Tax invoices, credit and debit notes - time limits are set
04 March 2014
Posted by: Author: Carmen Moss-Holdstock
Author: Carmen Moss-Holdstock (DLA Cliffe Dekker Hofmeyr)
An amendment has been proposed in the 2014 Budget Speech
relating to the time frame where debit or credit notes under s21(1) of the
Value-Added Tax Act, No 89 of 1991 (VAT Act) are required to be issued.
Under s16(2) of the VAT Act, a vendor can only claim an input
deduction if he is in possession of a tax invoice or debit note or credit note.
A 'tax invoice' is a document that needs to meet the requirements of s20(4) and
s20(5) of the Act for the vendor to claim an input deduction. An 'invoice' on
the other hand is a 'document notifying an obligation to make payment' and the
issuing of which may affect the timing of supply.
In terms of s20(1) of the Act, a registered vendor must within
21 days of the date of supply issue a tax invoice which complies with the
requirements under s20(4) and s20(5) of the VAT Act. Where a vendor has
accounted for an incorrect output tax, he can issue a debit or credit note to make
an adjustment in calculating the tax payable by him where the supply was either
cancelled, or where there was a fundamental variation or alteration in the
nature of the supply, or due to an alteration of an agreement or where the
goods or services supplied are returned.
The problem arises when a vendor has either issued a tax invoice
for an incorrect amount or has omitted certain information on the tax invoice
as required by s20(4) and s20(5) of the Act. The vendor is unable to simply
re-issue a tax invoice reflecting the correct amount by way of a debit or
credit note under s21(1) of the Act, or to correct any information omitted on
the tax invoice in order to comply with s20(4) and s20(5) of the Act. Vendors may
have incorrectly issued debit and credit notes that may not technically have
been in line with the Act. A further and more critical issue that arises is that
the VAT Act does not provide a remedy where a vendor has failed to issue a
debit or credit note within a reasonable time period. The VAT Act fails to
provide a remedy under circumstances where the other vendor/party has failed or
refuses to provide or issue the relevant credit or debit note as the case may
In the case of an agent, where the agent makes a supply of goods
or services for or on behalf of any other person who is the principal of the
agent, that supply shall be deemed to be made by the principal and not the
agent. Provided that where that supply is a taxable supply and that agent is a vendor,
the agent may issue a tax invoice or debit or a credit note.
The Commissioner for SARS has issued a proposal delivered in the
Budget Speech 2014, whereby SARS intends to impose time limits upon when a credit
or debit note needs to be issued by. This will provide certainty to vendors who may need to issue or provide
another vendor with the relevant creditor debit note. Agents will also need to comply with this
This article first appeared on cliffedekkerhofmeyr.com.