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

  1. #11
    Diamond Member Justloadit's Avatar
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    I think that you may be looking at this in the wrong manner.

    As a agent for Sanlam, you made the sale on the behalf of Sanlam. The customer is paying Sanlam directly, because Sanlam is sending the invoice directly to the customer, and in that payment, it has the VAT portion.
    YOU DID NOT MAKE THE SALE. You were instrumental in making the sale, there for the commission provided by Sanlam yo you, will not include VAT, as there is no sale that you made to Sanlam. They are providing you with a payment as commission for the original sale made. This is the reason that Sanlam will not provide you with a VAT invoice, but a statement that you received income. When you enter this income in your books, it will be a zero rated VAT output.

    This is a similar manner in which Prepaid Electricity is handled by shops who are agents selling prepaid electricity.
    You will need to make an entry on your VAT form, as the income received from Sanlam as zero rated sale, and is a separate figure from your output VAT figure..

    I hope I explained it properly here.
    Maybe you should approach a SARs office, and allow them to explain it to you.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar pumping, Solar Geyser & Solar Security lighting solutions - www.microsolve.co.za

  2. #12
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    Quote Originally Posted by Justloadit View Post
    I think that you may be looking at this in the wrong manner.

    As a agent for Sanlam, you made the sale on the behalf of Sanlam. The customer is paying Sanlam directly, because Sanlam is sending the invoice directly to the customer, and in that payment, it has the VAT portion.
    YOU DID NOT MAKE THE SALE. You were instrumental in making the sale, there for the commission provided by Sanlam yo you, will not include VAT, as there is no sale that you made to Sanlam. They are providing you with a payment as commission for the original sale made. This is the reason that Sanlam will not provide you with a VAT invoice, but a statement that you received income. When you enter this income in your books, it will be a zero rated VAT output.

    This is a similar manner in which Prepaid Electricity is handled by shops who are agents selling prepaid electricity.
    You will need to make an entry on your VAT form, as the income received from Sanlam as zero rated sale, and is a separate figure from your output VAT figure..

    I hope I explained it properly here.
    Maybe you should approach a SARs office, and allow them to explain it to you.
    Well we are acting as agents for other providers, and they are paying VAT. The problem is a timing issue.

    I've asked our accountant to get more clarity on this matter.

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    Hi Justloadit, you seem to be saying that there is no VAT on the commission transaction. If its Sanlam then they are obviously VAT registered. Surely the transaction between Sanlam and the broker should be a Vatable one?

    Unless I am missing something, the broker should be issuing Sanlam with a VAT invoice each month for the commission due. Up until now as there was no VAT, there was no problem. Now the broker has to charge VAT on the commission invoice he issues each month. Sanlam are perfectly entitled to say that they will be paying the broker say R1000 in commission, regardless of whether it includes VAT or not ( I suppose it comes down to the wording of the contract).

    The change occurs on the brokers side where they now have to issue a VAT invoice for R1000 which is now inclusive of VAT. The broker is now really earning a little less commission each month, although some of this is offset by now being able to claim input VAT on some of their supplies.

    Sanlam do seem to be benefiting unfairly here, but they may have a rigid system in place as trying to get VAT invoices from thousands of brokers may just not be practical.

    I know you said the broker did not make the insurance sale, but surely they made the commission sale. The broker is the one who should be supplying the VAT invoice, not Sanlam.

    I can't seem to find any reference for commissions being exempt from VAT, unless paid to an employee.

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    Quote Originally Posted by BusFact View Post
    Hi Justloadit, you seem to be saying that there is no VAT on the commission transaction. If its Sanlam then they are obviously VAT registered. Surely the transaction between Sanlam and the broker should be a Vatable one?

    Unless I am missing something, the broker should be issuing Sanlam with a VAT invoice each month for the commission due. Up until now as there was no VAT, there was no problem. Now the broker has to charge VAT on the commission invoice he issues each month. Sanlam are perfectly entitled to say that they will be paying the broker say R1000 in commission, regardless of whether it includes VAT or not ( I suppose it comes down to the wording of the contract).

