[Question] What are the possible issues with under invoicing on export documents

[BusFact]

Although I have always been able to avoid these situations I have a client that has been asked by a very significant East African customer of his to do the following:

Quote is for say R600'000 of goods.
Customer wants him to invoice R200'000 value on the invoice for the same goods.
Customer will still pay him the full R600'000.
The R200'000 invoice is to go with the shipment - I presume to reduce duties on their side.

Now the ethics of this are obviously dubious, but are there any criminal issues such as fraud that they need to be concerned about? I can't see why SARS would care as it doesn't affect their tax received (He still invoices the full R600k in his books). I do see how the East African country would care as they end up with lower duties, but would their be any realistic legal ramifications if caught out?

[Blurock]

I would be very uncomfortable doing business with you, should you go ahead. These things have a habit of coming back to bite you when you least expect it.

[Dave A]

The moral side of this is really clear cut - this could be the first step towards becoming a prominent politician without doubt.

If your client sends a R200k invoice with the goods as first payment and a R400k invoice as the second part due...
At least the defence attorney has something to work with.

[BusFact]

I would be very uncomfortable doing business with you, should you go ahead. These things have a habit of coming back to bite you when you least expect it.

Just to clear up any misconceptions, my client is the exporter and its his customer. I'm not involved. I wish I had export orders for R600k.

But in any event you bring up a valid point. It does create an uncomfortable situation - if as a prospective customer you found out. But the reality is that no other customers would ever likely find out. It would take an audit of sorts to pick this up. So he's unlikely to lose customers.

Of course the "karma" issue relates to the ethics. What he wants to know is how it might bite him.

[BusFact]

If your client sends a R200k invoice with the goods as first payment and a R400k invoice as the second part due...
At least the defence attorney has something to work with.

I can see how that might work for a service, but with goods there will be a tally of items and a total. Any deferred payment would appear quite obvious on the invoice ... but maybe something similar.

[Justloadit]

The issue here is that the customer, if not satisfied will find another supplier to do what he wishes.

There is a situation, that the invoice must be stamped by the bank, and is recorded somewhere. Usually when payment is received, a form is filled in which specifies the reason for the payment. I am not sure if the two ever get linked. Has the customer prepaid? As a post payment may be an issue, where the client uses the invoice as evidence of the amount he should pay.

I had a situation in which my book keeper made a mistake on the invoice, and added a zero the unit cost, which of course made the total invoice far higher than what it should have been. When I emailed it to the customer he complained about the incorrect value. I reissued a correct invoice, however the bank would not stamp it, as the original was already filed. I did hand the correct invoice to the shippers, who then took it through customs and the shipment was delivered. To date, I have not heard anything, so I do not know. I did make a note and letter which I have placed with my original documents with the details.

.

[BusFact]

Thanks Victor. Thats a good point. I think the form is an F178 or something. That could make his life interesting.

[sterne.law@gmail.com]

R200 000 for goods, R400 000 for consulting fees?
eeeeeeeeeeeeeeek!!!

[BusFact]

Eish, but there are some creative people around here

[Dave A]

And in a South African context, entirely believable too!

[johnwarner75]

R400,000 for consulting fees is very steep.-that’s 200%

[wynn]

This sounds very much like the beginning of another 419 type scam!!! be very careful.

You invoice R200,000 and supply R600,000 worth of goods?
Before you can wipe your eyes out they will legally demand the other two thirds of the goods seeing as they paid you R600,000 and you have only delivered goods worth R200,000 (your invoice)

That means you will have to supply twice the amount of goods again that cost you six thousand.

[mother]

This sounds very much like the beginning of another 419 type scam!!! be very careful.

I agree with wynn here. Or alternatively, unless they pay the R600k in advance, they could end up paying only R200k, as per the invoice.