Page 437 - Juta's Indirect Tax

IN 56 (2) VaLue-added tax act: InterPretatIOn nOtes IN 56 (2)
Example 3 – Subcontractor/Commission agent
Facts:
Company C, a registered vendor for VAT purposes, has exclusive mining rights in South Africa. Company C has appointed various subcontractors to recover precious metals from its different mining areas. The subcontractors, being registered vendors for VAT purposes, are paid for their services rendered based on a percentage of the selling price of the precious metals realised by Company C. Company C markets the precious metals, calculates the amount payable and pays the subcontractor. Company C (recipient) is in a position to determine the consideration payable for the supply.
Can Company C issue recipient-created tax invoices for the supplies acquired from the subcontractors without obtaining prior approval from the Commissioner?
Result:
Company C quali es in terms of BGR 15 (refer to 5.2 of this Note) to issue recipient-created tax invoices without obtaining prior approval from the Commissioner, provided that the requirements of BGR 15 (refer to 5.4 of this Note) are satis ed.
Example 4 – Royalties
Facts:
Company E, a registered vendor for VAT purposes, has exclusive intellectual property rights on an accounting software package. Company E has supplied the right to use the intellectual property to Company F (also a registered vendor). Company F will pay Company E 5% of its monthly turnover as consideration for the right to use the intellectual property. Company E is dependent on Company F for determining the value to be placed on the right to use the intellectual property.
Can Company F issue recipient-created tax invoices for the supplies acquired from Company E without obtaining prior approval from the Commissioner?
Result:
Company F quali es in terms of BGR 15 (refer to 5.2 of this Note) to issue recipient-created tax invoices without obtaining prior approval from the Commissioner, provided that the requirements of BGR 15 (refer to 5.4 of this Note) are satis ed.
2. Quality & Testing
Example 5 – Farmer
Facts:
Vendor A is a farmer who sells produce to Co-operative XYZ (both parties are registered vendors for VAT purposes). Vendor A is responsible for the delivery of its produce to Co-operative XYZ. Co-operative XYZ on receipt of the delivery weighs the produce and issues an in-house ticket to Vendor A. Co-operative XYZ determines the price payable per ton to Vendor A based on the quality of the produce. The testing and measuring of the quality is performed by Co-operative XYZ.
Can Co-operative XYZ issue recipient-created tax invoices for the supplies acquired from Vendor A without obtaining prior approval from the Commissioner?
Result:
Co-operative XYZ quali es in terms of BGR 15 (refer to 5.2 of this Note) to issue recipient-created tax invoices without obtaining prior approval from the Commissioner, provided that the requirements of BGR 15 (refer to 5.4 of this Note) are satis ed.
Example 6 – Mining Industry
Facts:
Company B, a registered vendor for VAT purposes, conducts a mining activity in which it extracts precious metals and supplies it to Company C. Company C is a registered vendor for VAT purposes. Company C calculates the amount payable to Company B based on the quality of the precious metals. The determination of the quality of the precious metals is performed by Company C in line with international guidelines. Company C (recipient) is in a position to determine the consideration payable for the supply.
Can Company C issue recipient-created tax invoices for the supplies acquired from Company B without obtaining prior approval from the Commissioner?
Result:
Company C quali es in terms of BGR 15 (refer to 5.2 of this Note) to issue recipient-created tax invoices without obtaining prior approval from the Commissioner, provided that the requirements of BGR 15 (refer to 5.4 of this Note) are satis ed.
Juta’s IndIrect tax 2016 429