    The change occurs on the brokers side where they now have to issue a VAT invoice for R1000 which is now inclusive of VAT. The broker is now really earning a little less commission each month, although some of this is offset by now being able to claim input VAT on some of their supplies.

    Sanlam do seem to be benefiting unfairly here, but they may have a rigid system in place as trying to get VAT invoices from thousands of brokers may just not be practical.

    I know you said the broker did not make the insurance sale, but surely they made the commission sale. The broker is the one who should be supplying the VAT invoice, not Sanlam.

    I can't seem to find any reference for commissions being exempt from VAT, unless paid to an employee.
    It's a tricky situation. As far as I can tell, brokers do not issue VAT invoices, it's almost impossible to create VAT invoices on commission payable. The brokerage does not control the amounts that will be paid, so invoices would have to be after a provider has issued a commission statement. Which will then anyway be too late to "add vat", so essentially you pay the VAT out of your own pocket. That is why they include VAT in commission once you give them your VAT number.

    Regarding the VAT on commission the last time I googled I found a document stating that any commission income should include VAT.

  5. #15
    Diamond Member Justloadit's Avatar
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    Commission is not a sale, it is an agent fee for having facilitated the sale.
    It would be in Sanlam's interest to create a VAT invoice, as they would then have 14% claimed as VAT input.

    When in doubt find out, go to SARS and pose the question. Ultimately it is not my opinion or your opinion at the end of the day, it is what SARS will do and who will be accountable when there is an issue with the VAT.
    So to clear up the issue, got to a SARS office physically and get the ruling out of SARS. If Sanlam is proceduraly incorrect, then Sanlam will have a problem with SARS, and knowing the company, I think they would not risk this issue, and that the staff at ground level are not aware of the correct procedure.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar pumping, Solar Geyser & Solar Security lighting solutions - www.microsolve.co.za

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    Quote Originally Posted by Justloadit View Post
    Commission is not a sale, it is an agent fee for having facilitated the sale.
    It would be in Sanlam's interest to create a VAT invoice, as they would then have 14% claimed as VAT input.

    When in doubt find out, go to SARS and pose the question. Ultimately it is not my opinion or your opinion at the end of the day, it is what SARS will do and who will be accountable when there is an issue with the VAT.
    So to clear up the issue, got to a SARS office physically and get the ruling out of SARS. If Sanlam is proceduraly incorrect, then Sanlam will have a problem with SARS, and knowing the company, I think they would not risk this issue, and that the staff at ground level are not aware of the correct procedure.
    Pretty sure VAT is calculated. As I said it's more the timing of the sale and when we receive the commission. I hope our accountant can source someone that can give a definitive answer.

    http://fspbusiness.co.za/articles/va...oker-3878.html

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    Quote Originally Posted by ktersius View Post
    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?
    Yes I agree. Are you able to determine when is the commission accounted for as income in your hands, for income tax purposes?

  8. #18
    Diamond Member Justloadit's Avatar
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    Quote Originally Posted by ktersius View Post
    Pretty sure VAT is calculated. As I said it's more the timing of the sale and when we receive the commission. I hope our accountant can source someone that can give a definitive answer.

    http://fspbusiness.co.za/articles/va...oker-3878.html
    I suggest you visit a consultant in the SARS office.
    Ultimately they are the ones who will judge whether you have done it correctly.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar pumping, Solar Geyser & Solar Security lighting solutions - www.microsolve.co.za

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    Quote Originally Posted by Andromeda View Post
    Yes I agree. Are you able to determine when is the commission accounted for as income in your hands, for income tax purposes?
    Hmm not sure, according to our accountant when we receive it.

  10. #20
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    OK, I tend to agree. Then for VAT purposes the same would apply, in my opinion. By that I mean that the date of supply would revert to the date when payment is received.

    I have tried to find a practice note or authoritative opinion, but no luck. I guess you should rely on your accountant because he will, I am sure, confirm his opinion with SARS.

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