The recent Taxation Laws Amendment Bill 2013 (TLAB), proposed a
new section dealing with time of supply rules for contingent
The proposed s9(4)(b) of the Value Added Tax Act, No 89 of 1991
(VAT Act) provides that "where services are supplied under
an agreement and the consideration for such services supplied in
whole or part is not determined at the time that such services are
rendered or performed, that supply shall be deemed to take place
when and to the extent that any payment in terms of the agreement
is due or is received or an invoice relating to the supply is
issued by the supplier or the recipient, whichever is the
A vendor must include a supply and calculate output tax in its
VAT return if an invoice is issued during the tax period in terms
of s16(4) of the VAT Act. The tax is calculated on the tax
inclusive consideration indicated on that invoice. Notwithstanding
the general rule relating to the date of issue of an invoice, a
supply will also be recognised if any payment is received by the
supplier before the invoice is issued. However, the current issue
is that while there are time of supply rules which apply under s9
of the VAT Act under circumstances where goods have been supplied,
even where the consideration cannot be determined upfront, the same
provision does not extend to circumstances where services are
supplied for a contingent consideration.
The immediate problem that arises is in transactions where the
determination of the consideration for the supply is subject to
various underlying factors, for example in the mining industry,
where the price can only be determined on extraction of the metals
and/or the average prevailing exchange rate at the time. Another
example referred to in the Explanatory Memorandum of the TLAB, is
where certain services are linked to future contingent events, such
as the payment of risk services performed by a company linked to
share price performance over a certain period of time. Another a
situation that arises is where the payment for certain agency
services supplied may be inextricably linked to the price of the
underlying goods supplied. To counter these situations where
services are offered for a contingent consideration and where no
special time of supply rules are in place, s9(4)(b) of the VAT Act
has been proposed.
The reason for the proposal is to amend the anomaly and by
implementing special time-of-supply rules that will apply to both
goods and services, more specifically, where consideration for the
performance still needs to be ascertained or can only be
ascertained at a later date. The trigger date will occur on the
earlier of the date when either payment is due or received or the
date of invoice. The effective date for the proposed amendment is 1
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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