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Revealed: Two ways to reflect the Vat amount on a tax invoice correctly

by , 07 January 2014
If you're a Vat vendor, you'll know this golden rule very well: 'The most important link in the Vat chain is the tax invoice'. You'll also be very aware that if you get your tax invoice wrong, you won't be able to deduct input tax on your purchases. Now that's a risk you can't afford to take. Use these two ways to reflect the Vat amount on a tax invoice correctly.

Without valid tax invoices, you can't prove your input tax claims and your customers who are registered for Vat can't claim the Vat back you charged.

Essentially, the tax invoice provides an audit trail in your records and verifies your output tax. This is important if SARS checks up on your record-keeping, especially now that the Tax Admin Act is in place.

Seeing as the Practical Vat Loose Leaf Service states that 80% of the assessments raised by SARS relate to defective tax invoices, it's in your best interest to ensure yours are correct.

Here are two methods you can use to correctly reflect the Vat amount on a tax invoice

Method 1: All individual amounts reflected
Price (excl Vat): R6 000
Vat charged: R 840
Total including Vat: R6 840

Method 2: Total transaction amount including Vat only and the Vat rate charged
The total transaction @ R6 840
Vat included @ 14%

You can use any of these two methods on your tax invoice to show the Vat levied.

If the customer is a registered Vat vendor, his Vat registration number must appear on the supplier's invoice if the tax invoice is for more than R5 000. This helps eliminate Vat fraud by creating an audit trail for SARS for follow.

Well there you have it. Using these two methods will help ensure you show the Vat amount on the tax invoice correctly.

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