For entrepreneurs registered for Value Added Tax (VAT), the document known as a Tax Invoice is a crucial aspect of business operations that cannot be overlooked. Not only does it serve as proof of a sale of goods or services, but it is also a key document directly related to the Revenue Department. Understanding what this document is will undoubtedly help your business run smoothly and in compliance with the law.
What is a Tax Invoice?
A Tax Invoice is an important document that a VAT-registered business (the seller) is required to issue to the buyer of goods or services every time a sale is made. It shows the value of the goods or services and the amount of VAT that the seller has collected from the buyer for that transaction.
This document is important for both the seller and the buyer. For the seller, it is used as evidence to remit VAT (output tax) to the Revenue Department. For the buyer (who is also a registered business), it is used as proof to deduct tax (input tax) from their own output tax, which helps reduce the tax burden on the business.
How many types of Tax Invoices are there?
According to the Revenue Code, the Revenue Department has prescribed several types of tax invoices. However, there are two main types that business owners must know and use regularly:
Full-Form Tax Invoice (Section 86/4)
A full-form tax invoice is a standard tax invoice with all items required by law. It is suitable for business-to-business (B2B) transactions because the buyer can use it as complete evidence to deduct input tax.
Abbreviated Tax Invoice
An abbreviated tax invoice is a document issued by retail businesses that sell goods or provide services directly to a large number of consumers (B2C), such as convenience stores, restaurants, and department stores. This group of businesses is approved by the Director-General of the Revenue Department to issue abbreviated tax invoices for convenience and speed. However, the buyer cannot use it to deduct input tax.
Key Elements in a Full-Form Tax Invoice
To be valid and complete under the law, a full-form tax invoice must contain at least the following items:
- The words “Tax Invoice” in a clearly visible position.
- The name, address, and 13-digit taxpayer identification number of the seller (the issuer).
- The name, address, and 13-digit taxpayer identification number of the buyer.
- The sequential number of the tax invoice and the number of the book (if applicable).
- The date of issue.
- The name, type, quantity, and value of the goods or services.
- The amount of VAT calculated from the value of the goods or services, clearly separated from the price.
- Other information as prescribed by the Director-General, such as the head office or branch that issued the invoice.
Comparison of Full-Form vs. Abbreviated Tax Invoices
| Full-Form Tax Invoice | Abbreviated Tax Invoice | |
| Buyer's Name/Address | Required | Not required |
| Buyer's Tax ID | Required | Not required |
| VAT Display | VAT is separated from the price | Price includes VAT |
| Buyer's Tax Right | Can be used to deduct input tax | Cannot be used to deduct input tax |
| Issuer | General VAT-registered businesses | General VAT-registered businesses |
Article Summary
Choosing and issuing the correct type of tax invoice with all required elements is a duty and responsibility that every entrepreneur must prioritize to avoid future penalties. In an era where businesses handle a massive volume of documents, a good document management system (DMS) and ECM system can help store, retrieve, transfer, and verify tax invoices in a systematic and efficient manner. Moreover, integrating Automation technology into financial and accounting processes is a key step towards Digital Transformation, which helps reduce steps, minimize errors, and enhance an organization's competitiveness. In the future, AI technology will play an even greater role in accurately and quickly extracting and verifying information from these documents.
