Tax

The audits of Value-Added Tax (VAT) returns by the South African Revenue Service (SARS), have increased the focus on the validity of tax invoices for the purposes of VAT.

A VAT vendor submitting VAT returns is responsible for ensuring that all invoices included in the returns comply with the relevant legislation. If valid tax invoices cannot be provided at the time of a VAT audit, the vendor may lose up to 100% of the input tax being claimed on the invoice, even if an amended valid invoice can be provided subsequent to the audit. Furthermore, serious penalties, interest and other consequences may be imposed on the VAT vendor for errors, intentional omissions and fraud.

The requirements

Section 20 of the Value-Added Tax Act, no 89 of 1991, together with the VAT404 Guide for Vendors as updated in March 2012, sets out the requirements for a valid tax invoice.

A VAT vendor must issue a tax invoice within 21 days of the supply having been made where the consideration for the supply exceeds R50, whether the purchaser has requested this or not. If the consideration for the supply is R50 or less, a tax invoice is not required. However, a document such as a till slip or sales docket indicating the VAT charged by the supplier, will be required to verify the input tax.

The requirements for tax invoices of which the consideration or taxable supply is more than R5 000 are:

the words “tax invoice” should be displayed;
name, physical address and VAT registration number of the supplier name, physical; address and VAT registration number of the recipient;
original serial number of the tax invoice;
the date of issue of the tax invoice;
full and proper description of the goods sold and / or services rendered;
quantity or volume of goods and / or services supplied; and
total amount of the invoice and VAT amount in South African currency (except for certain zero-rated supplies).

The requirements for tax invoices of less than R5 000 are:

the words “tax invoice” should be displayed;
name, physical address and VAT registration number of the supplier;
original serial number of the tax invoice;
the date of issue of the tax invoice;
full and proper description of the goods sold and / or services rendered;
total amount of the invoice and VAT amount in South African currency (except for certain zero-rated supplies).

Second-hand goods

In the case of second-hand goods purchased from a non-vendor, the purchaser has to record the following information:

name, address and identity number of the supplier, confirmed by the person’s identity document or passport. (If the value of the supply is equal to or greater than R1 000, a copy of this document must be retained by the purchaser. If the non-vendor is a juristic person, a letterhead or similar document stating the name and registration number of the juristic person is required);
date of acquisition;
quantity or volume of goods;
description of the goods;
total consideration paid for the supply; and
declaration by the supplier stating that the supply is not a taxable supply.

Conclusion

If a vendor fails to deduct an input tax in respect of a particular tax period, that input tax may be deducted in a later tax period, but limited to a period of five years from the date that the particular supply was made. However, when a vendor becomes aware of an output tax not declared in the relevant period, a corrected VAT return for that specific period should be submitted. It is not acceptable to declare the output tax in the next period and SARS may impose penalties and interest on the output VAT omitted.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Provisional tax is not a separate type of tax but pre-payments on income tax for a specific tax year. The aim of provisional tax payments is to help taxpayers to fulfil their tax responsibilities by spreading tax payments over a tax year. After SARS has assessed a taxpayer for income tax, the provisional tax payments will be set off against the final liability for income tax for a specific tax year.

Underpayment of provisional tax

If a taxpayer did not pay enough provisional tax during the tax year and there is a liability after offsetting provisional tax against income tax due on assessment, the taxpayer will be liable for penalties and interest on underpayment of provisional tax. The table below provides more information on the penalties and interest applicable to the underpayment of provisional tax.

Overpayment of provisional tax

If provisional tax was overpaid, i.e. provisional tax payments were more than the assessed income tax liability for a tax year, the excess amount will be refunded to the taxpayer with interest. Please refer to the table below for more details on overpayment of provisional tax.

Three provisional tax returns per tax year

The provisional tax return/IRP6 must be submitted two or three times per year, depending on the circumstances of the taxpayer.

The following table sets out the deadlines, penalties and interest, and calculations for the different provisional tax payments for the current tax year starting on 1 March 2015 and ending on 29 February 2016.

Description	First provisional tax return – IRP6 (compulsory)	Second provisional tax return – IRP6 (compulsory)	Third provisional tax return – top-up payment – IRP6(3) (optional)
Deadline for submission and payment (if applicable) of IRP6 return	31 August 2015	29 February 2016	30 September 2016
Taxpayer fails to submit provisional tax return (IRP6)	SARS may estimate taxable income and amount of tax payable	N/A
Penalty payable by taxpayer on late payment of provisional tax	10% of amount paid late
Interest payable by taxpayer on late payment of provisional tax	Variable rate published in the Government Gazette from time to time
Penalty payable by taxpayer on under-estimated provisional tax	20% of amount under-estimated
Interest payable by taxpayer on under-estimated provisional tax (interest is not tax-deductable)	Variable rate published in the Government Gazette from time to time
Interest payable by SARS to taxpayer on over-estimate of provisional tax (interest is taxable)	Variable rate published in the Government Gazette from time to time (normally 4 percentage points less than the above interest rates)
SARS’ suggested guidelines for the calculation of provisional tax payments	Half of total tax on estimated taxable income for the tax year	Total tax on estimated taxable income for the tax year	Total tax on estimated taxable income for the tax year
	Less: PAYE for the first 6 months of the tax year	Less: PAYE for full tax year (12 months)	Less: PAYE for full tax year (12 months)
	Less: Foreign tax credits (if applicable)	Less: Foreign tax credits (if applicable)	Less: Foreign tax credits (if applicable)
		Less: First provisional tax payment	Less: First provisional tax payment
			Less: Second provisional tax payment
	First provisional tax payment due (note 1)	Second provisional tax payment due (note 1)	Third provisional tax payment due

Note 1: If there is not provisional tax due, the IRP6 return must still be submitted.

As can be seen from the above table, provisional tax payments are based on an estimate of the taxpayer’s taxable income. Therefore it is crucial to estimate taxable income and tax-deductible expenses as accurately as possible.

Reference:

Category: Tax

THE VALIDITY OF TAX INVOICES – IT IS YOUR RESPONSIBILITY

PROVISIONAL TAX FOR INDIVIDUALS: DID YOU KNOW?

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