TAX

Simplifying VAT for Agency Functions

An agency concept under VAT involves acting on behalf of another person while supplying the goods or services. Under VAT, a person can act as a ‘disclosed agent’ or ‘undisclosed agent’ and the VAT treatment under both cases is different.

Often the term ‘agent’ is extended to refer other commercial arrangements such as franchise, sole distributors, etc. The businesses would carefully need to evaluate whether the rules relating to agency under VAT would apply. Also, there is no common rule under VAT which applies to all arrangement.

This article explains the agency concept under VAT along with the VAT treatment and processes to be followed to ensure appropriate compliance. The concept is different from ‘tax agency’ under VAT. A tax agent is a person registered with the tax authority who is appointed on behalf of another person to represent him/her before the authority.