[Question] Help needed with a invoice

[LSP]

Good morning

I am hoping that someone would be able to assist with this matter
I am fairly new at using pastel xpress v12 and have a bit of a situation really unsure how to proceed with it.
Our company has been issued a pro forma for an service - we must pay the amount off monthly in increments and they will issue us with receipts and once the service is rendered (in December) they will issue us with a tax invoice.
How do I proceed with this in pastel - as I cannot process this as a normal supplier with tax invoice?

really would appreciate any help

Thanking you all in advance

[Mike C]

Hi LSP - this is a very good question and it would be great if SARS were able to give us some kind of guidance here.

The company who issued the Pro-forma, presumably, does not want to issue a Tax Invoice as they would then have to pay the VAT. As they have not yet received full payment from you, they want to delay the matter.

You, on the other hand, cannot claim VAT back from SARS on on Pro-forma Invoice. Yet you have to enter your monthly payments (which I assume would include VAT) against something.

This is not generally a problem until you have a Review or an Audit. That's when the fight starts!

I would love to hear what the response from others are on this.

[Dave A]

...and once the service is rendered (in December) they will issue us with a tax invoice.

Will there just be a single service provided?
There are no services being provided in the interim?

[LSP]

Hi

The send us a proforma invoice - then each time we make a payment they send us a receipt for the amount paid and then in December once they have rendered the service (end Nov/Dec) they will issue the tax invoice for the full amount paid

Will there just be a single service provided?
There are no services being provided in the interim?

[LSP]

Sorry - yes service only provided end Nov/beg Dec

[Dave A]

Mike (or anyone else who knows the answer)

I seem to recall that VAT becomes due upon the event of either the taxable supply, or when payment is due (on the taxable supply), whichever event is the earlier.
Does that ring a bell anywhere?

(LSP, I know this isn't answering the question as to how you should capture the transaction in Pastel, but I think you can see why it's important to clear up this VAT issue first).

[Mike C]

Good memory Dave!

4.2 INVOICE BASIS
Under this method of accounting vendors must account for the full amount of VAT included in the price of the goods or services supplied in the tax period in which the time of supply has occurred. This applies to the output tax liability on cash and credit sales as well as the input tax that may be deducted on cash and credit purchases.
According to the general time of supply rule, a supply occurs at the earlier of the following events:
• At the time that an invoice is issued.
• At the time any payment is received by the supplier.

[BusFact]

Well the supplier is going to argue that the invoice is only going to be issued in December and the supply is only going to happen in December. So there will be no VAT transaction until December. Essentially you are paying them a series of deposits.

So each payment you make must simply go to the Supplier Account in Pastel (no VAT involved). By the time you get to December the Supplier account will be "in credit" for the full amount. Then they issue you the tax invoice in December and you capture that on Pastel in the normal way, and match the payments to the invoice. I use Pastel Partner, but I assume Xpress follows the same system.

The pro forma and receipts documents do not get captured on Pastel, they are merely for your records and to be filed.

I must add that its a strange way to make a payment arrangement. Why can't you just pay them the full amount in December when everything is supposed to be done?

[LSP]

Thank you
This payment arrangement is done with all suppliers that we use for the events in Nov and December - this is the only supplier that will not issue an invoice as payments are made.

[LSP]

Thank you

[Dave A]

Well the supplier is going to argue that the invoice is only going to be issued in December and the supply is only going to happen in December.

And wrongly so, it would seem.

LSP, you might want to consider sending your errant supplier a link to this thread.

[BusFact]

And wrongly so, it would seem.

I don't see why. Payment is only completed in December and supply is only made in December. The customer is merely paying deposits between now and then. I wish I had customers that paid like that

[Dave A]

I don't see why.

Mike quoted the relevant section:

4.2 INVOICE BASIS
Under this method of accounting vendors must account for the full amount of VAT included in the price of the goods or services supplied in the tax period in which the time of supply has occurred. This applies to the output tax liability on cash and credit sales as well as the input tax that may be deducted on cash and credit purchases.
According to the general time of supply rule, a supply occurs at the earlier of the following events:
• At the time that an invoice is issued.
• At the time any payment is received by the supplier.

[BusFact]

Sorry Dave. I missed that very little word "any" in the last line. My bad. It does seem that the supplier is in contravention of the VAT requirements, and need that brought to their attention by LSP.