Is an Emailed invoice valid?

by Christopher de Zeeuw on July 14, 2014 No comments

In order to be able to claim an input tax deduction, the VAT Act requires a vendor to obtain and retain a “document” that constitutes a valid tax invoice. The Act furthermore provides that a “document” includes any printout of information generated, sent, received, stored, displayed or processed by electronic means. It would appear, therefore, that a tax invoice sent by email would qualify as a valid tax invoice if the formal requirements for a valid tax invoice have been met.

The action of sending documentation electronically is however, not free from regulation. All applicable legislation and regulations must be considered and complied with, in order for e-invoices to be lawfully binding. Registered vendors wishing to submit an electronic invoice must comply with Section 20 of the VAT Act, read with the VAT 404 Guide for Vendors and VAT NEWS 20 (both of which are available on the SARS website. As per the VAT 404 Guide for Vendors, electronic invoicing is also required to comply with the Electronic Communications and Transactions (ECT) Act. Refer below for a summary of these requirements.

 

VAT Act:

As per Section 20(4) of the VAT Act, a tax invoice for an amount exceeding R5 000 (full tax invoice) shall be in the currency of the Republic and shall contain the following particulars:

  1. The words “tax invoice” in a prominent place;
  2. the name, address and VAT registration number of the supplier;
  3. the name, address and, where the recipient is a registered vendor, the VAT registration number of the recipient
  4. an individual serialized number and the date upon which the tax invoice is issued
  5. full and proper description of the goods (indicating, where applicable, that the goods are second-hand goods) or services supplied
  6. the quantity or volume of the goods or services supplied
  7. either—
    1. the value of the supply, the amount of tax charged and the consideration for the supply; or
    2. where the amount of tax charged is calculated by applying the tax fraction to the consideration, the consideration for the supply and either :
      1. the amount of the tax charged, or
      2. a statement that it includes a charge in respect of the tax and the rate at which the tax was charged.

VAT 404 Guide for Vendors

The guide confirms the requirements for a VAT invoice as stipulated by the VAT Act and in addition makes the following reference to electronic invoices in Chapter 11:

“The VAT Act includes specific requirements on the issuing of tax invoices, debit and credit debit notes, and the storage of these documents.  Although  the  requirements  were  drafted  when  most  vendors  followed  the traditional  manner  of  physically  issuing  and  retaining  documents  in  hard-copy  format,  they  are  equally applicable  to  vendors  that  do  “e-invoicing”.

In  VAT News  20  (September 2002)  and  VAT  News  22 (September 2003),  guidelines  were  provided  in  this  regard  and  it  was  stated  that  vendors  do  not  need  prior approval  from  the  Commissioner  to  implement  e-invoicing.  However,  it  should  be  noted  that  generally  the electronic  transmission  and  retention  of  documents  is  regulated  by  the  Electronic  Communications  and Transactions Act No. 25 of 2002 (the ECT Act). SARS is therefore not in a position to issue rulings or provide advice on whether any EDI systems or any other electronic communications meet the technical specifications of the ECT  Act.  As  the  National  Department  of  Communications  regulates  the  ECT  Act,  it  is  the  competent authority to approach for advice in this regard. Vendors wishing to implement an electronic system must ensure that they do not replace their existing paper-based documentary systems before ensuring that they meet all the requirements.”

 

VAT News Issue 20

The VAT news Issue 20 from September 2002 made specific reference to the issuing of electronic tax invoices. The requirements under section 20(4) of the act were once again confirmed but in addition the following new requirements were specifically mentioned for electronic invoices :

  1. “Tax invoices must be sent in encrypted format (at least 128 bytes), over a secure line or contain an electronic signature.
  2. The recipient of the supply must confirm in writing that he or she will accept electronic invoices for the purpose of claiming input tax.
  3. No other tax invoice may be issued and all copies extracted by the recipient must bear the words “copy tax invoice”.
  4. Debit and credit notes may accordingly also be issued electronically, subject to the requirements set out in the VAT Act.”

 

Electronic Communications and Transactions(ECT) Act

As per the VAT 404 Guide electronic invoicing is required to comply with the Electronic Communications and Transactions (ECT) Act. The ECT Act provides that any requirement in law for a document or information to be in writing will be met if the document or information is in the form of a data message, and is accessible in a form usable for subsequent reference. E-invoices will be valid in law and binding if the legal requirements prescribed under the ECT Act are met.

