- A securities lending arrangement involves one person lending a security or instrument to another person who agrees to return a similar security or instrument.
- Practice Note 5/1999 provided guidance on the tax implications of lending arrangements, including VAT.
- Recent court decisions and analysis led to the withdrawal of a statement in PN 5/1999 regarding VAT on scrip-lending fees.
- Binding General Ruling 62 clarified that scrip-lending fees under securities lending arrangements are exempt from VAT.
- Concerns were raised about stakeholders’ readiness for the changes and transitional issues.
- BGR 62 was published with an effective date of 1 April 2023 to allow time for adjustments.
- Vendors can issue credit notes if they did not make the necessary changes in time and continued to charge VAT after 1 April 2023.
- Issue 2 of BGR 62 clarified that credit notes cannot be issued for VAT levied on scrip lending fees before 1 April 2023.
- Both PN 5/1999 and BGR 62 are considered official publications and their explanations of the law constitute a prevailing practice.
- Vendors attempting to claim improper refunds will face penalties, interest, and understatement penalties.
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.
