As you may be aware, the Minister of Finance announced a value-added tax (VAT) rate increase in his budget speech on 21 February 2018. The standard rate of VAT will change from 14% to 15% with effect from 1 April 2018 (the Effective Date). This means that from the Effective Date, all taxable goods or services supplied by Sanlam, are subject to the VAT rate of 15%.
Kindly take note of the following transitional arrangements regarding the administration of your retirement fund–
- All fee review letters not issued yet and effective on or after the Effective Date, will reflect the new VAT rate. Fee review letters already issued, will not be re-issued. Any clients requiring a revised review letter or budget, should contact their Client Relationship Manager in this regard.
- The new fee VAT rate will be implemented automatically for all clients on the Effective Date.
- Where services are performed during a period which ends before the Effective Date, VAT at 14% is applicable, irrespective of the date of invoicing or payment. Therefore if fees – e.g. asset based fees and administration fees – are raised / invoiced / recouped from clients on or after the Effective Date in respect of services rendered before the Effective Date, for instance in March 2018, the rate of 14% apply. Thus for March contributions paid in April, VAT at 14% is applicable on the fees.
- However, where a service is rendered on or after the Effective Date, VAT at 15% is applicable. For example, member investment switches processed on 3 April 2018 will be charged at 15% VAT.
- Where the period of rendering the services spans the Effective Date, e.g. quarterly fees or bi-annual fees, an apportionment will be made to the fees. The 14% rate will be applied to the period before the Effective Date and the 15% rate will be applied to the period after the Effective Date.
- We are assuming that all 3rd party service providers on whose behalf we collect fees, will increase and apply the same principles as above. We will thus update our administration system and pay over any fees to 3rd party providers accordingly.
- Funds where insurance components are provided via non-Sanlam risk providers, need to take note that we only record the total risk premium on our administration system. If these premiums contain costs that attract VAT and risk premium rates will increase accordingly, you need to inform your Client Relationship Manager as soon as possible, since the increased premiums will not be changed automatically, but need to be changed with a documented amendment. Any potential changes to Sanlam risk premiums will follow the standard revision process.
If you have any further questions or concerns, please don’t hesitate to contact your Client Relationship Manager.