This week’s column is going to focus on the importance of a tax invoice and the function it serves in relation to VAT registered operators and clients in general.

Tax Invoice

Value Added Tax (VAT) is invoice based and is accounted for on invoices generated on both cash and credit transactions. The VAT payable is the difference between output tax and input tax. Output tax is the tax charged on supplies made while input tax is the tax incurred by the registered operator on the supply of taxable goods and services. For one to claim input tax, he or she must be in possession of a valid tax invoice.

In some cases VAT registered clients encounter difficulties in identifying correct tax invoices for use in claiming input tax. In most cases clients claim input tax using any document that they would have received from their suppliers. This results in disallowances and unnecessary delays in claiming refunds.  It is therefore vital that the clients have a clear understanding of the salient features to be contained on a VAT invoice and demand that this information to be included at the same time a purchase of goods or service is made.

Salient Features to be included on a VAT Invoice

A valid tax invoice should have the following mandatory features:

v  The words “tax invoice” should be  in a prominent place;

v  the name, address and  VAT registration number of the supplier;

v  the name and address of the recipient and if recipient is a registered operator, the VAT registration number of the recipient;

v  an individual serialised number and the date upon which the tax invoice is issued;

v  a description of the goods or services supplied;

v  the quantity or volume of the goods or services supplied;

v  Price and VAT charged

In some cases clients accept invoices without supplier’s VAT registration number, the recipient’s address or VAT number and used to claim input tax. It should be emphasised that only invoices bearing all the above stated salient features are accepted by ZIMRA for use in claiming input tax. It should also be noted that input tax is only claimable on tax invoices issued by a supplier who is registered for VAT.

In the event of any attempts being made to claim input tax using an invalid tax invoice, this results in the amount incorrectly claimed being disallowed and a penalty of 100% is levied in accordance with Section 66 of the VAT Act. In cases where a  client suspects that he/she is   dealing with a suspicious supplier,  he or she is free to contact the nearest ZIMRA office for confirmation as to  whether the supplier is registered for VAT or not.

Lastly our valued clients are advised to strictly adhere to the requirements of a valid tax invoice so that they can successfully claim input tax and avoid unnecessary delays in claiming the refunds.