When must a VAT invoice be raised?

A VAT invoice must be raised when a VAT-registered business makes a taxable supply to another VAT-registered business because this practice is essential for both compliance with tax regulations and the proper functioning of the VAT system. The issuing of a VAT invoice provides a formal record of the transaction, which details the amount of VAT charged. This documentation is crucial for the buyer, as it enables them to reclaim the input tax on their VAT return if they are also registered for VAT.

The requirement for VAT invoices in these transactions helps ensure that the tax authorities can track the flow of VAT through the economy. It supports transparent reporting and allows both parties to maintain accurate accounting records.

For transactions involving non-registered businesses or situations where the business owner might feel an invoice isn't necessary, the obligation to issue a VAT invoice does not apply. Furthermore, treating VAT invoices as optional disregards the legal compliance required under VAT regulations, which could lead to complications or penalties for unregistered businesses. Thus, the specific conditions that necessitate the issuance of VAT invoices are critical for maintaining proper tax records and adhering to tax laws.