The time of supply is the earlier of the date an invoice is issued or the date any payment is received. That is the moment VAT becomes accountable, not the day the client eventually pays in full.
Why the time of supply matters
On the invoice basis of accounting, you declare output tax for the period in which the supply took place. If you invoice R100,000 in August and the client pays in November, the VAT on that invoice belongs to your August period.
Which means you may be paying VAT to SARS on money you have not yet received. For a business with long payment terms and thin cash reserves, that is not a technicality, it is a cash flow event.
Where it catches people
| Situation | Effect |
|---|---|
| Invoice issued early to secure a purchase order | VAT is accountable from the invoice date |
| Deposit received before invoicing | Payment received can trigger the supply |
| Client pays 90 days late | The VAT was already declared |
| Invoice raised then cancelled | Handle by credit note, not by deletion |
The payments basis
Certain vendors may apply to account for VAT on a payments basis, where output tax follows the money rather than the invoice. Eligibility is restricted and there are conditions attached, so it is not a general alternative. If your cash flow is being squeezed by the timing described above, it is worth asking a practitioner whether you qualify.
Practical response
- Do not invoice early simply to tidy a month end. The date has consequences.
- Shorten terms where you can, so the gap between declaring and receiving narrows.
- Ask for deposits on larger jobs, which brings some cash in ahead of the liability.
- Set aside the VAT as it is invoiced rather than as it is paid. It was never your money.
Common questions
What if the client never pays?
Bad debt relief may be available in specified circumstances. There are conditions and time limits, so check the position.
Does a quotation trigger a time of supply?
No. A quotation is an offer, not an invoice, and no supply has taken place.
Does a proforma invoice trigger it?
A proforma is not a tax invoice. Receiving payment against one is a different matter, so take advice if you work this way.
Issue documents on the right date, with the VAT shown clearly on every one.
Create a VAT-ready invoice- Value-Added Tax Act 89 of 1991, sections 9 and 15
- SARS, Value-Added Tax
Disclaimer: This content is for general information only and does not constitute legal, tax, accounting or financial advice. Always confirm important requirements with SARS, the relevant authority or a qualified professional.
