You can use the Internet and email, to legally send invoices to your clients. The purpose of this article is to explain what SA law requires when invoicing your client electronically.
Preparing a tax invoice
The relevant legislation is section 20 of the Value Added Tax Act, 1991 (Act 89 of 1991) ("the VAT Act"), which says:
- your tax invoice (electronic or not) must contain the following mandatory information:
- the words "tax invoice" in a prominent place;
- your name, address and VAT registration number;
- your client's name, address and VAT registration number;
- a serialised invoice number;
- the date;
- a full and proper description of the goods or services supplied by you;
- the quantity or volume of the goods or services supplied by you;
- the amount due including the VAT charged (or a statement that VAT has been excluded and specifying the applicable VAT rate).
- you cannot issue more than one tax invoice for each supply goods or services. Make sure the second tax invoice for the same supply is clearly marked "Copy;"
In respect of credit notes and debit notes, have a look at section 21(3)(a) and (b) of the VAT Act on www.acts.co.za for what mandatory information is required (which is very similar to invoices).
Electronic tax invoices
In the VAT404 Guide for Vendors and VATNEWS 20 (on the SARS website at www.sars.co.za) SARS have set out the following requirements if you wish to issue tax invoices, debit notes and credit notes in electronic format instead of the traditional paper version (hard copy). These are:
- Tax invoices must be sent in encrypted format (at least 128 bytes), over a secure line or contain an electronic signature;
- The recipient of the supply must confirm in writing that he or she will accept electronic invoices for the purpose of claiming input tax;
- Both the supplier and the recipient of the supply must retain the documents in readable and encrypted form for a period of five years from the date of the supply.
- The transmitted electronic document will constitute the original tax invoice, credit or debit note. Hard copies extracted from the system must bear the words "computer generated copy tax invoice", "computer generated copy credit note" or "computer generated copy debit note" thereon. All further copies must also bear such words.
The requirement that your tax invoices must be sent in encrypted format (at least 128 bytes), over a secure line or contain an electronic signature provides you with the pull or push options, to either have your client come and get them from you (pull), or you to send them to your client (push). The ‘pull' option envisages you asking your client to come to your website and download the invoice. Typically you could achieve this by sending your client an email (that does not have the invoice attached) asking him/her to click on the link provided in the email and download the invoice. The 128 bit encryption refers to an SSL digital certificate that confirms the identity of website you are on and enables an encrypted session between your computer and the website's server, no different to when you do your internet banking. You can get a SSL digital certificate from a certification authority such as L@Wtrust (www.lawtrust.co.za).
The ‘push' option envisages using an electronic signature. This is not an electronic image of your hand-written signature, but an electronic signature as provided for in the Electronic Communications and Transactions Act, 2002 (Act 25 of 2002) ("the ECT Act"). SARS do not say advanced electronic signature must be used, only an electronic signature. This requirement is met under section 13 of the ECT Act which provides the requirement for an electronic signature is met in relation to a data message (e.g. email) if a method is used to identify the person and to indicate the person's approval of the information communicated; and having regard to all the relevant circumstances at the time the method was used, the method was as reliable as was appropriate for the purposes for which the information was communicated.
Using a personal digital certificate (as opposed to a SSL digital certificate) issued by L@Wtrust (www.lawtrust.co.za) will also serve this purpose. This is how:
- Apply to be issued with a digital certificate from a certification authority such as L@Wtrust
- Get your client to agree in your standard terms and conditions to receiving invoices electronically;
- Convert your invoices from Microsoft Word or Excel format to Adobe PDF format.(www.lawtrust.co.za).
- This digital certificate will then be installed on the browser of your computer. There is a bit of a learning curve to digital certificates but nothing too hectic;Then use your digital certificate to sign the Adobe PDF document (this functionality comes with Adobe Acrobat Professional.). If you look after your digital certificate then you'll be able to show the electronic invoice could only have come from you and that the contents of the invoice could not have changed unbeknownst to you, which is not dissimilar to what a hand-written signature seeks to achieve.
- Email the electronically signed invoice to your client.
Your accounting package software vendor should be able to assist you further is getting the above set up. You could even save on costs of sending hardcopy invoices (printing, postage etc): Remember, you cannot issue more than one tax invoice for each supply goods or services - therefore, a suggestion could be to get your clients, when they agree to receiving invoices electronically, to further agree to receiving the original invoice electronically as well and to provide you with an email address to use. Then you can update your systems to provide that a hardcopy invoice no longer needs to be sent to the client concerned. Only send hardcopies to those clients who still insist on receiving hardcopies, but remember this hardcopy will be the second tax invoice for the same supply and you'll need to ensure it is clearly marked "Copy."
Group Legal Advisor: Law Holdings (Pty) Ltd