Gone are the days where Value Added Tax (VAT) registered business operators would scribble an invoice, send it to a client and the client enjoys a deduction of input tax. Recently, Parliament enacted most of the proposed revenue measures by the minister of finance and economic development, Prof Mtuli Ncube. One of the key changes on the VAT law is the claiming of input tax on local supplies. It is very vital that VAT registered operators are fully conversant with the new requirements to avoid falling into a VAT pit hole. I am sure we all need not to be reminded about circumstances where one goes against the tax laws. However, allow me to shed some light and help you understand the new requirements for claiming input tax.
Input tax
Technically, input tax refers to VAT that is incurred by a VAT registered taxpayer on acquisition of goods or services. Accordingly, the Input tax may be deducted by the registered taxpayer where such goods or services acquired are used to produce taxable supplies. Just so that we are all on the same page, taxable supplies refer to those goods or services that would ordinarily be charged a VAT rate of 14.5% or 0%. For a taxpayer to claim an input tax credit on local purchases there are specific compliance requirements stipulated by the law that must be adhered to.
Prior to 1 January 2022, input tax on local purchases could only be claimed by a VAT registered taxpayer in possession of a valid tax invoice. Per the old provisions of the Act, a valid tax invoice was required to exhibit the following features:
- Words “tax invoice” prominently placed
- The supplier’s name, address and VAT registration number
- The name, address and VAT registration number of the customer
- Invoice number and invoice date
- Description of goods or services (including quantity or volume)
- Value of the supply and VAT charged
Consequently, an invoice that falls short on any one of these features would be rendered as invalid and any input tax claimed would be disqualified resulting in additional tax, penalties and interest. Let us now turn to the new requirements.
Fiscalisation
Fiscalisation is technically a requirement for VAT registered taxpayers to record their sales through a fiscal device. The device produces an invoice technically referred to a ‘fiscal tax invoice’. It is however vital to note that the Fiscalisation law was introduced in 2010. The law actually requires every VAT registered operator to fiscalise i.e., record all sales through a fiscal devise. Accordingly, due to low compliance by taxpayers It is apparent that the taxman was struggling to enforce this provision hence, the new changes.
With effect from 1 January 2022, the definition of a tax invoice was changed to align it with the requirements of the Fiscalisation law that was launched through SI 104 of 2020. The definition now reads, ‘tax invoice means a fiscal tax invoice provided by a registered operator and printed by a fiscalised electronic register or fiscal memory device used by a registered operator for the purpose of section 20.’ This definition actually changed the basis of claiming input tax as you will see below
Valid Tax Invoices
Accordingly, this amendment now renders any invoice other than invoices printed by a fiscal device as invalid and cannot be used to claim input tax. Additionally, the words “tax invoice” now need to be replaced with words “fiscal tax invoice”, all other features required to be shown on the invoice remain the same. These new requirements are effective from 1 January 2022 going forwards. Further, the new law provides that all-unclaimed input tax on invoices produced prior to the effective date remain claimable for as long as the tax invoice is valid as per the old requirements and the invoice is less than 12month old from the date of invoice. However, this is only applicable up to 31 March 2022.
Conclusion
The new Fiscalisation requirements will undoubtedly coerce VAT registered operators to comply as failure may lead to loss of business. This is predominately based on the fact that input tax incurred on unfiscalised operators is automatically a prohibited claim.