 

These requirements include that:

“Clause 14. Original

  1. Where a law requires information to be presented or retained in its original form, that requirement is met by a data message if—
    1. the integrity of the information from the time when it was first generated in its final form as a data message or otherwise has passed assessment in terms of subsection (2); and
    2. that information is capable of being displayed or produced to the person to whom it is to be presented.
  2. For the purposes of subsection 1(a), the integrity must be assessed­—
    1. by considering whether the information has remained complete and unaltered, except for the addition of any endorsement and any change which arises in the normal course of communication, storage and display;
    2. in the light of the purpose for which the information was generated; and
    3. having regard to all other relevant circumstances.”

 

“Clause 16. Retention

  1. Where a law requires information to be retained, that requirement is met by retaining such information in the form of a data message, if—
    1. the information contained in the data message is accessible so as to be usable for subsequent reference;
    2. the data message is in the format in which it was generated, sent or received, or in a format which can be demonstrated to represent accurately the information generated, sent or received; and
    3. he origin and destination of that data message and the date and time it was sent or received can be determined.”

 

Summary

The requirements imposed by SARS regarding e-invoicing are designed to facilitate effective auditing of e-invoices and to ensure conformity between paper and e-invoices. Failure to comply with these requirements may result in SARS imposing penalties and interest on non-compliant vendors. There are still no specific guidelines issued by SARS regulating e-invoicing however it is recommended that companies conform with the requirements of VAT Act (and all subsequent discussion papers) and the ECT Act in order to ensure compliance and avoid possible penalties.

 

In order to comply :

  1. The original document generated by the accounting system must be a valid tax invoice, as defined above
  2. Tax invoices must be sent in encrypted format (at least 128 bytes), over a secure line or contain an electronic signature.
  3. The recipient of the supply must confirm in writing that he or she will accept electronic invoices for the purpose of claiming input tax.
  4. No other tax invoice may be issued and all copies extracted by the recipient must bear the words “copy tax invoice”
  5. The data message will constitute the original document (as is the requirement for a valid tax invoice) if it passes an assessment, which, in essence, entails the verification of whether the information has remained complete and unaltered in the light of the purpose for which the information was generated and having regard to the general circumstances
  6. Information required to be retained by law is accessible for subsequent reference.
    1. The e-invoice must be accessible in the format in which it was generated, sent or received or an alternative format which can accurately represent the information;
  7. The origin or destination of the e-invoice and the date/time it was sent or received is determinable.

 

CapiLink Compliance

All companies that utilise CapiLink enjoy full compliance with regards to all current legislation and guidelines for e-Invoicing.

 

Specifically CapiLink addresses the requirements as follows:

Requirement CapiLink Compliance
1. The original document generated by the accounting system must be a valid tax invoice, as defined above CapiLink assists companies with the invoice structure and content to ensure requirements are met from the accounting system.
2. Tax invoices must be sent in encrypted format (at least 128 bytes), over a secure line or contain an electronic signature. All documents are 128 byte encrypted and signed with a digital certificate
3. The recipient of the supply must confirm in writing that he or she will accept electronic invoices for the purpose of claiming input tax. CapiLink customers are encouraged to complete this step. CapiLink can assist by sending out forms to the customers confirming their acceptance of electronic documentation.
4. No other tax invoice may be issued and all copies extracted by the recipient must bear the words “copy tax invoice” CapiLink changes the words on all documents from the accounting system to include COPY to ensure all subsequent copies contain this word
5. The data message will constitute the original document (as is the requirement for a valid tax invoice) if it passes an assessment, which, in essence, entails the verification of whether the information has remained complete and unaltered in the light of the purpose for which the information was generated and having regard to the general circumstances Information is sent to CapiLink servers via encrypted and secure FTP services which ensures information is complete and not altered from the client source to the CapiLink servers.
6. Information required to be retained by law is accessible for subsequent reference.

  1. The e-invoice must be accessible in the format in which it was generated, sent or received or an alternative format which can accurately represent the information;
All information is stored on the CapiLink servers for a period of 5 years in the original formats as sent to the customer.
7. The origin or destination of the e-invoice and the date/time it was sent or received is determinable CapiLink stores the email address with date and time a document is sent to a customer.
Christopher de ZeeuwIs an Emailed invoice valid?

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