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FAQ - 1 June 2016

Wednesday, 01 June 2016   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. Does the word invoice after "pro-forma" make this a valid tax invoice?

Q: A client uses the wording "pro-forma” on his invoice to collect a deposit from his clients. If they do not pay him then he does not issue a tax invoice and therefore does not declare the vat thereon. Is this correct?

A: There are two issues raised in this request.  

The first relates to a deposit.  In terms of the proviso to the definition of deposit in section 1(1) of the Value-Added Tax Act, "a deposit (other than a deposit on a returnable container), whether refundable or not, given in respect of a supply of goods or services shall not be considered as payment made for the supply unless and until the supplier applies the deposit as consideration for the supply or such deposit is forfeited”.  What the document is called that is used to collect the deposit is irrelevant. 

With regard to a valid tax invoice, section 1(1) provides that it is document provided as required by section 20.  Both sections 20(4) (full tax invoice) and 20(5) requires that a "tax invoice” must "contain the … words "tax invoice”, "VAT invoice” or "invoice” …”  

An invoice, also defined in section 1(1), means a document notifying an obligation to make payment.  If a ‘pro forma invoice’ notifies an obligation to make payment, it would be an invoice as envisaged in the Value-Added Tax Act.  

It may well be that the phrase "pro forma invoice” doesn’t constitute a valid tax invoice, but that may be irrelevant.   This is because the time of supply is "deemed to take place at the time an invoice is issued by the supplier or the recipient in respect of that supply or the time any payment of consideration is received by the supplier in respect of that supply, whichever time is earlier.”  In other words, the issuing of a valid tax invoice is not relevant to when the tax must be accounted for if an invoice was issued.  

2. Can a minor individual be registered for income tax?

Q: We have a client who wants us to register his two daughters who are minors for income tax. The reason is to distribute income from a trust to them. I know that S7 says that the trust distributions to a minor will be taxed in the parents hands, however, the question we have is can a minor be registered for income tax as per tax act?

A: The obligation to register as a taxpayer is to be determined mainly under section 66 of the Income Tax Act, read with the annual notice to submit returns, and then also the Tax Administration Act.  In terms of the notice relevant to the 2015 year of assessment, a natural person who, at the end of the year of assessment, was under the age of 65 and whose gross income didn’t exceed R70 700, does not have to furnish a return.  If the taxable income of the individual concerned is also less than this amount, quite likely under the circumstances, no tax would be payable.  This also applies to minor children.  

We accepted that the two minor children are beneficiaries of the trust – in other words, that the trustees are mandated to vest the amounts.  The fact that the amount was vested in a minor doesn’t make it ‘non-taxable’ as you say.  Section 25 of the Income Tax Act, which as you indicated, is subject to section 7 (in this instance probably section 7(3)).  In that instance there will be no amount that accrues to the minor and no section 25 application.  

Disclaimer: Nothing in these queries and answers should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answers, SAIT do not accept any responsibility for consequences of decisions taken based on these queries and answers. It remains your own responsibility to consult the relevant primary resources when taking a decision.  



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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