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Disclosed and Undisclosed Agency Agreements

ITM Newsletter July 2022

VAT legislation recognises two types of agents: disclosed and undisclosed. However, the term “agent” or “intermediary” is not specifically defined in Section 2 of the VAT legislation but the term is used throughout the VAT Consolidated Act 2010.

In an era of increased third-party providers and agency agreements, we have detailed below a high-level summary of this area as careful consideration should be given when determining the VAT treatment of agency arrangements.

What is an Agency?

Agency is a fiduciary relationship which exists between two parties under which one of them (known as the principal) agrees that the other (known as the agent) may act on its behalf, including to enter contracts with third parties. Agency relationships are capable of being formed by way of express agreement (verbal or in writing) or may be implied from the conduct or situation of the parties.

A principal may be disclosed or undisclosed.

Disclosed Agents:

A disclosed agent is someone who discloses/represents to his customers that he is acting on behalf of a disclosed principal (i.e. the principal is named) and the agent will earn a commission on his sales.

Undisclosed Agents:

An undisclosed agent is someone who holds himself out as a principal, even though he is in fact acting on behalf of an undisclosed principal (here the principal remains unnamed).

What is the VAT Treatment of disclosed agents?

The supply of the goods/services for VAT purposes is between the principal and the customer.

The principal raises the invoice to the customer for the supply of the goods/services. The commission charged by the agent is a separate supply of services to the principal. The agent will invoice the principal for his commission.

What is the VAT treatment of undisclosed agents?

Section 22(1) VATCA 2010 provides that supplies of movable goods through undisclosed agents in accordance with Section 19(1)(b) are treated as being supplies to and by the agent.

VAT legislation deems there to be a simultaneous supply to and by the agent. The effect of this is to make two supplies where only one actually (legally) takes place as the undisclosed agent generally does not take legal ownership of the goods.

This means that the undisclosed agent must issue a VAT invoice for the goods or services “supplied” by him. The agent’s commission effectively merges with the consideration for the goods/services being supplied. Therefore, the agents commission will be liable to the rate of VAT applicable to the goods or services being supplied (i.e., taxable at either the 0%, 4.8%, 9%, 13.5% or 23% VAT rates or VAT exempt).

The purpose of the provision is to ensure that the ultimate buyer obtains an invoice on which he can obtain input credit. It can also prevent disclaimers of liability by the undisclosed agent.


Agents are becoming more and more popular in this era, while in the past travel agents, auctioneers and real estate agents focused on this area, in more recent times we have seen the net widen in terms of entities operating online through various platforms who need to consider whether they are operating as, or using, a disclosed or undisclosed agent.

The question as to whether the agent is disclosed or undisclosed effects can also impact the place of supply rules and where the goods or services are deemed to be supplied for VAT purposes.

Consideration should be given to the terms of the contractual legal agreement between the agent and its Principal so that they reflect the commercial reality of transactions between them.

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