VAT Invoices: What Every Accountant Needs to Know
A tax invoice is one of the most important documents in South Africa’s VAT system. It affects both the supplier and the recipient—without a proper tax invoice, a business cannot claim VAT deductions, and non-compliant invoices can result in penalties from SARS.
Under the Value-Added Tax Act, 89 of 1991 (VAT Act), a supplier (vendor) must issue a tax invoice that complies with SARS requirements within 21 days of making a taxable supply. On the other hand, a recipient (vendor) can only claim an input tax deduction on VAT paid if they have a valid tax invoice at the time of claiming the deduction.
If you’re running a business or handling invoices, it’s crucial to understand when you need a tax invoice, what it must include, and how using accounting software can simplify compliance. This guide covers everything you need to know, plus practical tips to keep your invoicing accurate and hassle-free.
What Is a Tax-Compliant Invoice?
A tax-compliant invoice meets all the legal requirements in the Value-Added Tax (VAT) Act. Missing information on an invoice means VAT cannot be claimed, which can affect cash flow and increase your business’s tax liability.
When Is a Tax Invoice Necessary?
If your business is registered for VAT, you must issue tax invoices based on the following rules:
Full Tax Invoice – Required for transactions over R5,000 (including VAT).
Abridged Tax Invoice – Required for transactions between R50 and R5,000 (including VAT).
No Tax Invoice Needed – If the transaction is R50 or less, but a till slip or sales docket must be kept for VAT claims.
What Must Be Included in a Tax Invoice?
Full Tax Invoice (for transactions over R5,000 including VAT)
A full tax invoice must contain:
The words “Tax Invoice”, “VAT Invoice”, or “Invoice”
The supplier’s name, address, and VAT registration number
The recipient’s name, address, and VAT registration number (if applicable)
A serial number and the invoice date
A detailed description of the goods or services provided
The quantity or volume of goods/services supplied
The value of the supply, the VAT amount, and the total amount payable
Abridged Tax Invoice (for transactions between R50 and R5,000 including VAT)
An abridged tax invoice must include:
The words “Tax Invoice”, “VAT Invoice”, or “Invoice”
The supplier’s name, address, and VAT registration number
A serial number and invoice date
A description of the goods or services
The value of the supply, the VAT amount, and the total amount payable
Address Requirements on Tax Invoices (BGR 21)
According to SARS Binding General Ruling (BGR) 21, the supplier’s and recipient’s address on a tax invoice must be one of the following:
The physical address of the business
The postal address of the business
Both the physical and postal address
The invoice must reflect the branch’s address for VAT-registered branches or divisions. Additionally, the tax invoice must show the foreign recipient’s address for zero-rated exports.
Minimum Requirements for Credit and Debit Notes (Section 21(3))
A credit note is be issued when:
A vendor overcharged a customer for a supply.
A return or refund is processed, reducing the original taxable amount.
There is a cancellation of a taxable supply.
A debit note is be issued when:
A vendor undercharged a customer.
The original invoice did not reflect the correct tax amount.
Note: The vendor must issue a credit or debit note only if the original tax invoice has already been issued and adjustments to VAT are required.
For a credit or debit note to be valid for VAT purposes, it must contain:
The words "Credit Note" or "Debit Note" clearly stated.
The name, address, and VAT registration number of the supplier.
The name and address of the recipient.
The original tax invoice number being adjusted.
The date of issue of the credit or debit note.
A detailed explanation of why the note was issued.
The adjusted VAT amount and the new total consideration.
If applicable, the exchange rate used if the original invoice was issued in a foreign currency.
Note: If a full tax invoice was originally issued, the credit/debit note must also include all the required details from the original tax invoice.
Practical Tips for Maintaining Accurate Tax Invoices
Staying on top of invoicing doesn’t have to be complicated. Follow these tips to ensure your invoices are always compliant:
Keep accurate records – Track and record all sales and purchases to complete VAT returns easily.
Issue tax invoices on time – Set a schedule to generate and send invoices promptly.
Use a unique numbering system – Invoices should be sequentially numbered to avoid missing documents.
Verify VAT registration numbers – Check your customer’s VAT registration status before including their details.
Create a template with all required fields and reuse it for every invoice to save time and prevent errors.
Benefits of Using Accounting Software for Invoicing
Manually issuing invoices can be time-consuming and prone to mistakes. Accounting software can automate invoicing and ensure every tax invoice meets SARS requirements. Benefits of using accounting software include:
Save tax-compliant invoice templates – Easily create and retrieve invoices with pre-filled required fields.
Schedule recurring invoices – Set up automatic invoicing for repeat clients.
Convert quotes to invoices – Quickly turn approved quotes into tax invoices.
Send automatic invoice reminders – Reduce late payments with automated email reminders.
Generate invoices from anywhere – Use a mobile app to issue invoices remotely.
Track payments in real-time – Instantly see which invoices are paid and which are outstanding.
Examples of software vendors can use to generate tax-compliant invoices and stay VAT-compliant are QuickBooks or SAGE.
Do I Need to Charge VAT on My Invoices?
Mandatory VAT Registration applies if your annual turnover exceeds R1 million, you must register for VAT and charge it on your invoices.
Voluntary VAT Registration: You can register voluntarily if your turnover exceeds R50,000 in the past 12 months.
Turnover Tax Exemption: Businesses registered for turnover tax do not need to charge VAT.
Read more about these in our previous article on Types of VAT Registration.
Benchmark your invoice to our example Tax Invoice and Credit Note.
