7
T
imes are tough. Profitability is difficult to maintain in
the face of rising petrol costs, labour demands and
a slowing economy. Effective risk management is
crucial to your survival especially when margins are under
pressure. This applies to tax related paperwork as much
as it does to route optimisation and load protection.
Cross border deliveries have their own set of demands but
failing to get things right at home could leave you out of
pocket to the tune of millions. Be warned; if you’ve paid
your input VAT but don’t possess the associated tax invoice,
you may not deduct the input tax you’ve paid on the goods
or services purchased. If you make the deduction SARS can
– and will – add it back. To make things worse, SARS may
also impose a percentage-based penalty.
This is what happened in a recent case before the
Pretoria Tax Court. A vendor CC deducted input tax of
close to R4.5m on a VAT-return that was not supported
by the relevant tax invoices.
The CC had actually obtained the goods from another
VAT-registered supplier and based on the facts of the
case, there was no indication that it would have been
denied the input tax deduction if it did indeed have the
tax invoice.
Allegedly, someone in the supplier’s service had
committed fraud and this is why the CC did not receive its
tax invoices. SARS learnt of this whilst instituting a tax audit
on the return, and then issued an assessment on 7 March
2008 reversing the full amount.
This case highlights a problem that could be widespread.
There are instances other than fraud where tax invoices
can’t be obtained by recipient companies. The Value-
Added Tax Act, No. 89 of 1991 (the VAT Act) states
that companies may only claim input tax on supplies
supported by valid tax invoices.
No paperwork, no mercy
Missing VAT registration numbers and incomplete or missing tax invoices could render your input VAT
claims invalid.
The CC in this case asked SARS to direct that a tax
invoice was not required, in the circumstances. When
SARS refused, the CC objected and then appealed
to the disallowance of the input tax deduction. The
Court agreed that SARS was correct to disallow the
objection in line with the relevant objection and appeal
provisions, strictly applied. So the company lost R4.5m
for the lack of an invoice.
The Court didn’t consider whether or not it would be
possible to allow the deduction on the basis of a person’s
constitutional right to ‘administrative action that is lawful,
reasonable and procedurally fair.’
So for now, VAT registered companies andCCs arewarned.
Ensure that all input tax invoices are compliant, and make
sure that the record of invoices is complete. Another
problem that may be encountered by newly established
businesses involves delays in the VAT registration process
that could render tax invoices invalid.
A tax invoice is invalid if,
inter alia
, it does not reflect
the VAT registration number of the customer, who will
not have a VAT registration number until SARS has
processed its registration. SAICA (South African Institute
of Chartered Accountants) has made submissions
to and consulted with National Treasury and SARS,
requesting amendments to the VAT Act to resolve this
registration problem.
Somaya Khaki, SAICA’s Project Director: Tax Suite says that businesses that
are unsure about their tax compliance status should consult their accountants
or find a professional tax consultant at
This is a tax
information database powered by SAICA and is the definitive resource for
anyone needing to consult a tax professional. Simply access the website,
click on ‘Find a Tax Specialist’, select the relevant options and link up to an
appropriately skilled tax professional in your area. Better safe than sorry!
Ensure that all input tax invoices
are compliant, and make sure that the
record of invoices is complete.
