Where output tax has already been declared to SARS on a sale or supply and a credit note is issued, due to any of the above reasons, it's obvious that Vat has been accounted for incorrectly, whether for too much or too little, warns the Practical Vat Loose Leaf Service.
So how can you avoid this and account for Vat on credit notes correctly?
Here's how you can manage Vat when dealing with credit notes
This is how Vat works if you issue credit notes:
If the original amount payable is reduced or cancelled, the seller can reduce the output tax declared. And the buyer must reduce the input tax by the reduction in input tax, as shown on the credit note.
In this case, you'd issue a credit note to cancel the original invoice and then issue a new tax invoice.
Please note that if details of a prompt payment discount are shown on the face of a tax invoice, it's not necessary to issue a credit note when the customer takes up the discount.
Also keep in mind that if you cancel a tax invoice before issuing it, all copies of the cancelled invoice must remain with the supplier.
Here's what the Vat implications are when you receive a credit note:
Are there any requirements for credit notes?
Yes, credit notes must contain the following:
Now that you know how Vat works with credit notes, make sure you never get it wrong.