VAT – Tax invoices: the address confusion

vatAuthor: Varusha Moodaley

VAT vendors who make taxable supplies of goods or services are obliged to issue tax invoices to the recipients of such supplies within 21 days of having made such a supply.

A valid tax invoice is of utmost importance because without such a document a vendor, being the recipient of a supply, is not entitled to claim any input tax deductions in respect of goods or services acquired in the course or furtherance of making taxable supplies.

The requirements for a valid tax invoice are contained in the VAT Act; one of these requirements being that a tax invoice for supplies in excess of R5 000.00 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 R5 000.00 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 SARS VAT 404 Guide for Vendors (March 2013) (“the SARS Guide”) 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. No substantiation is provided as to the basis for limiting the acceptable address to the physical address.

The result of this uncertainty and inconsistency is that vendors, being the recipients of taxable supplies, 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 (for tax invoices in excess of R5 000.00) be reflected on the tax invoice.  The term ‘address’ is not defined in the VAT Act and regard must therefore be had to the ordinary meaning of the word. ‘Address’ is defined in the Oxford English Dictionary as the place where a person lives or an organisation is situated; particulars of this, especially for postal purposes.

Based on the ordinary meaning of the word, it seems that a person’s address may therefore be 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.

BGR21 sets out the options available to vendors regarding the address that must be reflected on a tax invoice or a credit or debit note issued to either a vendor recipient or a non-resident recipient.

In terms of BGR 21, the address of the recipient and the supplier that must be reflected on a tax invoice, credit or debit note is either the physical address from where the enterprise is being conducted; the postal address of the enterprise; or both the physical and the postal address of the enterprise.

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 the physical and the postal address of the non-resident.

The SARS Guide was updated on 5 May 2014 and also now stipulates, in line with BGR 21, that either the physical address or the postal address or both will be accepted as the ‘address’ that must be reflected on a tax invoice issued to recipients of supplies.