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Dealing with VAT and short-term insurance: What does SARS allow as alternatives to tax invoices?

by , 22 February 2016
Often, when paying commission to insurance brokers, you can't really calculate the amount of the commission, and therefore the amount of the VAT.

Also, what often happens is that by the time you need to claim input tax, you haven't received a tax invoice from the brokers.

So SARS allows you to claim the VAT on commission payments, without a tax invoice from the insurance brokers.

In essence, you can issue your own tax invoice for your VAT input tax claim.

Let's look at this in more detail...

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1. Supply of short-term insurance

You don't have to issue a tax invoice, credit or debit note, for the supply of short-term insurance.

But there are conditions to this, with the policy document requiring the following information:

·         Your name along with the name of the client;

·         Your client's address, VAT number and the policy number;

·         A statement confirming SARS' direction that they're allowed to tell a vendor to issue a tax invoice, or a credit note, or a debit note, in a different format than usual, as according to section 20(7) and section 21(5) of the VAT Act.

·         If your client is a VAT vendor who wishes to deduct the VAT he pays as input tax, then you must have a statement informing her that for VAT purposes, she must have the policy document along with proof that the premium has been paid (for example, bank statements); and

·         The amount of the premium, which indicates either the value of thee supply , amount of VAT and the total amount OR the total premium including VAT and a statement saying that VAT's included.
 
 
2. Supply of intermediary services:

SARS says that the bordereau or a commission statement, which the intermediary gives you for providing their services, doesn't have to contain the words 'tax invoice', 'credit note' or 'debit note', as required within the VAT Act.
 
*To learn much more fantastic information on dealing with VAT and short-term insurance, check out chapter I 17: Insurance: VAT
Treatment in Short-term Insurance
in your Practical Guide to VAT Loose Leaf Service handbook.

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