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What's the difference between a regular invoice and a tax invoice?

by , 31 October 2013
Do you know the difference between a regular invoice and a tax invoice? If you don't, you better read on to ensure your company's complying with the Vat Act.

It's important to understand there's a difference between an invoice and a tax invoice.

Invoice vs. tax invoice: Here's what you need to know

Invoice: An invoice is any document that notifies a person of his or her obligation to make a payment.

Tax invoice: A tax invoice is a special document required by the Vat Act, says the Practical Vat Loose Leaf Service.

The Loose Leaf Service adds, 'you need it to claim any input tax credits in your Vat return for taxable supplies you've received, like products you buy to enable you to deliver a service or sell a product in your business, for example, building materials if you do construction, office supplies and phone usage.'

Essentially, a tax invoice provides an audit trail in your records and verifies your output tax.

Be warned: If you issue a defective tax invoice, or fail to issue one within 21 days of making a supply, you could face two years in jail or a fine for R80 000.

Here are the eight requirements of a valid tax invoice.

The bottom line: The most important link in the Vat chain is the Tax invoice. Get it wrong, and you won't be able to deduct input tax on your purchases. Knowing the difference between an invoice and tax invoice will help ensure you comply with the Vat Act.

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