Understanding VAT Agent Accounting in South Africa: Insights from Section 54 of the VAT Act

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Many South African businesses act as agents—buying or selling goods and services on behalf of clients. This can be a practical solution when clients prefer not to manage suppliers themselves and are happy to pay a fee for someone else to handle the logistics.

After listening to Pieter van der Zwan’s TaxBreak podcast episode on VAT and agency relationships, I revisited Section 54 of the VAT Act to unpack what it means for VAT-registered businesses operating in this way.

What Is an Agent for VAT Purposes?

An agent is someone who acts on behalf of another person (the principal) in a transaction. This relationship must be formalised—usually through a written agreement—to prove the agency arrangement.

The agent doesn’t own the goods or services involved. Instead, they facilitate the transaction, and the principal remains responsible for the VAT. Practically, this means:

  • The principal knows who the suppliers are and what they charge.

  • The agent cannot hide supplier details.

  • The principal pays the agent a fee or a percentage of the project cost for arranging the goods or services.

Example: Takealot as Agent and Principal

Takealot, South Africa’s largest online retailer, operates in both roles depending on the transaction.

When acting as a principal:

  • Takealot sells products it owns.

  • It accounts for VAT on the full selling price.

When acting as an agent:

  • Takealot facilitates sales for third-party sellers.

  • The sale is deemed to be made by the seller (the principal).

  • Takealot may issue a tax invoice marked “agent sale”.

  • The seller declares the output VAT.

  • Takealot only declares VAT on the commission it earns.

This structure ensures VAT is correctly accounted for by the actual supplier and avoids Takealot including the full sale value in its own VAT returns.

Section 54: Key Provisions

Section 54 of the VAT Act outlines how VAT should be handled when agents are involved. Here’s a summary of the main points:

Section 54(1): Selling on behalf of a principal

  • The sale is deemed to be made by the principal.

  • The agent may issue a tax invoice marked “agent sale”.

  • The principal declares output VAT.

  • The agent declares VAT only on commission earned.

Section 54(2): Purchasing on behalf of a principal

  • The purchase is deemed to be made by the principal.

  • The agent may request the supplier to issue the invoice in their name, marked “agent purchase”.

  • The principal claims input VAT.

  • The agent does not claim input VAT or declare output VAT when reimbursed.

Section 54(3): Record-keeping and notifications

  • Agents must keep detailed records of all transactions.

  • A document must be issued to the principal within 21 days after month-end, including:

    • Value of goods or services,

    • Purchase order number,

    • Principal’s details and VAT number,

    • VAT treatment (e.g. zero-rated supply).

  • Records must be retained in line with Section 55 and the Tax Administration Act.

Practical Example: Interior Designers as Agents

Consider an interior designer managing a home renovation. They purchase furniture and décor on behalf of the client. If acting as an agent:

  • The purchases are made on behalf of the client.

  • The designer may request invoices marked “agent purchase”.

  • The client claims the input VAT.

  • The designer’s VAT turnover includes only design fees and commission—not the full value of purchases.

Without proper documentation, SARS may treat the full transaction value as the designer’s turnover, leading to incorrect VAT treatment. From an accounting perspective, this approach ensures only actual company revenue is reflected in the profit and loss. Using a control account for agency transactions helps keep records accurate and reconciled.

Why This Matters

Understanding VAT agent accounting helps you:

  • Stay compliant with SARS requirements,

  • Accurately report VAT,

  • Understand your true revenue and profitability.

A common issue during SARS audits is businesses claiming to use VAT agent accounting but failing to provide the necessary documentation. To apply Section 54 correctly:

  • Formal documentation must establish the agency relationship.

  • Invoices must be sent to the principal.

  • If goods are imported, a statement must be issued to the principal within 21 days of month-end.

  • SARS requires proof—not just a verbal claim—that the arrangement qualifies as agency.

Simply saying “we acted as an agent” isn’t enough. The burden of proof lies with the taxpayer.

If you’re unsure whether your business qualifies or need help preparing the right documentation, speak to your accountant or tax advisor. Your accounting records can also be set up to clearly show what is your revenue and what are project-related transactions.

For a deeper dive, I highly recommend Pieter van der Zwan’s TaxBreak podcast episode on VAT and agency relationships—available on Spotify and YouTube. His explanations are practical and tailored for South African tax professionals.

If you have questions about how Section 54 applies to your business, or need help with SARS notifications, feel free to reach out. We’re here to help you stay compliant and confident in your VAT reporting.