I am registered for VAT on the invoice basis (not the payment basis).
In other words, I am liable to pay SARS output tax, based on the tax invoices that I processed in the two months prior.
I offer, as an incentive to my clients, discounted support bundles which they can purchase in advance of my providing my services to them. I provide the client with a Proforma Invoice and they pay me for the support bundle, and their account goes into credit.
As and when I provide them with my services, I process a Tax Invoice to the client for the time spent, which is offset against the credit balance on their account. I then pay the relevant output tax on that invoice when the next VAT return is due, and the client can then claim the same VAT from SARS.
One of my clients has challenged me on this approach, and they insist that I provide them with a Tax Invoice for the full amount of the support bundle, so that they can claim the VAT immediately. They say that, in terms of the VAT Act, I am liable for the output tax at the time of the receipt of the payment or the tax invoice, whichever comes first.
This is the first I've heard of that approach - is it correct?