Claiming input tax on Pre-Registration Invoices (Backdated VAT registration): What SARS Allows
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Our previous article “Types of VAT Registration” was written just under two years ago. At that time, the principal concern surrounding the backdating of VAT registration was whether SARS was legally entitled to unilaterally register a taxpayer for VAT and whether such action was unconstitutional.
In that article, we demonstrated that the VAT legislation expressly permits SARS to backdate the registration of a vendor for VAT purposes. This backing dating of VAT registration is widely known as ‘automatic’ registration.
However, since the earlier article was published, there have been some interesting developments. This article will focus on two new area of insight arising from these developments, namely:
Retrospective claiming of input tax
Assume that, on 1 August 2026, a vendor’s VAT registration is backdated to 1 January 2024. It is evident that, during the period from 1 January 2024 to 31 July 2026, the vendor did not levy or account for output tax and, correspondingly, did not claim any input tax.
The question is therefore whether the vendor may retrospectively claim the input tax incurred during the period for which the VAT registration was subsequently backdated.
Regarding the levying of output tax, SARS would apply a ‘deemed’ (as per section 62 of the VAT Act) output tax on the sales made by the person. For instance, if the person made a sale of R100.00, SARS would deem R86.96 in revenue, with the remaining R13.04 representing the output tax.
The main concern for vendors was whether they would be entitled to claim input tax in respect of the period for which their VAT registration was retrospectively backdated. If vendors were not permitted to claim the relevant input tax, they could face a substantial VAT liability, which could result in a grossly unfair outcome.
The previous article suggested that suppliers should be approached to amend ‘old' invoices to include the recipient's VAT registration number. However, SARS guidance provides a more practical solution where the VAT registration has been backdated. SARS's SARS VAT 404 – Guide for Vendors par. 13(4) states that, in such circumstances, the requirement for the recipient's VAT registration number to appear on the tax invoice does not apply to supplies received before the registration date. Consequently, an existing tax invoice may still constitute valid documentary evidence for claiming input tax, provided the other documentary requirements are met.
The amended invoice should include the VAT registration number of the recipient. To confirm the authenticity of the amendment, the supplier should insert the VAT number on the original invoice and authenticate the amendment by applying the company stamp.
However, this can be a tedious and daunting exercise, particularly where a vendor has numerous regular suppliers. It also depends on the willingness and ability of each supplier to cooperate and make the necessary amendments to the historical invoices.
Instead, the SARS VAT 404 – Guide for Vendors made the following statement:
“In a case where a person’s VAT registration is backdated and certain supplies were received before the registration date, the requirement for the VAT number of the recipient to be reflected on the tax invoice will not apply. As a result, the tax invoices received for any supplies made to that vendor before the date of registration may still be considered as valid proof for input tax documentary requirements.”
Commentary
SARS has indicated that invoices issued before the effective date of VAT registration may still constitute valid documentary evidence for purposes of claiming input tax. This position is contained in a SARS guide rather than in the VAT Act. Nevertheless, SARS may be held to the position set out in stated Guide.
This approach makes the process considerably less onerous for vendors, as invoices issued before the effective date of VAT registration may be used as supporting documentary evidence for input tax claims. The deduction is available only on goods and services that were acquired before registration and are still available to be used in the taxable enterprise on or after the effective date.
The input tax can only be claimed when four conditions are met:
The supplier must have been a registered vendor who actually charged VAT, implying that input tax cannot be claimed for purchases from non-vendors.
No deduction may have been made before.
The goods or services must be applied on or after the effective date in making taxable supplies, which in practice means they must be on hand at registration, and
The deduction must not be blocked by section 17(2), so passenger motor cars and entertainment stay out.
It is also expected that the pre-registration invoices must contain all the other information required for a valid tax invoice. The only omission should ordinarily be the VAT registration number of the recipient of the goods or services.
A vendor can expect SARS auditors to scrutinise the validity of invoices for various reasons. In such circumstances, the vendor may need to approach the supplier and request the necessary amendments, as explained above. Nevertheless, the process is considerably less onerous than originally envisaged.
Contested date of backdated VAT registration
A "vendor" is defined as any person who is either registered or required to be registered for VAT. This means that even if a person has exceeded the R1 million taxable threshold and has not registered with SARS, they are still considered a vendor for VAT purposes and must account for output tax. This threshold increased from R1 million to R2.3 million with effect from 1 April 2026.
SARS will register a person as a vendor once the person exceeds the R1 million threshold, based on the information available. As a result, SARS backdates the VAT registration to the date the person exceeded the threshold.
Given that the ‘person’ was required to register for VAT within 21 business days after exceeding the R1 million (increased to R2.3 million with effect from 1 April 2026) taxable supply threshold, SARS would apply a ‘deemed’ output tax on the sales made by the person.
Based on the hypothetical example above, SARS backdated the taxpayer’s VAT registration to 1 January 2024. However, the taxpayer may dispute the VAT registration date determined by SARS.
The taxpayer could, for example:
Provide financial statements or other supporting records to demonstrate that the compulsory VAT registration threshold was only reached after 1 January 2024.
Identify any exempt supplies included in the turnover, where applicable, as these amounts should not be taken into account when determining whether the compulsory VAT registration threshold was reached., or
Refer to the proviso to section 23(4)(b) of the VAT Act which reads:
“Provided that the Commissioner may, having regard to the circumstances of the case, determine that person to be a vendor from such later date as the Commissioner may consider equitable”
Section 23(4)(b) of the VAT Act allows a taxpayer to present its financial circumstances to SARS and request that the Commissioner determine a later effective date for VAT registration.
The taxpayer must, however, present a credible and well-supported case. For example, the taxpayer could argue that backdating the VAT registration to the date determined by SARS would result in a substantial VAT liability and place significant pressure on the taxpayer’s cash flow and liquidity.
The taxpayer could also point out that allowing a later VAT registration date would not necessarily prejudice the fiscus. This is because the taxpayer may already have paid corporate income tax on the relevant income without making any adjustment for VAT.
The point is that section 23(4)(b) provides a legal mechanism to contest the SARS prescribed date for VAT registration.
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