Category: Section 2 (VAT) – Financial services

Section 2 (VAT) – Financial services

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2. Financial services

(1)     For the purposes of this Act, the following activities shall be deemed to be financial services:

(a)     The exchange of currency (whether effected by the exchange of bank notes or coin, by crediting or debiting accounts, or otherwise);

(b)     the issue, payment, collection or transfer of ownership of a cheque or letter of credit;

(c)     the issue, allotment, drawing, acceptance, endorsement or transfer of ownership of a debt security;

(d)     the issue, allotment or transfer of ownership of an equity security or a participatory security;

(e)     ……….

[Paragraph (e) deleted by section 19 of Act 37 of 1996]

(f)     the provision by any person of credit under an agreement by which money or money’s worth is provided by that person to another person who agrees to pay in the future a sum or sums exceeding in the aggregate the amount of such money or money’s worth;

[Paragraph (f) substituted by section 19 of Act 37 of 1996]

(g)     ……….

[Paragraph (g) deleted by section 19 of Act 37 of 1996]

(h)     ……….

[Paragraph (h) deleted by section 19 of Act 37 of 1996]

(i)      the provision, or transfer of ownership, of a life insurance policy, the provision or transfer of ownership of reinsurance in respect of any such policy: Provided that such an activity shall not be deemed to be a financial service to the extent that it includes the management of a superannuation scheme;

[Paragraph (i) substituted by section 19(1)(d) of Act 37 of 1996, amended by section 67(1) of Act 34 of 2019 and substituted by section 49(a) of Act 20 of 2021]

(j)      the provision, or transfer of ownership, of an interest in a superannuation scheme;

[Paragraph (j) substituted by section 19 of Act 37 of 1996]

(k)     the buying or selling of any derivative or the granting of an option: Provided that where a supply of the underlying goods or services takes place, that supply shall be deemed to be a separate supply of goods or services at the open market value thereof: Provided further that the open market value of those goods or services shall not be deemed to be consideration for a financial service as contemplated in this paragraph;

[Paragraph (k) substituted by section 13 of Act 136 of 1992 and section 82 of Act 53 of 1999 and amended by section 93 of Act 32 of 2004 and section 41 of Act 9 of 2006]

(l)      ……….

[Paragraph (l) deleted by section 44 of Act 16 of 2004]

(m)    ……….

[Paragraph (m) deleted by section 10 of Act 20 of 1994]

(n)      ……….

[Paragraph (n) substituted by section 10 of Act 20 of 1994 and deleted by section 19 of Act 37 of 1996]

(o)     the issue, acquisition, collection, buying or selling or transfer of ownership of any cryptocurrency:

[Paragraph (o) added by section 90(1)(a) of Act 23 of 2018 effective on 1 April, 2019]

Provided that the activities contemplated in paragraphs (a), (b), (c), (d), (f) and (o) shall not be deemed to be financial services to the extent that the consideration payable in respect thereof is any fee, commission, merchant’s discount or similar charge, excluding any discount cost.

[Subsection (1) amended by section 19(1)(g) of Act 37 of 1996, by section 87(1)(a) of Act 30 of 1998 and by section 90(1)(b) of Act 23 of 2018 effective on 1 April, 2019]

“Cheque” definition of section 2 of VAT Act

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(2)     For the purposes of subsection (1)-

(i)      “cheque” means a bill drawn on a bank payable on demand, a postal order, a money order, a traveller’s cheque, or any order or authorisation (whether in writing, by electronic means, or otherwise) to a financial institution to credit or debit any account;

[Paragraph (i) substituted by section 10 of Act 20 of 1994 and section 93 of Act 32 of 2004]

“Derivative” definition of section 2 of VAT Act

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(iiiA)  “derivative” means a derivative as defined in and within the scope of International Financial Reporting Standard 9 issued by the International Accounting Standards Board;

[Definition of “derivative” inserted by section 93(c) of Act 32 of 2004 and substituted by section 130(1)(a) of Act 24 of 2011 and by section 47(1) of Act 17 of 2023 with effect from 1 January, 2024]

“Long-term insurance policy” definition of section 2 of VAT Act

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(v)     “life insurance policy” means any policy of insurance issued in the ordinary course of carrying on a life insurance business as defined in section 1(1) of the Insurance Act, 2017 (Act 18 of 2017);

[Definition of “life insurance policy” substituted by section 22(a) of Act 136 of 1991, by the definition of “long-term insurance policy” in section 19(1)(h) of Act 37 of 1996, by section 82(b) of Act 53 of 1999 and by the definition of “life insurance policy” in section 49(b) of Act 20 of 2021]

“Participatory security” definition of section 2 of VAT Act

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(vi)    “participatory security” means a participatory interest as defined in section 1 of the Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002), but does not include an equity security, a debt security, money or a cheque;

[Definition of “participatory security” substituted by section 115 of Act 74 of 2002 and section 78 of Act 20 of 2006]

“Superannuation scheme” definition of section 2 of VAT Act

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(vii)   “superannuation scheme” means a scheme whereby provision is made for the payment or granting of benefits by a benefit fund, pension fund, pension preservation fund, provident fund, provident preservation fund or retirement annuity fund as defined in section 1 of the Income Tax Act.

[Definition of “superannuation scheme” substituted by section 10 of Act 20 of 1994 and section 130 of Act 24 of 2011 with effect from 10 January 2012]