The fundamental distinction
In South Africa, the distinction between a "tax invoice" and an "invoice" is governed by the Value-Added Tax Act 89 of 1991. Only a VAT-registered vendor (referred to in the Act as a "registered vendor") is permitted to issue a tax invoice and charge VAT on supplies. A business that is not registered for VAT must not use the term "tax invoice" and must not charge VAT on its invoices.
This distinction matters significantly for B2B transactions. When you purchase goods or services for your business from a VAT vendor and receive a valid tax invoice, you can claim the VAT charged as an input tax deduction on your own VAT return. This reduces the VAT you owe to SARS. You cannot claim input tax against a document that is not a valid tax invoice, even if it displays a VAT amount.
The R5,000 threshold
SARS distinguishes between two types of tax invoice based on the value of the supply:
- Full tax invoice: required for taxable supplies where the VAT-inclusive consideration exceeds R5,000
- Abridged tax invoice: permitted for taxable supplies where the VAT-inclusive consideration is between R50 and R5,000
- No tax invoice required: for supplies under R50, though VAT must still be accounted for
The R5,000 threshold applies to the total amount of the invoice including VAT, not the net amount. For example, an invoice for services worth R4,348 net + VAT of R652 = R5,000 total would be exactly at the threshold. Any amount above R5,000 total requires a full tax invoice with all mandatory fields.
Comparison: full vs abridged tax invoice
| Field | Full Tax Invoice | Abridged Tax Invoice |
|---|---|---|
| Words "tax invoice" | Required | Required |
| Supplier name and address | Required | Required |
| Supplier VAT number | Required | Required |
| Invoice number (sequential) | Required | Not required |
| Date of issue | Required | Required |
| Recipient name and address | Required | Not required |
| Recipient VAT number | Required (if VAT vendor) | Not required |
| Description of supply | Required | Required |
| Quantity and unit price | Required | Not required |
| VAT amount | Required | Required (or statement) |
| Total including VAT | Required | Required |
| When to use | Supplies over R5,000 | Supplies R50 - R5,000 |
What non-VAT vendors must issue
If you are not registered for VAT, your business documents must not use the term "tax invoice" and must not show a VAT amount. Issuing a document labelled "tax invoice" when you are not a VAT vendor is an offence under section 20(7) of the VAT Act. SARS can impose penalties and require you to remit the VAT amount shown on the non-compliant document, even though you were not entitled to charge it.
Non-VAT-registered businesses should issue invoices (or quotes, receipts, and statements) without any VAT references. The document should clearly show the total amount due without VAT and should not imply that VAT is included or excluded.
Debit notes and credit notes
In addition to tax invoices, SARS recognises two related documents: debit notes (issued by the supplier when the original tax invoice understated the amount) and credit notes (issued when the original tax invoice overstated the amount or when a supply is cancelled or returned). Both must meet their own content requirements under the VAT Act and must be issued within the same 21-day window that applies to tax invoices.
Common errors to avoid
The most common tax invoice errors that SARS identifies in audits include: omitting the supplier's VAT registration number; omitting the recipient's VAT number on a full tax invoice for a supply to another VAT vendor; issuing a document labelled "invoice" or "receipt" rather than "tax invoice"; using non-sequential or reused invoice numbers; and failing to separate the VAT amount from the net amount on full tax invoices. Any of these errors can disqualify the document as a valid tax invoice and prevent the recipient from claiming input tax.
For full details on the fields required on each type of tax invoice, see the SARS VAT invoice requirements guide. For freelancer-specific invoicing issues, see the freelance invoicing guide.
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