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One Vat Act rule commission agents and brokers must follow when doing self-invoicing

by , 28 October 2013
The Vat Act has specific rules for commission agents and brokers. One of them is the issuing tax invoices to businesses that pay you commission for sales exceeding R50. To do that, you can make use of the 'self-invoice' process. Here's what you need to know about self-invoicing so you can stay on the right side of Vat Act.

Vat for commission agents and brokers is very tricky and it's easy to get wrong, especially if you want to make use of self-invoicing and don't know the Vat Act.

But don't fret. The Practical Vat Loose Leaf Service explains all you need to know about self-invoicing below.

What is self-invoicing and how does it work?

According to the Loose Leaf Service, self invoicing or 'recipient invoicing' is where the buyer of the goods creates his own tax invoice to claim Vat.

So, essentially the buyer will make out a tax invoice with his own and the seller's details on it. He gives a copy of it to the seller, who must declare the Vat.

Please note that both parties must agree to this and agree that the seller of the goods won't also go and issue a tax invoice.

If you want to use the 'self-invoice' process, you MUST get written permission to do so from the SARS office where you're registered.

You must send a letter asking for permission and explaining why you need to do self-invoicing.

To make it easier for you, here's a sample letter you can send to SARS to request the use of self-invoicing.

Here's a sample letter you can send to SARS to request the use of self-invoicing

Address to:
The SARS Office where you are Vat-registered
Date
Dear Sir

VALUE-ADDED TAX: REQUEST FOR RECIPIENT CREATED INVOICING (SELF-INVOICING)

We are writing to you to request approval in the practice of recipient created invoicing or self-invoicing. We set out our request more fully below.

  1. Section 20 (2) of the Value-Added Tax Act, 1991 ('the Act') provides for a recipient of goods or services to create a tax invoice containing the particulars as set out in Section 20.
     
  2. Our business comprises the following: insert a description of your business here.
     
  3. We wish to apply the self-invoicing system to the following transactions: Provide a full description of the transactions to which you want to apply self–invoicing.
     
  4. Currently, we claim input tax as follows: Explain how the invoicing works now and what the difficulty is with the current procedure.
     
  5. Attached please find undertakings from the following suppliers that tax invoices will not be issued by themselves: Include a letter from your supplier which says that he will not issue any tax invoices to you for those supplies that you are self-invoicing.

We trust you will view this application favourably.

Yours faithfully
XXXXX

Remember, your suppliers must also confirm in writing that you'll issue tax invoices on their behalf, and that they won't issue tax invoices in respect of such supplies.

If you want to make use of the self-invoicing process, make sure you comply with Vat law.

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