Are you a broker or commission agent? Use these seven expert tips to deal with Vat correctly

Simangele Mzizi, Fsp Business, 02 Oct. 2014

Tags: vat, sars, brokers and vat, commission agent and vat, brokers and commission agents

If you’re a broker or commission agent, you can’t escape Vat. And SARS expects you to deal with it correctly.

If you don’t, the taxman will charge you penalties and interest.

Since parting with money is the last thing you want in this tough economy, read on to discover seven tips that will help you deal with Vat correctly so you can stay on SARS’ good side.

Before we get to the tips, let’s make it clear who is a broker and who is a commission agent

A broker is a person who buys and sells goods, or arranges deals or plans on behalf of other people and charges a fee (commission).
A commission agent is a person who provides a service on behalf of someone else and then charges commission for it.
Now let’s look at the tips you must use to deal with Vat correctly.

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What the VAT Act Says About Agents…

Vendors never seem to understand the law when it relates to agents, and as a result, they become magnets for costly Vat audits!

If the agent buys something for you (e.g. you send your secretary out to buy stationery for you, on her credit card), the tax invoice can be made out to her, but she can't claim the input tax. You'll claim it.

If the agent sells something on your behalf (e.g. a franchisee sells your products), he can issue a tax invoice if he's Vat registered. But the sale is actually made by you. If he claims your input tax, not only will SARS disallow it, but you can expect the SARS auditors to knock on your door, looking for an explanation!

The agent can keep the tax invoices, but he must make a statement out to you each month.

Find out exactly what the rules are for agents



Seven tips for dealing with Vat correctly if you’re a broker or commission agent

Experts behind the Practical Vat Loose Leaf Service outline the tips you must use:
  1. If you’re Vat registered, issue your tax invoice to your principal for the commission you earn.
  1. Give your principal a monthly statement showing the selling price and Vat on sales made on his behalf. If the statement also says “tax invoice” it can show your commission and Vat on it.
  1. Never show your principal’s sales on your VAT201.
  1. Only show your commission and Vat charged on your VAT201.
  1. Keep records of sales made for your principal for five years.
  1. Don’t claim input tax on the goods you got from your principal to sell on his behalf.
  1. Don’t show your principals sales as your turnover, it isn’t. If you do, SARS will audit you because the sales on your Vat returns will be higher than sales on your income tax return. As a result, SARS will think you’re evading Vat!
Using these tips will help you deal with Vat correctly if you’re a broker or commission agent.

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