VAT CONNECT ISSUE 7 (december 2017)

Welcome to the latest edition of VAT Connect, the electronic newsletter for vendors that keeps you up to date with the tax matters that affect you.

To read our newsletter below, click on each heading to expand the corresponding article.

In VAT Connect 6 (September 2017) we mentioned that Binding General Rulings 40 and 41 (the BGRs) were published to explain the VAT and employees’ tax treatment of directors’ fees earned by non-executive directors (NEDs). In addition, a Draft VAT Quick Reference Guide for NEDs was issued for public comment and FAQs were posted on the SARS website to provide further assistance to the public in this regard.

Emanating from the public comments, it became clear that there is generally some uncertainty as to how one would test if an individual should be regarded as an employee or an independent contractor in different situations. (See also Interpretation Note No.  17 – Employees’ Tax: Independent Contractors for further guidance on the test as to whether a person is an employee or independent contractor.)  Although the BGRs explain some generally applicable concepts that need to be taken into account in making that distinction, the focus of attention is to deal specifically with NEDs and the question as to whether they are liable to register and charge VAT on their services. The BGRs therefore clarified that NEDs are independent contractors when carrying on their functions and not employees. Consequently, an NED may be required to charge VAT on any services rendered if that person is registered or liable to register for VAT.

It follows, that the services rendered by any independent contractor in carrying out duties as a member of a commission of enquiry or serving on the board of a pension fund may attract VAT by applying exactly the same general principles explained in the BGRs.  However, no VAT will be payable if that member serving on the board, committee or commission of enquiry is found to be a common-law employee of the recipient of the services or if the value of taxable supplies made by that member is below the compulsory VAT registration threshold.

Should guidance be required about a transaction or aspect not covered in the Quick Reference Guide or the FAQs, you may apply for a VAT class ruling or a VAT ruling. Note, however, that the Commissioner will not rule on whether a person is an “employee” or an “independent contractor”, or whether an entity qualifies as a “company” as defined under the Companies Act.

VAT Connect is an information guide and not a binding general ruling for purposes of the VAT Act. For general enquiries regarding VAT call the SARS Contact Centre on 0800 00 7277. Should there be any aspects relating to VAT on which a specific VAT ruling is required, you may apply for a ruling by completing form VAT301 and sending it together with all the necessary information to SARS by facsimile on +27 86 540 9390 or by e-mail to [email protected]. Refer also to the Quick Reference Guide on VAT Ruling Application Procedure for more details on how to apply for a ruling.

Last Updated: 07/12/2017 11:13 AM     print this page
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