Page 515 - Juta's Indirect Tax

BGR 006 (2) VALUE-ADDED TAX ACT: BinDing gEnErAL rULingS BGR 011
5. The law and its application
A vendor making a taxable supply of goods or services must issue a tax invoice to a recipient within 21 days of making that supply. The recipient must retain the tax invoice to substantiate any input tax deduction for the goods or services acquired. Tax invoices form part of the records that vendors (that is, suppliers and recipients) are required to keep under section 55, and are used to create a paper trail for audit purposes.
The details shown on a tax invoice may, in certain circumstances, be incorrect due to various reasons, for example, due to the granting of a discount. Section 21 therefore makes provision for a credit or a debit note to be issued in these instances. 5.1 Instances in which credit notes must be issued (section 21)
A supplier (or the recipient)* is required to issue a credit note for an allowance granted if the allowance –
• alters the original purchase price of a supply of goods or services in terms of an agreement with the recipient; and
• results in the tax charged on the tax invoice in relation to that supply being incorrect (that is, the amount of tax charged
shown on the tax invoice exceeds the actual tax charged).
A credit note must contain the particulars speci ed in section 21(3), subject to section 21(5).
5.2 Instances in which a tax invoice must be issued
A credit note cannot be issued in instances where an allowance does not adjust the price at which goods and services were originally supplied.
An allowance granted to a retailer for having performed a speci c function or task (for example, providing speci c advertising services), is a supply of a service from the retailer to the supplier. Allowances granted to compensate, subsidise, reward or reimburse a retailer for expenses incurred for or activities undertaken on behalf of the supplier constitutes consideration for a separate supply of services by the retailer to the supplier.
The retailer, as supplier of these services, must issue a tax invoice within 21 days of the date of the supply in accordance with section 20.
5.3 Recipient-created tax invoices, debit and credit notes
To the extent that circumstances exist where a supplier is unable to issue a tax invoice, debit or credit note due to circumstances beyond the supplier’s control, provision is made for the Commissioner to allow the recipient of a supply to issue a tax invoice for a supply made by a supplier.
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
• responsible for measuring or testing the goods sold by the supplier.
Interpretation Note No. 56 deals with recipient-created tax invoices, credit notes and debit notes and states which conditions must be met to qualify for the issuing of recipient-created tax invoices, credit notes and debit notes.
6. Ruling
The Commissioner, with regard to allowances granted in the FMCG industry, issues the following binding general ruling (BGR).
The supplier must issue a tax invoice, except if the provisions of section 20(2) apply, where the allowance is regarded by the supplier and the recipient of the supply as consideration for the supply of a service. The tax invoice must satisfy the requirements of sections 20(4) and (5). A credit note must be issued by the supplier, except if the provisions of section 21(5) apply, where an allowance is regarded by the supplier and the recipient of the supply as a reduction in the original purchase price. The credit note must satisfy the requirements of section 21(3).
This BGR is conditional upon the supplier maintaining an updated list of all the allowances received or granted for each calendar or nancial year, which indicates whether the allowance results in a tax invoice, credit note or debit note being issued. Such list as well as agreements or statements substantiating this classi cation must be retained as part of record-keeping requirements contemplated in section 55.
To the extent that this BGR does not provide for a speci c scenario in respect of allowances granted or received, a VAT Ruling must be applied for from the Commissioner.
This BGR is issued in accordance with section 76P of the Income Tax Act No. 58 of 1962, as made applicable to the VAT Act by section 41A. This ruling is effective from the date of issue until it is withdrawn or amended, the relevant legislation is amended or a decision of the courts differ materially from this ruling.
Legal and Policy Division
South African Revenue Service
EFFECTIVE DATE: ACT:
SECTIONS: SUBJECT:
BINDING GENERAL RULING (VAT): BGR 11
01 September 2012
VALUE-ADDED TAX ACT 89 OF 1991 SECTIONS 9, 10, AND 20
USE OF AN EXCHANGE RATE
All rulings issued in regard to the use of an exchange rate for purposes of issuing a tax invoice are withdrawn with effect from 1 September 2012.
* The Commissioner, in terms of section 21(5), may in certain circumstances direct that the recipient, as opposed to the supplier, may issue a credit note.
Juta’s IndIrect tax 2016 507