international income earned

Betty Bookkeeper gives advice on claiming VAT on an invoice from a liquidated supplier – October 2016

Hi Betty 

I have a technical query regarding VAT. I have a client who received a purchase invoice from a supplier who has informed them that they will be placing their company (the supplier’s company) into liquidation soon.

My concern is that my client will be claiming back the output VAT on this purchase invoice, however it is doubtful that their supplier will be paying the input VAT from this invoice to SARS, since they will be going into liquidation soon.

Will my client be at any risk from SARS whereby the output VAT is disallowed, because the input VAT (from the other side of the transaction) does not get paid by the supplier?

If there might be a problem in claiming the output VAT on this invoice, should my client rather withhold the VAT portion of this invoice from their supplier?

CE Mitchley

Hi there

I don’t see any problem with the client claiming back the VAT, as long as they have a valid VAT invoice. It is not their concern whether the output VAT is eventually paid over to SARS. Their only concern is that they have incurred the expense, and are in possession of the required documents in order to make the claim.

The client is not at any risk from SARS if the output VAT is not paid – this would be an issue between SARS and the supplier.

Hope that helps!

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