Follow these four rules when issuing a credit note

Simangele Mzizi, Fsp Business, 22 Oct. 2014

Tags: sars, issuing a credit note, rules for issuing a credit note, credit notes

According to experts behind the Practical Vat Loose Leaf Service, in terms of Vat law, you can issue a credit note when a sale or a supply takes place and one of the following happens to that supply (sale):

• The sale is cancelled;
• The nature of the supply changes or varies or has been altered;
• The amount changes – this could be due to a discount for prompt payment or for reaching certain volumes; and
• The goods or some of the goods are returned.

While Vat law makes it perfectly legal to issue credit notes, you must play by the rules to avoid SARS penalties and interest.

Here are the four rules you must follow when issuing a credit note…

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Stick to these four rules when you issue credit notes or be prepared to face SARS penalties

The following rules apply to credit notes:
Rule 1: The document must contain these details:
  • The words “credit note” in a prominent place;
  • Your name, address and Vat registration number;
  • The name, address, where the recipient is a registered vendor and the Vat registration number of the recipient; and
  • The date on which the credit note was issued.
Rule 2: The credit note must include either of these details:
  • The amount you reduced the supply on the tax invoice by and the amount of the excess tax; or
  • If you use the tax fraction to calculate your Vat, include either the amount the Vat has reduced by or a statement that the reduction includes an amount of tax and the rate of the tax included.
Rule 3: Your credit note must have a brief explanation of the circumstances that led to you issuing the credit note.
Rule 4: When you issue a credit note, you must ensure it has enough information for you to identify the transaction the credit note refers to.
Now that you know about these rules, follow them every time you issue a credit note so SARS doesn’t charge you penalties and interest.
PS: We strongly recommend you check out the Practical Vat Loose Leaf Service. It gives you tips, tools and advice to comply with the Vat Act.

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