Claiming Input VAT- To be or not to be?
If you as a VAT vendor thought you are able to claim the VAT on just any VAT/ tax invoice you have been issued, think again.
There are many traps that VAT vendors fall into by claiming VAT on an invoice when they are not entitled to do so. It is important as a VAT vendor and business owner to manage your VAT risks and to prevent leakages as far as possible.
The fundamental requirements to claim VAT on a VAT/tax invoice are as follows:
Prior to even considering claiming VAT on an invoice, you need to be a registered VAT vendor at the time that the valid invoice was issued to you. Voluntary VAT registration is allowed if you can prove that your taxable supplies during a 12-month period exceeds R50 000. If your taxable supplies are greater than R1 million for a 12-month period, you will be compelled to register as a VAT vendor. Taxable supplies include both vatable and zero-rated supplies.
When considering your “taxable supplies” for both voluntary and compulsory VAT registration, SARS will look retrospectively at the past 12 supply of goods or services. If there is however a contractual obligation to provide such taxable supplies in the next 12 months, then registration can take place prospectively. When you register for VAT, a VAT 101 form needs to be completed, bank statements, proof of address as well as company documents will need to be submitted to SARS.
When the above is met, you may claim VAT on a VAT/tax invoice if:
A tax invoice for a supply of less than R 5 000 has less stringent requirements for an input claim which are the following:
It must have the words “tax/ vat invoice” on the invoice.
The invoice must separately state the value of the supply and the VAT on the supply. The invoice must have a date on it as well as the suppliers name, registration number and registered address
For an invoice with a greater value than R5 000 the requirements are more stringent:
In addition to the requirements listed above, the buyers’ details need to be included which includes their valid VAT number as well as their full name and their registered address.
You, as a VAT vendor, need to be sure that all of the invoices on which you claim your input VAT meet the requirements and are kept proper record of as proof in the event of any future audits or verifications from SARS.
You need to be producing taxable supplies to claim any input. If you only partly produce taxable supplies and partly exempt supplies, then you will be required to apportion your VAT input claim.
The supply made to you must have been in the course of the furtherance of your enterprise and there needs to have been a direct link between the supply and the production of your taxable supplies in order for the VAT to be allowed as a claim.
So, unfortunately it is not as simple as just “claiming the vat” on an invoice that had VAT charged on it. Be sure to have your VAT risk controlled by ensuring you meet all of the above requirements before claiming any input tax on your VAT 201 form.