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Thread: VAT on commission "as and when basis" policy.

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    VAT on commission "as and when basis" policy.

    We have a few policies that was written before we were VAT registered. The commission on these policies are as and when. Meaning we get a small payout every month for a certain period.

    Our VAT registration has now been processed and we need to declare VAT on commission earned. The problem is now that the provider doesn't want to pay us VAT on these existing policies as it was pre-vat. We however get this commission on a monthly basis and should probably pay VAT on them.

    What can be done about this situation? Should be backdate all those payments to the months the policies were written so that effectively they are not included as income post-vat? Or is the provider in the wrong here?

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    Perhaps you need to explain a bit more ...... what type of business etc

    You cannot charge and claim vat on anything before you were vat registered and neither can you now try to do it !
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    HR is right. Any changes will only occur since your VAT registration everything else stays as it was.

    More info is required though. For example, is your customer/provider VAT registered? If not, then I can see the problem from their side. If they are then they shouldn't have any issue with VAT now been charged to them.

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    Business is insurance and life brokerage. My feeling is to just not mark commission coming in from them as VAT inclusive. If SARS queries it we will just have to state that this monthly income was generated before VAT registration, and is being paid out on a monthly basic over a period of X months.

    They are VAT registered.

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    Why would SARS query it, if you are not charging vat before you are registered and are now charging vat after you have registered ?
    Them being vat registered has got nothing to do with your invoicing - if you are vat registered you will charge vat, if you are not, you won't.

    Personally I think you are trying to fiddle something.
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    Quote Originally Posted by HR Solutions View Post
    Why would SARS query it, if you are not charging vat before you are registered and are now charging vat after you have registered ?
    Them being vat registered has got nothing to do with your invoicing - if you are vat registered you will charge vat, if you are not, you won't.

    Personally I think you are trying to fiddle something.
    Understand that we do not invoice the provider(Sanlam) they generate a commission statement every month witch shows the amount being paid over to us.(For a sale of policies which occurred before we were VAT registered) Therefore the amount does not include VAT, and they said they will not start paying VAT since it was made before we were registered.

    The only thing for me to fiddle is to tell the accounting package if this income received has VAT or not and maybe the effective date of the transaction. I can't go and declare that we received VAT on something which we do not receive VAT for, otherwise we are paying VAT out of our own pockets.

    Therefore I need to know what the procedure is in such cases, as not to have VAT audit issues.

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    I would advise reading Sec (9) of the Act which defines time of supply. My take is that you should be charging VAT.

    Besides that, Sanlam are being obtuse because they simply claim any input taxes paid, from their output VAT.

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    Quote Originally Posted by Andromeda View Post
    I would advise reading Sec (9) of the Act which defines time of supply. My take is that you should be charging VAT.

    Besides that, Sanlam are being obtuse because they simply claim any input taxes paid, from their output VAT.
    I received this back when I enquired about the VAT.

    The brokerage has an As-and-When (Full reserve) broker contract.

    The amount that is being paid to the broker, is the amount released from the reserve account of the remuneration account. The money in the reserve account is commission which was already earned by the broker, before the VAT registration was placed on the records of the brokerage.

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    Well that is clearly Sanlam's view. Sec (9) basically determines that the time of supply is when the invoice is dated or payment received, whichever is the earlier....

    Put another way, when is the commission accounted for as income in your hands, for income tax purposes?

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    Quote Originally Posted by Andromeda View Post
    Well that is clearly Sanlam's view. Sec (9) basically determines that the time of supply is when the invoice is dated or payment received, whichever is the earlier....

    Put another way, when is the commission accounted for as income in your hands, for income tax purposes?
    Well it would be silly to set the date of income when the policies were sold because "as and when" means that when a client cancels you don't get the the rest of the money. Therefore on our side it is accounted for on a monthly basis as it comes in. But Sanlam sees it as money "already paid". I'm not sure what to do about it though, how do you convince Sanlam otherwise?

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