A tax invoice is a document with prescribed contents. Section 20 of the Value-Added Tax Act 89 of 1991 sets out exactly what must appear on one, and a document missing any of those particulars is not a valid tax invoice however professional it looks.
That matters in both directions: a vendor must issue valid tax invoices, and a vendor claiming input tax must hold one. An invalid invoice means a disallowed claim, penalties and interest on assessment.
Business Requirements at a Glance
What a full tax invoice must contain under section 20 of the VAT Act.
- The words “Tax Invoice”, “VAT Invoice” or “Invoice” in a prominent place
- The name, address and VAT registration number of the supplier
- The name and address of the recipient, and the recipient’s VAT registration number where the recipient is a vendor
- An individual serialised number and the date on which the invoice is issued
- A description of the goods or services supplied
- The quantity or volume of the goods or services supplied
- The value of the supply, the tax charged and the consideration, or the consideration and a statement that it includes VAT and the rate charged
Registration and Legal Requirements
Only a registered VAT vendor may issue a tax invoice. A business that is not registered for VAT may not charge VAT, may not issue a tax invoice, and may not show a VAT registration number. Doing so is an offence and the amount charged as VAT is recoverable by SARS.
The invoice must be issued in South African currency for a standard-rated supply, subject to the rules for zero-rated exports. Where an invoice is issued in a foreign currency for a taxable supply, confirm the correct treatment with SARS.
The invoice must be issued within the period the Act requires after the supply. Confirm the current period with SARS.
An abridged tax invoice is permitted where the consideration is below a prescribed amount, with fewer particulars required. Confirm the current threshold and the reduced particulars with SARS, since the amount is set in the Act and revised.
Only one tax invoice may be issued per supply. Where a copy is provided, it must be marked as a copy.
Corrections are made by credit or debit note, not by reissuing an invoice with a different number. A credit note reduces the consideration; a debit note increases it. Both have their own prescribed particulars under the Act.
Documents and Ownership Information Required
What a business needs in place before it can issue tax invoices.
- VAT registration with SARS and a VAT registration number
- A registered entity or registered sole proprietorship, with a business bank account
- An invoicing system that produces sequential, unique invoice numbers
- Accurate customer records, including customers’ VAT numbers where they are vendors
- A record of every invoice, credit note and debit note issued
- Supporting documents for every supply — orders, delivery notes, contracts
- A system that cannot reuse or duplicate an invoice number
Tax, Licence and Compliance Requirements
An invoice missing a required particular is not a valid tax invoice. SARS can disallow an input tax claim supported by a defective invoice, and the disallowance carries interest and can carry penalties under the Tax Administration Act 28 of 2011.
The most commonly missing particulars are the recipient’s address, the recipient’s VAT number where the recipient is a vendor, and a proper description of the goods or services. “Services rendered” is not a description.
Check supplier invoices before paying them. If you are a vendor claiming input tax, the invoice you hold has to be valid. Ask the supplier to correct a defective invoice at the time, because obtaining a corrected invoice years later during an audit is difficult and sometimes impossible.
Verify a supplier’s VAT number. SARS provides a facility to confirm that a VAT number is valid and belongs to the supplier. Claiming input tax on an invoice from a business that is not registered produces a disallowance and can raise questions about the transaction.
Electronic invoices are valid where they meet the requirements, and the rules on electronic issue and retention should be confirmed with SARS.
Records must be retained. The Tax Administration Act requires records supporting a return to be kept for the prescribed period from submission, and longer where an audit, objection or appeal is open.
Process, Deadlines and Ongoing Obligations
Set the invoice template up correctly once, against the section 20 list, and every invoice afterwards is compliant. Most invoicing errors are template errors repeated thousands of times.
Review the template annually and whenever your business changes — a new trading name, a new address or a change in registration status all affect it.
Confirm the current requirements with SARS. Thresholds, prescribed periods and retention periods are set in legislation and revised, and the SARS website and its VAT guides are the authoritative source.
- Build the invoice template against the section 20 list, once
- Never charge VAT or show a VAT number unless registered
- Use sequential, unique invoice numbers that cannot be reused
- Describe the goods or services properly — not “services rendered”
- Include the recipient’s address and VAT number where they are a vendor
- Mark any duplicate clearly as a copy
- Correct errors by credit or debit note, not by reissuing
- Check supplier invoices for validity before paying them
- Verify supplier VAT numbers with the SARS facility
- Retain all records for the prescribed period
Frequently Asked Questions
What makes an invoice a valid tax invoice?
The particulars prescribed in section 20 of the VAT Act — the words “Tax Invoice”, supplier and recipient details, supplier’s VAT number, a serialised number, the date, a description, quantity and the value and tax.
Can I issue a tax invoice if I am not VAT registered?
No. Only a registered vendor may issue one, charge VAT or show a VAT number. Doing so otherwise is an offence and the amount is recoverable by SARS.
What happens if an invoice is defective?
SARS can disallow an input tax claim supported by it, with interest and possible penalties. Ask the supplier to correct it at the time — getting it fixed years later is very difficult.
How do I correct an invoice?
By credit note or debit note with their own prescribed particulars, not by reissuing an invoice with a different number.
Invoice particulars, thresholds, issue periods and retention rules are set in the Value-Added Tax Act and the Tax Administration Act and by SARS, and are revised. Confirm current requirements with SARS or a registered tax practitioner.