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What are the VAT consequences associated with an auction house?

14 April 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: A client of mine bought a shelf company in the current year. This company is going to be an auction house, where person A can come and make use of the company to auction an animal to person B. The ownership of the animal directly gets transferred from person A to person B. My client acts in the middle. Where person B transfers the money for the animal, to my client, then my client transfers the money received less the commission charge over to person A. My client will register for VAT as soon as the turnover above R50 000 can be proved. Does my client need to charge VAT on the price of the animal? Is the price of the animal itself part of turnover/income? According to my knowledge, my client should charge VAT on the commission fee only, once registered. Does my client need to get every person who sells an animal, to sign a VAT form for sale of second hand goods, and which will be the correct form that must be signed?

A: As a standard principle auctioneers are agents as far as VAT is concerned per s54(1) VAT Act in respect of the goods sold on behalf of others. The agent may issue the invoice in respect of the supply as agent but the principal will have to account for the VAT output. The auctioneer must then also retain the documentation as required in s54(3) VAT Act in respect of the principal. The auctioneer as agent will only have to account for VAT on his or her sales commission earned and not the value of the horse sold between A and B.

However section 54(5) VAT Act also provides a special dispensation that when the principal and the auctioneer agree to have a supply by auction of any goods, other than a taxable supply, treated as if the supply were made by the auctioneer and not by the principal, the supply will be charged with tax as if it were made by the auctioneer in the course or furtherance of the auctioneer’s enterprise. The auctioneer may then recover the amount of tax charged on the supply from the principal or retain or deduct the relevant amount out of any money in the auctioneer’s hands belonging or payable to the principal.

The auctioneer must in both instances maintain the records contemplated in s 20(8) VAT Act as if the principal made a supply of second-hand goods to him or her, not being a taxable supply. The auctioneer will then have to account for VAT output tax on the sale of the goods, even though you would not have had to account for vat on the supply had you sold the goods without the intervention of the auctioneer. Where the auctioneers purchases goods for sale, such goods will be treated as normal as if the auctioneer was trading in such goods and he would have to account for the output tax on such sales.

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.


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