Since the advent of electronic billing in SA, one of the foremost questions asked by billers and recipients is whether an electronic bill constitutes a valid invoice.
Is the bill you receive in your inbox as legal as the one you receive in your postbox?
SARS requires that the recipient of an electronic bill must submit written confirmation that they will accept electronic invoices for the purposes of claiming VAT.
Alison Wright, Sales and Marketing Director, Striata
The first part of this question concerns the validity of the electronic delivery process as a replacement for the traditional print and post process. According to the Value-Added Tax Act of 1991, an invoice must be presented as a `document`. The Act does not stipulate that the invoice must be physically printed onto paper. Therefore, sending an invoice electronically does not impact on its validity.
The next question concerns the format of the electronic invoice document. The South African Revenue Service (SARS) has issued official statements detailing the requirements for a legal electronic tax invoice.
The first requirement is that an electronic invoice, debit or credit note must contain the mandatory information as required by the Act for that type of document. In the case of an invoice, this includes:
* The name, address and VAT registration number of the biller;
* The name and address of the customer;
* A unique invoice number;
* The date;
* The words `tax invoice`;
* A description of the goods/services supplied;
* The number of units, mass or volume of goods;
* The amount due and the VAT charged; or
* A statement that VAT is included in the price, as well as the rate of VAT charged.
The second requirement concerns the security of the document in transit (between the sender and the recipient). In order to be valid, documents must be transmitted using encryption with a key length of at least 128-bits or contain an electronic signature, which means that the software used to create and send electronic invoices must have encryption capability. In addition, the recipient must have a means of decoding the document.
Thirdly, SARS requires that the recipient of an electronic bill must submit written confirmation that they will accept electronic invoices for the purposes of claiming VAT. The Electronic Communications and Transactions Act considers online registration to constitute written agreement, therefore agreement or permission given by e-mail is acceptable.
A further requirement is that the electronic invoice be treated as the original (assuming no paper version), and that any copies printed by the recipient bear the words `copy tax invoice`.
In its initial statement, SARS tabled a further requirement that the biller and the recipient retain the documents in a readable and encrypted format for a period of five years from the date of issue.
The primary objective of these requirements is to ensure that when a SARS audit encounters invoices that were generated and delivered electronically, these invoices are accurate and complete in terms of content, and the integrity of the invoice has not been compromised by the process.
These requirements also guarantee that the electronic invoice conforms to the characteristics of its paper predecessor. Most billers opt to mirror their paper invoices in the format of their electronic invoices, but this is not a SARS requirement as long as the mandatory information appears on the document.
The security requirements are stipulated to ensure that electronic invoices cannot be tampered with en route from the e-billing server to the invoice recipient. The encryption technology used by the biller must meet SARS`s requirement, but it should also be easily obtainable and simple for the bill recipient to use.
The conclusion to be drawn from the Act and SARS`s statements is that an electronic invoice is perfectly legal, as long as the process and the end result adhere to these simple criteria.
The same logic can be applied to credit notes, debit notes and statements. As long as the electronic versions of the documents adhere to the specifications of their paper counterparts, and have the right level of security, the document that lands in your inbox is just as legal as the one that ends up in your postbox.
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