What is a broker?
Brokers aren't exempt from Vat.
According to the experts at the Accounting & Tax Club when your total commission received in any 12-month period exceeds R1 million, you must register for Vat. If, on the other hand, your commission exceeds R50 000 a year, you may apply for voluntary Vat registration.
To demonstrate how Vat works if you're a broker, we'll give you a practical example…
Everything you need to know about brokers and Vat
Example: John is a life insurance broker and life insurance is Vat-exempt. Because the life insurance company receives the premiums and determines the commission, it makes use of 'self-invoicing'.
The life insurance company sends a tax invoice to John showing that he earned R57 000 (including Vat) commission. He must declare R57 000 as standard-rated supplies in Block 1 of the VAT201 and declare R7 000 output tax (R57 000 X 14/114 = R7 000) in Block 4 of the VAT201 form.
Here's how to treat Vat if you're broker