In the recent case of Mr A v The Commissioner of the South African Revenue Services, the Tax Court handed down a judgment regarding the failure of a vendor to produce sufficient documentary evidence in respect of VAT claims.

Mr A was conducting a construction business.  He was a registered VAT vendor and was liable for submitting VAT returns every two months.  VAT is an indirect tax charged on the supply of goods or services by vendor. The VAT Act 89 of 1991, allows a vendor to claim a rebate for VAT by setting off payments made to the vendor against payments received from Clients.

In this case, Mr A claimed rebates for the following VAT periods; 07/2011, 09/2011 and 11/2011.  Mr A's input VAT for the six-month period was R905 187.15 and output VAT was R6 465 622.50.

SARS did not accept that Mr A purchased goods and services in the amount of R 6 465 622.50 over a period of six months, as it was a significant amount for a vendor conducting a construction business.  Therefore, SARS requested Mr A to furnish documentary proof in respect of the relevant purchases.

Interestingly, Mr A provided the SARS with the following documentary evidence:

  • Unstamped bank deposit slips;
  • Quotations from various suppliers
  • Invoices issued to persons other than himself or his construction business;
  • Invoices not reflecting the name of the purchases; and
  • Invoices reflecting purchases of goods that were for private consumption and not for goods that were inputs to the goods and services he supplied as part of his construction business.

SARS argued that the documentary evidence provided did not support Mr A's claim for input VAT and as a result Mr A did not discharge the onus of proof that SARS was incorrect in disallowing his claim for input VAT.

During the hearing, Mr A was given a further opportunity to provide SARS with the relevant documentary evidence, however Mr A argued that he had previously provided SARS with the relevant documents but it was misplaced, therefore he should be absolved from providing further documentary evidence.

In light of the above, the Tax Court held that SARS was correct in rejecting the Mr A's claim, as Mr A failed to furnish sufficient documentary evidence, even when he was given a further opportunity to do so during the hearing.

The appeal was therefore dismissed.

It is important for vendors to ensure that they keep records of all invoices they receive or issue when conducting business, as SARS is entitled to  reject a vendor's claim upon failure to provide sufficient documentary evidence.