6 Min. Read

Tax Invoice Requirements in South Africa

Dec 1, 2021

Have you been wondering what information you need to include in your invoices? If you’re a new small business or you have just started charging your customers, there are certain requirements to follow.

The good news is that the South African Revenue Service (SARS) has outlined all the necessary information. Let’s take a closer look at all the tax invoice requirements in South Africa.

Here’s What We’ll Cover:

What Are Tax Invoices?

Types of Invoices

What Is Required on a Tax Invoice?

What Is Required on an Abridged Tax Invoice?

Do You Have to Collect VAT?

Key Takeaways

What Are Tax Invoices?

South Africa uses a Value Added Tax (VAT) system for businesses. This means that you’re allowed to deduct the VAT that you incur on various business expenses. The VAT gets collected based on the supplies that your business makes, or your output tax.

Not issuing proper tax documents means that you can’t deduct the input tax that you incur from your business expenses. The VAT Act outlines that a tax invoice must contain specific and relevant information. You need to provide details about the taxable supply made and who was involved in the transaction.

As a small business, you’re required to issue a valid tax invoice when you exceed a price of R5 000. This gets referred to as consideration for the supply. You can also issue an abridged tax invoice if the consideration for the supply is R5 000 or less.

When you do this, you will need to provide either a sales docket or a till slip that indicates the VAT charged. This helps to verify the amount of input tax that got deducted from the original invoice. You will also need to do this with any previous invoices.

What Are Tax Compliant Invoices?

There are some different invoice types. They need to contain the relevant information that’s necessary to comply with the VAT Act. If for some reason you don’t include the required information then you can’t collect VAT.

Types of Invoices

Generally, there are two main types of tax invoices for you to consider. They’re the Fill Tax Invoice Requirements and the Abridged Tax Invoice Requirements. It’s also worth noting that there is a difference between a tax invoice and an invoice.

An invoice is going to be documented proof of a transaction. It outlines when the transaction got conducted and the specified amount to be paid. It can also include things such as charges, refunds, payments, and specific dates.

Tax invoices, on the other hand, are legal documents that get submitted to customers. They include tax, the merchant’s identity, business number information, and item descriptions. As well, they’re going to include the total quantity and a foreign currency stamp that needs to be made visible.

VAT is a type of indirect tax that gets placed on goods or services when they’re consumed within the economy. It’s specifically applied towards products that have a rise in value and it’s usually charged at the production and distribution stages.

Essentially, this allows the customer to only have to pay for the purchase price of the product. Which doesn’t induce other material costs that were already taxed before they received the product. South Africa requires business owners to include a 15% inclusion on the required prices.

If you incur a VAT rate while you do business then you do have the opportunity to claim it back. Typically, most VAT returns get completed every two months.

What Is Required on a Tax Invoice?

For a tax invoice to get considered to be valid, you must include some specific information. But this is only if the full tax invoice amount is over R5 000. Here’s what you need to include:

The name, address, and VAT registration number for your small business
The words “Invoice”, “Tax Invoice” or “VAT Invoice”
If the recipient is a vendor, their name and address
If the recipient is a vendor, their VAT identification
The serial number and the date the invoice was issued
A complete and accurate description of the goods or services that were included in the invoice
The volume or total quantity of the goods or services that you supplied
The value of the supply
The total amount of tax that was charged
The overall consideration of the supply, including the value and the tax

What Is Required on an Abridged Tax Invoice?

For an abridged tax invoice to get considered to be valid, it must include the following information. And this is for an amount that ranges between R50 and R5 000.

The name, address, and VAT registration number for your small business
The words “Invoice”, “Tax Invoice” or “VAT Invoice”
The serial number and the date the invoice was issued
A complete and accurate description of the goods or services that were included in the invoice
The value of the supply, the amount of tax charged and the consideration of the supply

Do You Have to Collect VAT?

For VAT purposes you are going to need to first register for your business to collect it. You can do this voluntarily if your annual turnover exceeded R50 000 in the previous 12-month period. That said, if you have registered your business for turnover tax, then you aren’t required to charge VAT on your invoices.

However, you must register your business and collect VAT if you have an annual turnover that exceeds R1 million. Or if you expect to exceed an annual turnover of R1 million then you must follow the VAT reporting rules.

Key Takeaways

There can be a lot to know and understand when it comes to issuing an invoice. One of the biggest things to keep in mind is that an invoice is different compared to a tax invoice. An invoice is a document that a transaction occurred and it will have a different invoicing process. It’s a request for payment that includes applicable taxes.

A tax invoice is going to include contact details about the merchant and their business number. As well as item descriptions and their total quantity. You must also include your business contact address and your VAT tax registration number.

Knowing the requirements for tax invoices can help ensure that you invoice a customer with the correct tax rates and the correct details. You can make sure that any future VAT charges are done accurately, even if it’s with foreign suppliers. This way, you can also abide by the rules set by the tax authorities.

Did you enjoy reading this guide? Head over to our resource hub for more content!