SARS recently issued BGR 14, effective 1 November 2013, in respect of the VAT treatment of supplies made and received by short-term insurers. Insurers will need to make the necessary adjustments to their systems and processes to ensure compliance with the ruling. BGR 14, however, does not contain transitional measures, especially considering the effective date of 1 November 2013 which leaves little time to effect changes to documentation and processes. BGR14 also implicitly relies on current VAT provisions relating to dual rate supplies which may not be practically implementable.
BGR 14 addresses many issues relating to VAT on short-term insurance which was not addressed previously and is welcomed in this regard. SARS should definitely be recognised for their work and effort into its creation. It should be realised by the industry that BGR 14 will impose substantial administrative and process burdens on some insurers.
The salient features of the ruling are:
- Clarification on the time of supply in the short-term insurance industry and related transactions – a deviation from the existing position.
- Clarification regarding the issue of tax invoices, debit notes and credit notes where the policy documents contain certain information – changes could necessitate documentary changes.
- Guidance on when an insurer may issue recipient-created tax invoices and debit or credit notes.
- Guidance on the zero rating of insurance relating to international transport, marine, hull insurance and insurance relating to fixed and movable property in an export country – read with the documentary requirements, it contains a deviation from the existing position.
- Clarification of the VAT treatment for group accident insurance where the employer acts as an agent or as principal.
- Guidance on the documentary proof required in respect of zero-rated supplies and for the claiming of input tax deductions – read in conjunction with the SARS Interpretation Note; this could require critical changes for the insurer.
Read more about VAT BGR 14 and its implications.
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