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Commission earners: Here's how to know if you have to register for Vat

by , 06 September 2013
As a travel agent, you generally receive a commission either for goods you sell or services you render. This means the normal enterprise rules will apply to you too. It's the same with other commission earners. Read on to find out when you're liable to register for Vat so you can comply.

According to the Practical Vat Loose Leaf Service, if you're carrying on with an activity where you act as a broker or an agent and you do this activity on a continuous or regular basis, in or partly in South Africa, you're carrying on an enterprise for Vat purposes.

And this means you must adhere to your Vat duties.

But to do this, you must know when you're supposed to register for Vat.

When must commission earners register for Vat?

As a commission earner, you're liable to register for Vat ONLY when your total commission and fees in any12-month period exceedsR1 million.

What happens after registration?

After you register, you'll have to charge Vat on your commission. This is known as output tax and you'll have to pay it over to SARS on your Vat return.

You'll also have to issue tax invoices to those companies or businesses that pay you commission.

Are commissions subject to the standard or zero-rate of Vat?

When it comes to rendering services, the general rule is that where you render a service to a South African resident and the service is rendered inside SA, Vat at the 14% rate is applicable.

If, on the other hand, you render a service to a non-resident and the service:

  • Is not in connection with fixed or movable property situated in SA at the time you render your service, or
  • The non-resident is not inside SA at the time you render your service

Then you can apply the zero-rate rule for Vat.

Here's an example of how this works: Let's say Francois, a French travel guide, contacts you to put together a seven-day package for French tourists in South Africa.

You work out the package as follows:

  • Foreign air tickets
  • Hotel accommodation
  • Bus tour
  • Dinner/dance at the Waterfront
  • Your fee

You have to consider each separate component of this package when determining how to levy Vat:

  • The foreign air tickets would be zero-rated as foreign airfare is zero-rated for Vat.
  • The hotel accommodation - include the 14% in your price. Even though the tourists are non-resident, they'll enjoy the service within SA. Therefore, your zero-rating doesn't apply.
  • The bus tour – this is an exempt supply, irrespective of who buys a bus ticket. So don't worry about the Vat here. 
  • Dinner and dance – include the 14% in your price. Even though the tourists are non-resident, they'll enjoy the service within SA. Therefore, your zero rating doesn't apply.
  • Your fee – -apply the zero-rate for this as you're rendering your service to a non-resident.

Well there you have it. Now that you know when you must register for Vat as a commission earner, make sure you comply with your vat duties.



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