Author: Carmen Moss-Holdstock (Cliffe Dekker Hofmeyr)
An amendment has been proposed in the 2014 Budget Speech relating to the time frame where debit or credit notes under s21(1) of the Value-Added Tax Act, No 89 of 1991 (VAT Act) are required to be issued.
Under s16(2) of the VAT Act, a vendor can only claim an input deduction if he is in possession of a tax invoice or debit note or credit note. A ‘tax invoice’ is a document that needs to meet the requirements of s20(4) and s20(5) of the Act for the vendor to claim an input deduction. An ‘invoice’ on the other hand is a ‘document notifying an obligation to make payment’ and the issuing of which may affect the timing of supply.
In terms of s20(1) of the Act, a registered vendor must within 21 days of the date of supply issue a tax invoice which complies with the requirements under s20(4) and s20(5) of the VAT Act.
Where a vendor has accounted for an incorrect output tax, he can issue a debit or credit note to make an adjustment in calculating the tax payable by him where the supply was either cancelled, or where there was a fundamental variation or alteration in the nature of the supply, or due to an alteration of an agreement or where the goods or services supplied are returned.
The problem arises when a vendor has either issued a tax invoice for an incorrect amount or has omitted certain information on the tax invoice as required by s20(4) and s20(5) of the Act. The vendor is unable to simply re-issue a tax invoice reflecting the correct amount by way of a debit or credit note under s21(1) of the Act, or to correct any information omitted on the tax invoice in order to comply with s20(4) and s20(5) of the Act. Vendors may have incorrectly issued debit and credit notes that may not technically have been in line with the Act. A further and more critical issue that arises is that the VAT Act does not provide a remedy where a vendor has failed to issue a debit or credit note within a reasonable time period. The VAT Act fails to provide a remedy under circumstances where the other vendor/party has failed or refuses to provide or issue the relevant credit or debit note as the case may be.
In the case of an agent, where the agent makes a supply of goods or services for or on behalf of any other person who is the principal of the agent, that supply shall be deemed to be made by the principal and not the agent. Provided that where that supply is a taxable supply and that agent is a vendor, the agent may issue a tax invoice or debit or a credit note.
The Commissioner for SARS has issued a proposal delivered in the Budget Speech 2014, whereby SARS intends to impose time limits upon when a credit or debit note needs to be issued by. This will provide certainty to vendors who may need to issue or provide another vendor with the relevant credit or debit note. Agents will also need to comply with this provision.