Page 407 - Juta's Indirect Tax

IN 42 VaLue-added tax act: InterPretatIOn nOtes IN 42
Agent
Principal
a
The agent will not be the owner of any goods or services acquired on behalf of the principal.
The principal is the owner of the goods or services acquired on his/her behalf by the agent.
b
The agent will not alter the nature or value of the supplies made between the principal and third parties.
The principal may alter the nature or value of the supplies.
c
Transactions on behalf of the principal will not affect the agent’s turnover, except to the extent of the commission or fee earned on such transactions.
The total sales represent the principal’s turnover whereas the mark-up is the principal’s pro t percentage. The commission charged by agents forms part of the principal’s expenses.
d
An agent only declares the commission for Income Tax and VAT purposes.
The principal declares gross sales as income for Income Tax purposes and as taxable supplies for VAT purposes.
In essence, the above-mentioned differences indicate, inter alia, that a person who accepts the commercial risks associated with a transaction and is trading for that person’s own account, is the principal and not the agent when concluding such transactions. For information on the legality (from a VAT perspective) of issuing tax invoices on behalf of the principal, refer to Paragraph 6 (Tax invoices).
4.2.1 Agent
Where the local entrepreneur is acting as an agent, the following will be applicable.
VAT on the fees/commission received by the agent
• Zero-rated — the fees/commission charged by the local entrepreneur for the service of arranging the tour package
will be zero-rated according to section 11 (2) (l) of the VAT Act if the foreign entrepreneur and the foreign tourist,
i.e. the recipients, are outside the Republic at the time the service of arranging the tour package is rendered. Example: X, an American citizen who is a permanent resident of America, contacts a South African travel agent to arrange his family vacation to South Africa.
The fee that the South African travel agent will charge X for arranging the family’s vacation will be zero-rated for VAT purposes. This is due to the fact that X is a non-resident of the Republic, and is not in the Republic at the time the service of arranging is rendered
• Standard-rated — the fees/commission charged by the local entrepreneur for the service of arranging the tour package will be standard-rated according to section 7 (1) (a) of the VAT Act if the foreign entrepreneur or foreign tourist, i.e. the recipient, is in the Republic at the time the service of arranging the tour package is rendered.
Example: X, an American citizen whois a permanent resident of America, whilst in South Africa on a family vacation, contacts a South African travel agent to arrangehis accommodation requirements in respect of his extended vacation. The fee that the South African travel agent will charge X for arrangingthe extended family vacation will be standard- rated for VAT purposes. This is due to the fact that X is in the Republic at the time the service of arranging is rendered.
Example: X, an American citizen who is a permanent resident of America, whilst in South Africa on a family vacation, contacts an American travel agent (a non-residentand not a vendor in the Republic) to arrangehis accommodation requirements in respect of his extended vacation. The American travel agent thereafter contacts a South African travel agent to make the necessary arrangements.
The fee that the South African travel agent will charge the American travel agent for arranging the extended family vacation of X will be standard-rated for VAT purposes. This is due to the fact that X is in the Republic at the time the service of arranging is rendered.
4.2.2 Principal
Where the local entrepreneur is acting as principal, the following will be applicable: VAT on the consideration received by the principal
• Zero-rated — the consideration charged by the local entrepreneur for the service of arranging the tour package will
be zero-rated according to section 11 (2) (l) of the VAT Act, if the foreign entrepreneur or the foreign tourist, i.e. the
recipient, is outside the Republic at the time the service of arranging the tour package is rendered.
• Standard-rated — the consideration charged by the local entrepreneur for the service of arranging the tour package will be standard-rated according to section 7 (1) of the VAT Act, if the foreign entrepreneur or foreign tourist, i.e.
the recipient, is in the Republic at the time the service of arranging the tour package is rendered.
The examples used under 4.2.1 will apply in the same way where the principal charges a fee/commission for the arranging of the tour package.
4.3 VAT implications on the various supplies within a tour package
In order to correctly identify the VAT implications pertaining to the supply of the tour package, it is necessary to identify the separate supplies included in the tour package.
The section below explains the various common components of a tour package and the VAT implications thereof.
4.3.1 Transport Services
4.3.1.1 International Air Travel
The services provided by an airline carrier (the supplier), being a vendor for VAT purposes, of transporting passengers (or goods in some instances) may be zero-rated in the following circumstances:
(i) The transportation of passengers from a place in an export country to a place in another export country:
Juta’s IndIrect tax 2016 399