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Important Notice: How to treat VAT when someone else buys goods on your behalf

by , 18 February 2016
Dear reader,

You create an agent/principal relationship when you ask another person or company to:

· Buy goods on your behalf;
· Sell goods on your behalf; or
· Import goods on your behalf...

And when this happens, the normal VAT rules don't apply. VAT treatment becomes tricky. And to make it worse, you won't be able to claim your input tax.

Read on as I show you how to treat the VAT when someone else buys goods/services on your behalf so you can treat VAT correctly.

Finally! Avoid the SARS VAT traps that cost businesses millions
Most VAT vendors are treating their agent/principal relationship as a standard VAT transaction!

You could lose all your input tax if SARS audits you and finds you don't have the supporting documentation!
Don't let this happen to you! Find out what the common VAT traps are and how to avoid them at this year's VAT Masterclass
Book your seat here
How to treat the VAT when your agent buys goods on your behalf
Let's take a look at an example.
Gorgeous is a company that manufactures beauty products. They contract Mrs Q to buy some of their ingredients.
In this instance, Mrs Q is the agent and Gorgeous is the principal.
So, Mrs Q buys ingredients from her supplier for Gorgeous. The supplier issues the tax invoice in Mrs Q's name.
Mrs Q gives the tax invoice to Gorgeous. And Gorgeous claims the VAT and pays it over to SARS.
If you thought 'the tax invoice must be in the name of Gorgeous for them to claim input tax', you'd be wrong!
Read on as I explain why…
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Getting your VAT refund from SARS just got harder…

A small administrative mistake is all it takes for SARS to have the right to withhold your refund.

Put a simple zero in the wrong place on the new VAT return could and you can forget about getting even a cent of your money back.

Make sure this never happens to you by filling in the new VAT return 100% correctly every, single time.

I'll show you how here.

You can claim VAT on a tax invoice addressed to your agent

Remember I said there are different rules for agent/principal relationships. And yes, VAT law confirms that a principal (Gorgeous) can claim the input tax on the tax invoice in the name of the agent (Mrs Q) (Section 54(1) and (2) of the VAT Act).
But there are certain documents you must keep for these transactions. And if SARS audits you, they'll ask for them!
The records you need to keep as an agent/principal

Your agent must give you details of the purchases he made for you on a monthly statement or, a copy of the tax invoice.
And if your agent makes purchases for you on a regular basis, he must give you a monthly statement showing the purchases he made and the VAT paid.
There you have it, now you know how to treat VAT when your agent buys goods for you. But, beware, there are different rules if your agent is selling goods for you rather than buying them. Find out all the details of how to comply with VAT law when you have an agent/principal relationship at this year's VAT Masterclass
P.S. Dee Bezuidenhout, previous VAT auditor at SARS, is giving you the inside scoop on the SARS VAT traps you must avoid. Book your seat at her VAT Masterclass here and save R1000!

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