Must a vendor agent charge VAT on artwork sold on behalf on a non-vendor principal?
26 May 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
client is a VAT Vendor. He has a high end jewellery store. An artist has
consigned artwork to him to sell on her behalf. The artist is not a vat vendor.
Is my client entitled to only account for VAT on the commission he earns when
he sells the artist’s work? If he adds VAT to the full selling price, she can't
deduct any input vat as the artist is not a vat vendor.
the facts provided we accept that the agreement is in fact one whereby the
client acts as an agent for the artist (the principal). The parties bear
the onus to prove this.
The ‘sale of
the consigned artwork’ is therefore not a supply by the client. Section
54(1) of the Value-Added Tax Act deems the supply made by an agent of a
principal to be made by the principal. The parties can only agree
otherwise if the principal is also a vendor (not applicable in this
The client will
therefore only levy output tax on the commission charged on the sale of the
goods. The client may have to indicate to recipients (customers) that the
supply of the art work is not a taxable supply and that no output tax applies
to that supply.
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.