The invoice is a key element of the conditions for deducting the VAT charged to a business (input VAT). The European Court of Justice (ECJ) recently ruled that VAT deduction may not be refused solely on the grounds of formal defects in the invoice. We described these judgments in our article Deduction allowed despite an incomplete VAT invoice.
Address
One of the requirements that a VAT invoice must meet is that it must state the addresses of both the supplier and the customer. The Dutch tax authorities take the view that the address is the place where the business actually resides or is established. If only a PO box is stated, the VAT invoice is not considered to be correct. This position is set out in the Decision on administrative and invoicing requirements.
The German tax authorities also take this view. The refusal to allow a VAT deduction on the grounds that the supplier had only stated their PO box on the invoice has been challenged. The Advocate General (AG) at the Court of Justice concluded that a VAT deduction cannot be refused where the VAT invoice states only the supplier’s PO box.
In our view, this conclusion by the Advocate General appears to be in line with previous rulings by the Court of Justice. However, the court naturally has the final say.
Material conditions
A key point in both the Court of Justice’s rulings and the Advocate General’s opinion is that it was established that all the substantive requirements for VAT deduction had been met. These substantive requirements are as follows:
- the goods and/or services must have been supplied by a VAT-registered business and;
- the customer must be registered for VAT and;
- have used the goods or services for their own VAT-taxable transactions.
VAT invoice
It remains important for business owners to ensure that invoices comply as closely as possible with all the requirements for a VAT invoice. European case law shows that the situation is not always as dire as the tax authorities would have us believe. However, it seems to make little sense to expend energy on disputes with the tax authorities when these can be avoided relatively easily. If the worst comes to the worst, there is the safety net of European case law
As well as the content of the VAT invoice, please also pay close attention to the substantive conditions for VAT deduction!