[Question] Warranty claims and VAT

[dellatjie]

Good morning,

I have been searching through section 11 and 12 of the VAT Act for answers, but to no avail.

Can anyone assist me with the following question:

Why do motor vehicle dealers not charge VAT on warranty invoices charged?

For example, something breaks on a car which is under warranty. The client does not pay, but the manufacturer pays. Therefore a warranty invoice (no VAT) is issued to the client and submitted to the manufacturer as a claim to pay back.

Is it possibly because the dealer is only the agent, not the seller?

The nearest answer I could get, is when a warranty plan is sold to a non-resident, in which case the transaction is zero rated.

[Justloadit]

Hi Dellatjie,

I suspect that the dealer is an agent acting on behalf of the manufacturer, as ultimately the manufacturer carries the cost of the repair.
It may also be that the cost of the warranty claim is not a real sale, but more for the balance sheet as an expense, or also used for trend purposes to study what failures occur.