: Download the Value-Added Tax Act
No. 89 of 1991 as amended here.

For further reading see Cliffe Dekker Hofmeyr’s “One less issue when issuing tax invoices” here.