As an agent, do you know when to issue statements to your principal?
In terms of Vat law, an agent is a person or a business that receives authorisation from a principal to engage into transactions with third parties that will be contractually and legally binding to the principal.
A principal, on the other hand, is a person or a business that authorises an agent to act on its behalf and engage into transactions with third parties that are contractually and legally binding.
Now, as an agent, you must issue statements to your principal. Failure to do this is an offence and could result in harsh penalties.
Since you don't want any penalties coming your way, keep reading to find out when exactly you must issue statements to your principal so you can comply.
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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
Here's when to issue statements to your principal if you're an agent
If you're an agent, you must issue monthly
statements to your principal.
According to the Practical Vat Loose Leaf Service
, you have a legal obligation in terms of
Vat law to give your principal a monthly statement that details all the supplies you got on his or her behalf. You have a deadline to meet of 21 days after the end of the calendar month and must have accounted to your principal by this time.
Here's what to include in your monthly statement as an agent
You must include:
A full and proper description of goods or services;
The quantity or volume involved; and
The price and rate of Vat charged. If the rate of Vat isn't shown, then indicate the amount of Vat included in the price.
When your principal has a monthly statement will all these details, he'll then use the statement to support his input tax claims. If you sell goods or services on behalf of your principal, he'll use details on the statement to correctly declare output tax.
Now that you know when to issue statements to your principal if you're an agent
, comply with Vat law to avoid harsh penalties.
PS: We strongly recommend you check out the Practical Vat Loose Leaf service.
It gives you tips, tools and advice to comply with the Vat Act.
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