Tax Invoice Legal Requirements in South Africa

As a small business owner or freelancer, it is easy to get caught up in all your sales and purchases that you forget about checking to make sure all legal requirements are met, especially when it comes to tax. It is imperative, however, that you become familiar with the legal requirements of tax invoices and VAT if you don’t want to land yourself in hot water.

What is the difference between an ‘Invoice’ and ‘Tax Invoice’?

An invoice is simply a document stating that a certain amount needs to be transacted between two parties, usually in turn for a product or service provided. An example could be services rendered by a new freelancer who is not yet registered for VAT.

A tax invoice however, is a required legal document that needs to meet specific requirements as stated in the VAT Act of 1991. There are two kinds of tax invoice, dependent on whether the purchases exceeds R3000. I will expand on this soon.

When is VAT a requirement?

Value Added Tax (VAT) registration is required for any company, partnership, trust fund or individual that exceeds an income of one million rands in taxable supplies within the space of twelve consecutive months. Note though, that you may still register for VAT prior to reaching that threshold amount.

A person or legal entity that is registered for VAT is termed as a ‘vendor’.

What are the requirements for a tax invoice document?

Tax invoices must be issued within 21 days of the goods or services having been supplied. The tax invoice needs to be issued regardless of whether the customer requests it or not.

As I mentioned earlier, there are two kinds of tax invoices to consider;

Full Tax Invoice

The full tax invoice applies to taxable supplies or services that are equal to or greater than R300,00. It has the following requirements:

  1. The currency must be in South African Rands (ZAR).
  2. The term “tax invoice” must be clearly displayed.
  3. It must include the name and address of the supplier.
  4. The VAT registration number of the supplier must be visible.
  5. The name and address of the recipient must be included.
  6. If they are a vendor, the VAT registration number of the recipient must be included.
  7. A full description of the goods or services, and the volume of each must be stated.
  8. Always include the date of issue and a serialised invoice number.
  9. The tax amount (14%), must be clearly shown as a separate amount.
  10. The invoice must be structured to show the total sum of the goods or services; displayed as a sub total, tax amount and grand total.

Abridged Tax Invoice

This tax invoice applies when the value of the taxable supplies or services is less than R3000.00. The requirements that are needed on this type of invoice are similar to those for the full tax invoice.

  1. The currency must be in South African Rands (ZAR).
  2. The term “tax invoice” must be clearly displayed.
  3. It must include the name and address of the supplier.
  4. The VAT registration number of the supplier must be visible.
  5. A full description of the goods or services, and the volume of each must be stated.
  6. Always include the date of issue and a serialised invoice number.
  7. The tax amount (14%), must be clearly shown as a separate amount.
  8. The invoice must be structured to show the total sum of the goods or services; displayed as a sub total, tax amount and grand total.

So, where to now?

We suggest using our product, payPod, which is a free online invoicing system to generate PDF invoices that can be downloaded or emailed to your client. It is 100% free to use (really!).