comments: What is a valid tax invoice? Part 2

This is the second part of this article about what a valid tax invoice is. Under this part we shall see what information is required on a VAT invoice, can someone use photocopies of invoices to claim VAT and the implication of invoicing in foreign currency.

Sunday, September 25, 2011

This is the second part of this article about what a valid tax invoice is. Under this part we shall see what information is required on a VAT invoice, can someone use photocopies of invoices to claim VAT and the implication of invoicing in foreign currency.

A VAT invoice must show the word "tax invoice”, particulars of person making supply that is name, address, VAT No, serial number, date of the invoice, particulars of customer/client if known to the supplier, particulars of supplies, the rate of tax for each category goods or services

In theory, the rules are strict. If an invoice does not contain one or more of the above pieces of information, it does not qualify as the basis for recovering input tax.

This has been demonstrated in many RRA audits where the authority has held that a document is not a tax invoice because it does not show the word "tax invoice’’, the VAT No or Type of supply.

In practice, if a document is obviously intended to be a VAT invoice, RRA is likely to use minor deficiencies in it as a reason for disallowing input tax unless they have been able to collect the output tax.

However, they do insist on the key details, such as the name, address, date and VAT number of the supplier, enough information about the supply to identify it as something bought for the purposes of the business, and the amount of VAT.

Photocopy invoices do not qualify to be valid tax invoices and RRA will not allow input tax to be claimed on the same. Therefore, one should endeavor to maintain original tax invoices on their VAT file.

However, in the event you cannot trace the original tax invoices, photocopies should be certified by the supplier as proof of an authentic copy.

You can invoice in any currency you wish but it is advisable that the document also states the Rwandan equivalent for the VAT charged so as to ensure that a Rwandan customer reclaims the same sum as the supplier paid as output tax.

You can (although not a requirement) convert foreign currency at the monthly rate of exchange published by the National Bank of Rwanda website (www.bnr.rw ).

Retailers are allowed to issue simplified tax invoices up to Rwf1,000. Although certain information such as the name of the customer and the amount of VAT is not required, these still have to show key details such as the name and address of the supplier, the nature of the goods supplied and the rate of VAT applicable.

Cash till receipts from super markets and car parking receipts are the most common example of a simplified tax invoice, which is used for VAT recovery.

In the next article we shall see whether the tax invoice must be in your names? What if you fail to get a VAT invoice? Self invoicing and its dangers, and can you claim VAT on self- invoices.

The author is Tax Manager at PwC Rwanda.

Email: frobisher.mugambwa@.rw.pwc.com