Page 518 - Juta's Indirect Tax

BGR 014
DATE: ACT: SECTION: SUBJECT:
Preamble
VALUE-ADDED TAX ACT: BinDing gEnErAL rULingS BGR 014 BINDING GENERAL RULING (VAT) NO: 14
22 March 2013
VALUE-ADDED TAX ACT 89 OF 1991 (the VAT Act)
SECTIONS 1, 7, 8, 9, 11, 16, 20 AND 21
VAT TREATMENT OF SPECIFIC SUPPLIES IN THE SHORT-TERM INSURANCE INDUSTRY
For the purposes of this ruling –
• ‘BGR’ means a binding general ruling issued under section 89 of the Tax Administration 28 of 2011; • ‘section’ means a section of the VAT Act unless the context indicates otherwise;
• ‘VAT’ means value-added tax; and
• any word or expression bears the meaning ascribed to it in the VAT Act.
1. Purpose
This BGR sets out the VAT treatment of the issues listed below which have been highlighted during discussions with the short-term insurance industry:
• The time of supply in relation to the supply of short-term insurance and the related intermediary services
• Alternative documents to be used as a tax invoice in respect of the supply of short-term insurance and the related
intermediary services
• Approval to issue recipient-created tax invoices, debit or credit notes
• International transport policies including stock through-put, goods in transit, marine insurance policies and travel
coupons
• Hull and associated liability insurance
• Insurance cover provided to South African residents in respect of xed property and movable property • Excess payments
• Indemnity payments
• Third party payments
• Recoveries
• Group accident claims
• Reinsurance
2. Ruling
2.1 Time of supply
(a) Supply of short-term insurance
Short-term insurers are, in terms of section 9 (1) read with section 16 (4), required to account for output tax in respect of the supply of short-term insurance in the tax period during which the premium is received by the insurer or its intermediaries. This is based on the assumption that the short-term insurance policy document (that is, policy, renewal notice or endorsement) is not an ‘invoice’ as de ned in section 1 (1).
(b) Supply of related intermediary services
Intermediaries are, in terms of section 9 (1) read with section 16 (4), required to account for output tax in respect of the supply of intermediary services (which include the maintenance and servicing of a short-term insurance policy, collecting or accounting for premiums payable as well as receiving, submitting or processing claims under such a policy) in the tax period during which payment in respect of the intermediary services is received.
The issuing of an invoice or tax invoice by the –
• short-term insurer, other than the policy document envisaged in paragraph 4.2 (a), in respect of the supply of short-
term insurance; or
• short-term insurer or the intermediary in respect of the supply of intermediary services;
which precedes the payment of the premium will result in the short-term insurer or the intermediary being required to account for output tax in the tax period during which the invoice or tax invoice is issued.
2.2 Tax invoices, credit or debit notes (a) Supply of short-term insurance
The Commissioner directs, in terms of sections 20 (7) and 21 (5), that the short-term insurer does not have to issue a tax invoice, credit or debit note, as the case may be, in respect of the supply of short-term insurance subject to the condition that the policy documents –
• contain the short-term insurer’s and insured’s name, address and VAT registration number (the insured’s VAT
registration where applicable) and the policy number;
• stipulate the premium amount, indicating either the value of the supply, amount of tax charged and the consideration
for the supply, or where the amount of tax charged is calculated by applying the tax fraction to the consideration for the supply, the consideration and either the amount of tax charged, or a statement that it includes a charge in respect of tax and the rate at which the tax was charged;
• contain a statement con rming the Commissioner’s direction in terms of section 20 (7) or 21 (5), as the case may be; and
• contain a statement informing the insured (being a vendor seeking to deduct the VAT paid as input tax) that for purposes of deducting input tax, the insured must be in possession of the policy document together with proof that the
premium has been paid (for example, bank statements).
510 Juta’s IndIrect tax 2016