Invoicing in South Africa before you register for VAT
How a South African business that is not yet registered for VAT should set up and check its invoices in Achekam so they never read as tax invoices.
By Achekam · · 4 min read · For Running a business businesses in South Africa
Plenty of South African businesses trade for months or years before they register for VAT: a new consultancy, a home bakery that has started supplying cafés, a one-truck delivery business. Their invoices are perfectly valid invoices. What they must not be is tax invoices, and they must not add 15% VAT that the business has no right to charge.
A non-vendor that charges VAT creates a problem for itself and its customer. The customer may try to claim input tax it is not entitled to, and the business has collected money described as tax that it cannot simply keep. This article explains how to keep a non-vendor's invoices clean in Achekam, and the one PDF to watch.
When a document is titled Tax Invoice
Your VAT registration number lives in Settings, under Firm Profile. Documents that Achekam's server produces print that number and are titled Tax Invoice only when a VAT number has been entered.
For a business that is not registered, the rule is therefore simple: leave the VAT number field empty. Do not enter your income tax reference, your company registration number or "pending" in that field to make the profile look complete. An entry there is what tells the server to present documents as tax invoices.
The invoice-screen PDF that is always headed TAX INVOICE
There is an exception you need to know about. The invoice PDF downloaded or e-mailed from the invoice screen is always headed TAX INVOICE and cites the South African VAT Act, whatever your VAT number. The defect lies in the PDF made in the browser; the server's own template handles the heading correctly.
So a non-vendor who downloads an invoice from the invoice screen, or e-mails it straight from there, will send a document that calls itself a tax invoice. The figures can still be right, with no VAT on any line, but the heading is wrong for your status.
Until that is fixed, check every PDF before it goes. If the heading is wrong, explain in the covering e-mail that the business is not registered for VAT and that no VAT has been charged, so the customer's bookkeeper does not treat it as a tax invoice.
Achekam does not check whether you are registered
Achekam does not check whether a business is VAT-registered before charging VAT on its documents. The software will put 15% on a line if the line says 15%, whether or not SARS has registered you.
That puts the responsibility squarely on whoever raises invoices. In a business with more than one person invoicing, write it down: "We are not registered for VAT. No line carries VAT." And check a sample of invoices each month until the habit is settled.
SARS explains who may and who must register for VAT, and what counts as an enterprise, on its Register for VAT page. Keep an eye on your turnover against the thresholds there, because registration can become compulsory before you notice.
The VAT setting on each line
A South African business sets each invoice line's VAT to 15% or 0%. For a non-vendor, every line should be 0%.
Be careful with what 0% means on this screen. It does not tell zero-rated and exempt apart, and for a non-vendor neither label is really true: you are simply outside the VAT system. That is fine for your invoices, because what the customer needs to see is that no VAT was charged. It matters later, when you register and start choosing between 0% and 15% for real.
Two other defaults to watch:
- Lines with no rate. When a line states no rate, VAT is taken at the rate in force on the invoice date. For South Africa that is the approved 15% that has applied since 1 April 2018. A blank is not the same as 0%: set every line explicitly.
- Quotations. A quotation or proposal carries one VAT rate for the whole document, by default the approved standard rate for your country. A non-vendor's quote can therefore show 15% VAT unless someone changes it. How to handle quotes is covered in VAT on South African quotations.
Checking a PDF before it goes to the customer
A draft invoice can be changed or deleted. Once issued, it takes the next number in your sequence and posts to the ledger as debtors, sales and output VAT. That makes the check before issue the cheap one.
Before issuing, look at:
- every line's VAT setting, which should be 0%;
- the VAT total, which should be nil;
- the business details, which should show no VAT number.
After issuing, download the PDF and look at the heading before sending it. If you send invoices by e-mail from Achekam, you can attach the PDF with or without a pay link, and a failed send is reported as not sent, so you will know if a customer never received it.
Adding your VAT number on the day you register
When SARS registers you, the change is not just a setting. On the day your registration takes effect:
- enter the VAT number in Firm Profile, so server-made documents become tax invoices;
- start setting standard-rated lines to 15%, and decide which of your supplies are zero-rated or exempt;
- update the VAT rate on any open quotations that will turn into invoices after that date;
- tell customers on regular orders that VAT will appear from your next invoice.
Invoices dated before the effective date stay as they were. Do not reissue them with VAT. For how each line's VAT works once you are registered, including the gap between 0% and exempt, read VAT on invoice lines in South Africa. Today, open Firm Profile and confirm the VAT number field is empty if you are not registered.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
