This page is written from the recipient’s side: what to check on a supplier’s invoice before you pay it and before you claim input tax on it, because a defective invoice becomes your problem on assessment rather than the supplier’s.
A disallowed input tax claim carries interest and can carry penalties, and by the time an audit raises it the supplier may be uncontactable. Checking at the time is the only reliable protection.
Business Requirements at a Glance
What to check on every supplier tax invoice.
- 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
Verify the 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 a registered vendor produces a disallowance, and it can raise wider questions about the transaction.
Check that your own details are correct. A full tax invoice must show the recipient’s name and address, and your VAT number where you are a vendor. Suppliers routinely get these wrong, and it is your claim that fails.
Check the description. “Services rendered”, “consulting” or “goods supplied” is not a description of what was supplied. A vague description is one of the most common defects and it is easy to have corrected at the time.
Check the arithmetic and the VAT rate applied. Errors in the calculation are common on manually produced invoices.
Check that it says “Tax Invoice” and carries a unique serialised number and a date.
Ask for a corrected invoice immediately where anything is wrong. A supplier will correct an invoice this month; the same supplier may be gone in three years when an audit raises it.
Documents and Ownership Information Required
What a recipient needs in place.
- VAT registration, to claim input tax at all
- A process that checks invoices for validity before payment or before the VAT return
- A record of every supplier invoice, credit note and debit note received
- Supplier records including verified VAT numbers
- Supporting documents linking each invoice to a real supply — orders, delivery notes, contracts
- Retention of all documents for the period the Tax Administration Act requires
- A process for obtaining corrected invoices promptly
Tax, Licence and Compliance Requirements
Input tax is denied on certain expenses by the Value-Added Tax Act 89 of 1991, including entertainment and certain motor vehicles, subject to exceptions in the Act. An invoice being valid does not make the claim allowable — the expense must also qualify.
Apportionment applies to mixed use. Where an expense relates partly to taxable supplies and partly to exempt or private use, only the taxable portion may be claimed, on a basis the Act permits. Getting apportionment wrong is a frequent audit finding.
The time of supply determines the period in which input tax may be claimed, and there is a limit on how far back a claim may be made. Confirm the current rules and the period with SARS.
Keep the invoice, not just the payment. Proof of payment is not a substitute for a valid tax invoice. A claim supported only by a bank statement fails.
Records must be retained for the period the Tax Administration Act 28 of 2011 prescribes from submission of the return, and longer where an audit, objection or appeal is open. Audits reach back years, and the invoice you cannot produce is the one that costs you.
An assessment can be objected to. Where SARS disallows a claim you believe is valid, the Tax Administration Act provides for objection and appeal within prescribed periods. Those periods are strict — act promptly and take advice.
Process, Deadlines and Ongoing Obligations
Build the invoice check into the payment process rather than the VAT return. Checking at the point of payment means the supplier is still engaged and a correction is routine.
Reconcile the VAT account monthly so errors surface while the documents are still at hand, and file every supplier invoice against the supply it relates to.
Confirm every rule and period with SARS or a registered tax practitioner, since they are set in legislation and revised.
- Verify supplier VAT numbers with the SARS facility
- Check that your own name, address and VAT number are correct
- Reject vague descriptions — “services rendered” is not a description
- Check the arithmetic and the VAT rate applied
- Ask for a corrected invoice immediately, not at audit time
- Check the invoice before paying it, not before filing
- Remember that a valid invoice does not make a denied expense claimable
- Apportion correctly where an expense has mixed use
- Keep the invoice — proof of payment is not a substitute
- Object within the prescribed period if a claim is disallowed
Frequently Asked Questions
Why check a supplier’s invoice?
Because a defective invoice becomes your problem on assessment. SARS can disallow your input tax claim with interest and penalties, and by then the supplier may be uncontactable.
What are the most common defects?
A vague description, your own details missing or wrong, an unverified or invalid supplier VAT number, and arithmetic errors on manually produced invoices.
Is proof of payment enough?
No. A valid tax invoice is required. A claim supported only by a bank statement fails on audit.
What if SARS disallows a valid claim?
The Tax Administration Act provides for objection and appeal within prescribed periods. Those periods are strict — act promptly and take advice.
Invoice particulars, input tax rules, apportionment, claim periods and retention requirements are set in the VAT Act and the Tax Administration Act and by SARS, and are revised. Confirm current requirements with SARS or a registered tax practitioner.