The last several years have seen an increase in “smart accounting systems” that have online capabilities and that can integrate with various other business solutions. These smart accounting systems have revolutionised traditional accounting, and there can be no question that many businesses run a more organised and financially sound operation as a result of the availabilities of these programs and applications.
While the benefits of using these systems speak for themselves, businesses should ensure that the data processing and back-end of these systems (which is often based overseas) are compliant with local value-added tax (VAT) legislation. A prevalent example is where Point of Sale systems integrate with these accounting packages – when customers swipe their cards or make online payments using the Point of Sale systems, they often get email notifications confirming they have paid. These confirmations are presented in the form of a “tax invoice”.
Subsequently, when the Point of Sale system integrates with the smart accounting package, the bulk sales of a day are imported into the accounting package by means of an invoice posting in the accounting package. Therefore, one sits with a situation where a customer has received a tax invoice from the Point of Sale application system and a second invoice, in respect of the same supply, which is generated when the Point of Sale system integrates with the accounting package. This results in two tax invoices having been generated in respect of the same supply. This is specifically prohibited in terms of section 20 of the Value Added Tax Act, which only allows one tax invoice to be issued in respect of each supply. The mischief that the legislature is trying to prevent is clear – when multiple tax invoices are issued in respect of the same supply, multiple VAT input claims can be claimed by vendors in respect of the same supply.
There are also various other smaller challenges with using smart accounting packages and ensuring that its operations are VAT compliant (including the requirements for a valid tax invoice, the circumstances under which you are allowed to issue credit notes, and certain default settings in respect of VAT percentages applied to certain transactions). Fortunately, these smart accounting systems allow for specific customisation and certain transaction flows to be conducted in a different way.
Compliance with local VAT legislation should therefore by no means be an impediment in using these systems, as long as businesses ensure compliance. The use of these systems should be promoted, but should be done with professional assistance and persons who have a keen grasp of both the accounting side of the systems, as well as tax legislation, especially during the set-up phase of the systems and new applications.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE).