Page 432 - Juta's Indirect Tax

IN 56 (2) VaLue-added tax act: InterPretatIOn nOtes IN 56 (2) INTERPRETATION NOTE: NO. 56 (Issue 2)
DATE: ACT: SECTIONS: SUBJECT:
Preamble
31 March 2014
VALUE-ADDED TAX ACT, 89 OF 1991
SECTIONS 20(2) AND 21(4)
RECIPIENT-CREATED TAX INVOICES; CREDIT AND DEBIT NOTES
In this Note unless the context indicates otherwise –
• ‘BGR’ means a binding general ruling issued under section 89 of the TA Act; • ‘section’ means a section of the VAT Act;
• ‘TA Act’ means the Tax Administration Act No. 28 of 2011;
• ‘VAT Act’ means the Value-Added Tax Act No. 89 of 1991; and
• any word or expression bears the meaning ascribed to it in the Act.
1. Purpose
This Note serves to –
• set out the legal framework for recipient-created tax invoices, credit and debit notes (also known as self-invoicing); and • discuss under 5, paragraph 2 of BGR (VAT) No. 15 (Issue 2) which provides the necessary approval to issue recipient-
created tax invoices, credit and debit notes.
2. Background
Generally, a supplier of goods or services is required to issue a tax invoice for taxable supplies made to a recipient within 21 days of the supply being made. The supplier is required to retain a copy of the tax invoice which forms part of the supplier’s records and serves to verify the output tax declared. The tax invoice issued by the supplier, in the hands of the recipient of the supply, becomes the document that is retained for purposes of substantiating the recipient’s input tax deduction.
The amount of value-added tax (VAT) shown on a tax invoice may in certain circumstances be incorrect, for example, where goods supplied have been returned. A credit note must, in this instance be issued to rectify the amount of VAT incorrectly charged. Tax invoices, credit and debit notes are, therefore, a very important part of how the VAT system operates as such documents are used to create a paper trail for audit purposes.
It is acknowledged that a supplier may in certain circumstances be unable to issue a tax invoice. Provision is therefore made for the Commissioner to allow the recipient of a supply to issue a tax invoice, credit and debit note for a supply made by a supplier.
3. The law
The relevant sections of the VAT Act are quoted in Annexure A.
4. Application of the law
4.1 Tax invoices (section 20)
A supplier, being a vendor, making a taxable supply of goods or services must within 21 days of making the supply issue a tax invoice to the recipient. A tax invoice must contain the details prescribed in section 20 for it to constitute a valid document for purposes of deducting input tax. These details will vary depending on the consideration for the taxable supply. A tax invoice is not required to be issued where the total consideration for a supply is in money and does not exceed R50. Refer to Annexure D for more details regarding tax invoices.
Recipient-created tax invoices
It is acknowledged that a supplier may in certain circumstances beyond the supplier’s control be unable to issue a tax invoice. The circumstances considered to be beyond the supplier’s control are where the recipient of the supply is in control of determining the quantity or quality of the supply, or is responsible for measuring or testing the goods sold by the supplier. Provision is therefore made for the Commissioner to allow the recipient of a supply to issue a tax invoice for a supply made by a supplier in certain instances.
The qualifying criteria that must exist before the Commissioner will allow the recipient of a supply to issue a tax invoice for a supply made by a supplier is that the consideration for a supply is determined by the recipient of the goods or services.
The recipient must, as required by the VAT Act, rst obtain written authorisation from the Commissioner before being allowed to issue recipient-created tax invoices.
4.2 Credit and debit notes (section 21)
A supplier must issue a credit or debit note to rectify the VAT incorrectly charged (as shown on a tax invoice) where – • the supply has been cancelled;
• the nature of the supply has been fundamentally varied;
• the consideration for the supply has been fundamentally altered or varied;
• the goods or services supplied have been returned to the supplier; or
• an error has occurred in stipulating the amount of the agreed consideration; and
424 Juta’s IndIrect tax 2016