PRO FORMA INVOICES FROM SUPPLIERS

[Skipper]

When making a purchase (on behalf of the company) I find that many suppliers provide a pro forma invoice and say that when payment for the purchase has been received, they will provide a full tax invoice. However, in many cases, after payment has been made, the promised tax invoice is not forthcoming, and one has to chase and chase to get it. One must have a tax invoice to be able to claim the VAT refund. It is annoying and a waste of my time. Perhaps I should insist of a tax invoice before payment?

[ITS]

Hi Skipper. Yes that is a familiar story. You can insist on a proper Vat invoice before payment. After payment the Suppliers often get very forgetful about issuing an invoice!

[Mike C]

Hi Skipper,

I have also experienced this frustration. Interestingly enough there is an instruction from SARS in the Guide for Vendors that says:

(Chapter 11.3)
• A vendor must issue a tax invoice to the recipient within 21 days of the supply having been made where the consideration for the supply exceeds R50 (whether the recipient has requested this or not).

When I have spoken to the supplier that insists on issuing a Pro-Forma Invoice they say that it is because the Tax Invoice is linked to their inventory. I can understand that ... but still don't know why they still are so slow in issuing it after the purchase has been made.

[EAB]

Mike C,

Agree, it is linked to inventory, but by not issuing an invoice they will sit with an customer in credit and with their inventory not balancing. Also not sure why they don't issue the invoices as it causes their books not to balance.

Maybe ask for an statement of your account and show the supplier your account is in credit and they owe you money

[Justloadit]

Mike C,
Also not sure why they don't issue the invoices as it causes their books not to balance.

It has something to do with fraud.
Customer requests an invoice for goods, the supplier issues said invoice, then the customer does not pay, but uses the invoice in his VAT return where he claims the VAT.
The supplier waits for payment, and the invoice gets reflected on the VAT as output, and pays SARS the VAT.
Supplier may then create a credit note to cancel the issued invoice, and claim the VAT back from SARS at the next VAT period.

Customer simply ignores the Credit note, and does not create a debit note in his accounting system, and now has a profit for the value of the VAT, with out having made a purchase.

Not legal, but a very easy way to get VAT back.

[kavesh]

It has something to do with fraud.
Customer requests an invoice for goods, the supplier issues said invoice, then the customer does not pay, but uses the invoice in his VAT return where he claims the VAT.
The supplier waits for payment, and the invoice gets reflected on the VAT as output, and pays SARS the VAT.
Supplier may then create a credit note to cancel the issued invoice, and claim the VAT back from SARS at the next VAT period.

Customer simply ignores the Credit note, and does not create a debit note in his accounting system, and now has a profit for the value of the VAT, with out having made a purchase.

Not legal, but a very easy way to get VAT back.

I concur with this reasoning. One finds most of the larger businesses will only issue a pro-forma invoice unless you have an account with them. We see this all the time where the creditors clerk at the customer does not follow up on their tax invoices. Sometimes months later they are chasing up after internal audit perhaps raised the alarm.