Page 512 - Juta's Indirect Tax

BGR 004 (3) VALUE-ADDED TAX ACT: BINDING GENERAL RULINGS BGR 005 5. Period for which this ruling is valid
This BGR is effective from 1 July 2014 and will apply until it is withdrawn or the relevant legislation is amended.
Group Executive: Interpretation and Rulings Legal and Policy Division
SOUTH AFRICAN REVENUE SERVICE Date of 1st issue: 21 January 2010
Date of 2nd issue: 25 March 2013
BINDING GENERAL RULING (VAT): BGR 5
25 March 2011
VALUE-ADDED TAX ACT 89 OF 1991 (the VAT Act)
SECTIONS 1, 20 and 21
DISCOUNTS, REBATES AND INCENTIVES IN THE MOTOR INDUSTRY
This ruling serves to provide –
• a legal framework for the treatment of discounts, rebates and incentives granted by motor car manufacturers
(manufacturers), and
• guidelines in determining whether the manufacturer is required to issue a credit note, or receive a tax invoice for
discounts, rebates and incentives granted.
2. Background
It is common in the motor industry for manufacturers to grant allowances in the form of discounts, rebates and incentives to motor car dealers (dealers) and nance companies. These allowances may either result in the previously agreed consideration for a supply being altered, or may represent payment for a supply of services by the dealer or nance company.
Manufacturers are currently experiencing dif culties in classifying which discounts, rebates or incentives alter the previously agreed consideration for a supply or represent payment for a supply of services.
3. Types of rebates* granted in the motor industry
Manufacturers supply motor cars in the following three scenarios:
• The manufacturer sells the motor car to the nance company and delivers it to the dealer.
• The manufacturer sells the motor car directly to the dealer.
• The manufacturer sells the motor car directly to the customer.
Rebates are volume driven and are determined based on various factors including model, value, unit and brand. In most instances, rebates are provided per motor car and are only granted once a dealer sells the motor car.
Rebates are granted to the dealer and nance companies depending on the circumstances.
3.1 Rebates granted to dealers
The rebates that are granted to dealers can be categorized into three categories, namely, qualitative, quantitative and other rebates.
3.1.1 Qualitative rebates
These rebates are granted based on speci c criteria and include, but are not limited to, the following:
• Dealer Standard Rebate may be item-speci c and is determined by the pro tability of the dealer, stock evaluations, ratings as per scorecards and franchise agreements. These are standards required in relation to the running of the
business. The rebate will be granted once the required standards are met.
• Customer Service Index (CSI) is where the customer service levels for sales and after sales are measured and reported
by the dealer. The amount is determined by reference to the relative position to competitors and the need to improve or retain the dealer’s position in external customer satisfaction surveys.
3.1.2 Quantitative rebates
The purpose of these rebates is to move stock and increase sales and include, but are not limited to, eet rebates, volume rebates, campaigns to move motor cars, new launches and run-outs and promotional rebates.
3.1.3 Other rebates
Storage and advertising rebates fall under the category of “other rebates”. Storage and advertising rebates are granted to place emphasis on the dealer’s showroom in order to shift the focus to a speci c motor car.†
3.2 Rebates granted to nance companies
The motor industry often makes use of nance companies and pays rebates to these companies. These rebates include, but are not limited to, volume rebates and rebates for the penetration of the market. The purpose of these rebates is to assist the nance company to provide competitive nancing, in order to retain customers and to increase the manufacturer’s sales.
* For purposes of this document, the term “rebate” will include discounts, rebates and incentives.
† The examples provided are not an exhaustive list and may include various other payments to the dealer.
DATE: ACT: SECTIONS: SUBJECT:
1. Purpose
504 Juta’s IndIrect tax 2016