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Four situations when issuing a credit note can help you avoid Vat complications

by , 06 November 2014
If you're a Vat vendor, you know all about tax invoices. They're the most important document in the Vat chain.

But there's another Vat document that's almost as important.

It's a credit note and getting this wrong could result in Vat audits and hefty penalties.

To help you avoid this, we're revealing exactly when you should issue credit notes...

 

Give your client credit notes in these four situations

 
Issue credit notes when a sale or a supply takes place and one of the following subsequently happens to that supply (sale):
 
1. You or the client cancels the sale;
 
2. The nature of the supply changes or varies or you alter it;
 
3. The amount changes – this could happen because of a discount for prompt payment or for reaching certain volumes;
 
4. Your client returns the goods or some of the goods.
 
Here's how issuing credit notes will affect your company's Vat.
 
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Credit notes will have this effect on your Vat

 
If you've already declared your output tax to SARS on a sale/supply, and you issued a credit note for any of the above reasons, it means you've incorrectly accounted for Vat as a result – whether too much or too little!
 
If, on the other hand, you haven't declared your output tax at a time of issuing a credit note, simply reduce it and use the copy of the credit note to substantiate your reason for doing so. 
 
If you have any questions about issuing credit notes, check out the Practical Vat Loose Leaf Service
 


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