- This is a binding general ruling (BGR) issued by the South African Revenue Service.
- The ruling clarifies the value-added tax (VAT) implications of securities lending arrangements.
- The BGR replaces the VAT content of Practice Note 5/1999 and is effective from 1 April 2023.
- Section 2(1)(f) deems the provision of credit under an agreement to be “financial services.”
- Under a securities lending arrangement, the borrower pays a “scrip-lending fee” for the use of the security or instrument.
- The scrip-lending fee is not considered a fee, commission, or similar charge and falls within the ambit of section 2(1)(f).
- Therefore, the scrip-lending fee is exempt from VAT and not subject to taxation.
- Vendors that continue to charge VAT on scrip-lending fees after 1 April 2023 must account for the VAT accordingly.
- Credit notes may be issued and adjustments made under certain provisions.
- This ruling is valid from 1 April 2023 until it is withdrawn, amended, or the relevant legislation is amended.
Source: sars.gov.za
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
