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Tax invoices: the address confusion
A valid tax invoice is essential to ensure a vendor is entitled to claim input tax deductions on goods or services acquired when making taxable supplies. Taxand South Africa provides clarity on the requirements contained in the VAT Act.
The requirements for a valid tax invoice include that a tax invoice for supplies in excess of R5000 must reflect the name, address and VAT registration number of both the supplier and the recipient of the supply. A tax invoice for supplies less than R5000 must only contain such details of the supplier.
There has recently been a great deal of confusion regarding the address that should appear on a tax invoice i.e. whether it is the physical address, the postal address or any other address. The confusion seems to originate from the South African Revenue Service (SARS) VAT 404 Guide for Vendors which indicated that the address contemplated in the VAT Act is the ‘physical business address’ from where the business of a vendor is conducted and not the post office box number of the business or the residential address of the business owner. The result of this uncertainty and inconsistency is that vendors found that SARS auditors sought to disallow their input tax claims on the basis that they possess invalid tax invoices. Recipients, in fear of having their input tax deductions disallowed, refused to make payment of tax invoices unless suppliers changed the addresses on their tax invoices to reflect the physical addresses.
The VAT Act simply requires that the address of the supplier and that of the recipient be reflected on the tax invoice, although the term ‘address’ is not specifically defined in the VAT Act. Based on the ordinary meaning of the word a person’s address is the place at which they wish to receive their post, rather than being strictly limited to a person’s physical address. There is therefore no legal justification for the view taken by the SARS in the SARS Guide.
Fortunately sanity prevailed and the SARS issued Binding General Ruling (VAT) No. 21 (BGR 21) on 11 March 2014 to clarify the issue. This ruling sets out that the address of the recipient and the supplier is either the physical address from where the enterprise is being conducted, the postal address of the enterprise or both. Similarly a tax invoice, credit or debit note issued for a zero-rated supply of goods or services made to a non-resident can reflect either the physical address of the non-resident in the foreign country, the postal address of the non-resident or both.