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Toll fees and VAT invoices

Friday, 31 January 2014   (0 Comments)
Posted by: Author: Johan van der Walt
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Author:  Johan van der Walt (DLA Cliffe Dekker Hofmeyr)

Toll fees and VAT invoices:  Must get the necessary documentation to substantiate VAT input claims.

SARS’s VAT 404 Guide states: "One of the underlying principles of the South African VAT system is that it is an invoice-based tax. This means that vendors are generally required to account for VAT on the basis of invoices being issued or received.” Furthermore: "The most important document in such a system is the tax invoice. Without a proper tax invoice you cannot deduct input tax on purchases for your enterprise, and if you have clients who are vendors … they cannot claim back the VAT …”

In brief, the following are the requirements of the Value-Added Tax Act, No 89 of 1991 (VAT Act) with regard to a supplier’s obligation to issue a tax invoice:

  • The general rule is that a supplier making a taxable supply 'must' within 21 days of the date of supply issue a tax invoice (s20(1)) which contains certain particulars (referred to as a 'full tax invoice' - s20(4)); or
  • Where the consideration for the supply is less than R5 000 an 'abridged tax invoice' (s20(5)) can be issued and where the total consideration is for less than R50 the supplier is not required to provide a tax invoice, but then, in terms of s20(6), "… the supplier shall provide the recipient with a document that is acceptable to the Commissioner” (eg a till slip).

 'Services' under the VAT Act include the 'making available of any facility' (s1). That would include a toll road operator (operator) providing a toll road facility to a road user (user).

Presumably, the supply of the toll road 'service' occurs each time the user passes under a gantry. Such service would be in respect of the particular stretch of toll road covered by the gantry in question. In reality, while traveling on a toll road, numerous individual gantry-by-gantry supplies, each with a value of less than R50, are continuously being made to the user.

On the above-mentioned basis the applicable provision would be s20(6). The operator would thus not be obliged to issue a full (s20(4)) or abridged tax invoice (s20(5)). However, it has to furnish ('shall provide') the user with, at least, "a document that is acceptable to the Commissioner” (hereinafter referred to as the acceptable documentation) to enable the user to claim the applicable VAT inputs in terms of s16(3).

The Guide states: "Tax invoices for supplies made … and the general maintenance of proper accounting records and documents are all very important aspects of how the whole VAT system operates. These documents form an audit trail which SARS uses to verify that the vendor has complied with the law. A tax invoice … also serves as the documentary evidence of any VAT deducted by the vendor as input tax. A tax invoice is only valid if it contains certain details and is issued by the supplier within 21 days of making a taxable supply, regardless of whether the recipient has requested this or not.”

It is clear that a user would need at least some basic documentation from the operator to calculate the VAT input claim. It is the operator’s responsibility under the VAT Act to supply the user, within 21 days, with the acceptable documentation under s20(6) even if the user has not demanded same from the operator. The operator’s obligation stems from the applicable VAT Act provisions and hence it is irrelevant whether:

  • The user is a registered, unregistered or an alternate toll road user; or
  • The operator has been paid, or not, for the toll road supplies made.
The issuing of the tax invoice or acceptable documentation must happen 'within 21 days of that supply'. It does not refer to 'business day' as defined in s1 of the VAT Act. Calculation of the 21 day period is accordingly determined under s4 of the Interpretation Act, No 33 of 1957. It is reckoned exclusive of the first (when passing under the gantry) and inclusive of the last day, unless the last day happens to fall on a Sunday or on any public holiday, in which case the time shall be reckoned exclusive of the first day and exclusive also of every such Sunday or public holiday.

The VAT Act does provide for an exception: Should the Commissioner be satisfied that there are or will be sufficient records available to establish the particulars of any supply or category of supplies, and that it would be impractical to require that a full tax invoice be issued, then he may direct (subject to any conditions imposed) that a tax invoice is not required to be issued (s20(7)(b)). Where such a direction has not been obtained from the Commissioner, the operator’s obligation to issue a tax invoice or acceptable documentation would be as set out above.

It is understood that registered toll road users have access to printable electronically generated invoices to substantiate their VAT input claims.

In the case of unregistered and alternate users the VAT Act nevertheless obliges the operator to issue to those users either a tax invoice (s20(1)), alternatively the acceptable documentation (s20(6)) within the 21 day period. Same could then be used for VAT 201 purposes.

The status of the user (registered, unregistered or alternate), and the fact that the operator has not received payment for its toll road supplies, has no bearing and does not somehow suspend the operator’s obligations under the VAT Act to issue a tax invoice, alternatively the acceptable documentation.

A recent, as yet unreported, Tax Court case (Case No VAT 872, decided 2 December 2013), dealt with the input-claiming vendor’s obligation to procure a tax invoice. The case dealt with barter transactions where no tax invoices were issued. Yekiso J, held:

  • The obligation to procure a tax invoice for purposes of claiming VAT inputs rests on the recipient vendor.
  • The fact that the vendor requested invoices from the supplier (who failed to provide same), did not leave the recipient vendor without a remedy. It could either have created a document deemed to be a tax invoice (under s20(2)), or it could have sought a court order compelling the supplier to issue the necessary invoices.
  • It was the recipient vendor’s responsibility to obtain tax invoices. SARS should not be ordered by the court to force the supplier to issue same.
  • Because the recipient vendor lacked tax invoices SARS was correct in denying it the VAT inputs.
The judgment indicates that a recipient vendor must do more than to merely request tax invoices from its supplier. A court order to compel the supplier might even be called for. Yekiso J also made it clear that it is not SARS’s duty to somehow strong-arm the supplier to force it to comply with its VAT Act obligations as far as tax invoices are concerned. To obtain the necessary tax invoices for VAT input purposes is basically the recipient vendor’s problem.

It is suggested that vendors in all instances timeously obtain from the operator the necessary documentation to substantiate their VAT input claims in respect of toll road usage, or risk facing VAT input add-backs should SARS conduct a VAT audit.

This article first appeared on



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