Services of agents and intermediaries
An agent (intermediary) for Value-Added Tax (VAT) purposes can either be disclosed or undisclosed.
It will be a matter of fact as to whether you are a disclosed or an undisclosed agent.
A disclosed agent is an agent who acts on behalf of another person (the principal), and who discloses this fact to the end customer.
For VAT purposes, the principal is the person supplying the goods and services to the customer. The principal is liable for the VAT on the supplies and must issue a VAT invoice to the customer.
The agent is liable for the VAT on the agent service they supply to the principal (for example, on the commission payments). The agent must issue a VAT invoice to the principal.
Where is the place of supply?
The place of supply depends on whether the customer is a taxable or a non-taxable person.
The place of supply of the services to taxable persons is the place where that taxable person is established.
The place of supply of the services to non-taxable persons is the place where the underlying transaction is supplied.
An undisclosed agent is someone who acts on behalf of another while holding himself or herself out as principal. In such cases, there are two simultaneous supplies for VAT purposes. The agent is simultaneously receiving services or goods from the principal and supplying them to the final customer.
The agent is liable for the VAT on the supply deemed to be supplied by him or her to the customer.
The commission that the undisclosed agent earns is embedded in the price that they sell the goods or services for. The VAT rate applicable to that commission is the same VAT rate which applies to the goods or services supplied.
What are the principal’s VAT obligations?
The principal is liable for the VAT on the goods or services supplied to the agent. The principal must raise an invoice to the agent for the supply, and not to the customer.