Can You Claim VAT on Commission Paid in South Africa?
The process of claiming VAT on commissions for commissions in South Africa can feel like getting lost in a maze. But with the right direction you can reap significant tax savings and remain in line with SARS rules.
When you pay commissions to brokers, agents, or intermediaries, understanding tax rules for VAT, the eligibility requirements as well as the document specifications and the process for refunds is vital to maximize your VAT refund and to avoid penalties.
Key Takeaways
- Commission Payments will be subject to tax at a normal amount of 15 percent within South Africa.
- VAT is a right that can claim VAT only by VAT registered vendors who have valid tax invoices and the correct documents.
- The tax on income is calculated without VAT you must distinguish the two in a clear way.
- There are specific limitations on time and conditions to claim the VAT input on commissions.
- Businesses and foreign tourists could also be eligible for VAT refunds if they meet certain conditions.
Understanding VAT on Commission Payments
For South Africa, commission payments are regarded as a tax-deductible supply in the VAT Act. If you receive or pay commission:
- The commission is due to be paid with VAT of 15% when the person receiving the commission is a VAT registered vendor.
- Tax on income is calculated based on the commission amount, which is minus VAT.
- If you’re the person paying the commission, you may be eligible to claim VAT input on commissions if you satisfy SARS standards.
Example for example: If you pay R10,000 in commission and R1,500 VAT, then you might be eligible to get back the R1,500 as input VAT.
Eligibility to Claim VAT on Commission Paid
In order to claim tax on commissions received the business must comply with the following requirements:
| Requirement | Details |
|---|---|
| VAT Registration | Your business needs to be an VAT-registered supplier in SARS. |
| Valid Invoices | Commission is required to be accompanied by the submission of a legitimate tax bill that includes the VAT number of the supplier. |
| Business Purpose | The commission has to be tied to the business activities that are tax-deductible. |
| Correct VAT Rate | VAT is to be assessed at 15 15% and is clearly stated upon the receipt. |
Required Documentation for VAT Claims
SARS requires a strict set of documents for processing VAT claims. Here’s what you require:
| Document | Purpose |
|---|---|
| Tax invoice | It is essential to reflect VAT separately. including all legal aspects. |
| The proof of payment | Confirmations of bank transactions, EFT receipts or receipts. |
| Commission agreement | The description of the service as well as the amount to be paid. |
| Formulation for VAT return | Completely filled out VAT201 form for the claim time. |
Tips: Always confirm your supplier’s VAT ID in the SARS’ VAT Vendor Search Tool.
Step-by-Step VAT Claim Process for Commission
- Find an original Tax invoice by the commission payer.
- Make the transaction the invoicing VAT within your financial system.
- Incorporate the VAT input in the VAT201 tax returns for the applicable period.
- Submit your VAT return via SARS eFiling.
- Maintain all documentation in the event the need arises for an audit.
Important Considerations & Common Pitfalls
| Issue | Why It Matters |
|---|---|
| Incomplete or unpaid invoice | Claim could be delayed or denied. |
| Commission is not tied to tax-paying activities | VAT on inputs is not allowed by SARS. |
| Claim made outside 5-year window | Late claims are void. |
| There is no VAT registration | You can’t claim input VAT even if there is no VAT seller. |
Time Limits for VAT Claims
Timing is crucial. Here’s what SARS needs:
- Input VAT has to be claimed within five calendar years following the time of supply (i.e. when an invoice is issued).
- Make the VAT refund claim in the period of 20 days following the conclusion of the tax year in the year that the service was made.
Late submissions can lead to SARS not allowing the claim even the claim is in good order.
VAT Refunds for Foreign Tourists & Non-Residents
Foreign companies and tourists may be eligible to claim VAT on commissions, or on goods covered by the VAT Refund Scheme in the following conditions:
- The value of the movable items surpasses R250.
- The goods are shipped in of 90 days beginning with the date of the invoice.
- The person has to be a non-resident with a valid international passport.
- All claims must be submitted at the VAT Refund Administrator (VRA) at a designated port of departure.
Note: Only VAT on items but not services (like commissions) is refundable under this scheme.
How to Contact the VAT Refund Administrator (VRA)
If you are required to apply for a VAT refund as non-resident
- Go to on the VRA site to download applications forms.
- Email: [email protected]
- Call: +27 11 394 1117
- Documents to be submitted must include:
- Original tax invoice
- Passport
- Exported goods to be inspected
VAT Recovery Tips for Businesses
- Always ensure that that commission invoices contain all elements of SARS compliance.
- Make use of the cloud-connected accounting program to manage and automate VAT records.
- Perform regular Internal VAT audits to find out if you have missed any taxes on inputs.
- Speak to an qualified tax expert whenever you are unsure.
Conclusion
Yes you can get VAT back on commissions you’ve earned to you in South Africa but only if you’re a VAT-registered vendor who has the proper documents. If you are aware of the rules, keeping accurate documents, and following deadlines, you’ll be able to recover VAT effectively and remain in compliance with SARS.
Are you ready to increase your VAT claim? Keep your documents in order, file them on time, and if needed you should consult an expert make sure you don’t make costly mistakes.
