Responsibility#1: Register for VAT
When your total commission received within any 12-month period exceeds R1 million, you must register for VAT.
But if your commission exceeds R50 000, then you can apply for voluntary VAT registration.
Responsibility#2: Apply these 2 VAT rules
Rule#1: Charge VAT on your commission
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The VAT which you earn on your commission is output tax
, and it's your duty to pay this over to SARS.
When you earn commission on a sale, you pay output, irrespective of whether the sale was at the standard rate, zero-rate or exempt VAT rate.
Rule#2: Issue a tax invoice
You must issue tax
invoices to the businesses who pay you commission.
All VAT vendors must issue tax
invoices for sales exceeding R50, and it's considered an offence not to do so.
But you can have a self-invoicing arrangement, as shall be seen next…
This is where the principal issues tax
invoices to claim input tax
. He must give the seller a copy.
Both parties must agree, in writing, to this and agree that the seller (agent) won't also issue a tax
NOTE: SARS has issued binding general ruling number 15 which deals with self-invoicing.
Responsibility#4: Report to a principal correctly
As an agent, you're not required to give copies of tax
invoices relating to sales on behalf of your principal to him.
But you must give your principal details of all your income earned from these sales, with the VAT amount as well.
You can lay out these details in the form of a summary which includes the date, what you supplied and the price including the VAT. The reason for this is that your principal can't see who your customers are and potentially bypass you in the future.
Those were 4 VAT responsibilities you have as a broker or commission agent. To learn more useful VAT information on brokers and commission agents, subscribe to the Practical VAT Loose Leaf Service.