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SARS Rules On Non-Executive Directors' Fees

15 February 2017

The South African Revenue Service (SARS) has confirmed that resident non-executive directors (NEDs) of companies should register for and charge value-added tax (VAT) in respect of any fees earned for their services.

On February 10, SARS issued two binding general rulings (BGRs) confirming the tax treatment of NEDs' fees, with effect from June 1, 2017.

BGR40 pointed out that NEDs are not employees, as no control or supervision is exercised over the manner in which they perform their duties, or their hours of work. Their fees received, for services rendered on a company's board, are thus not "remuneration," and are not subject to the deduction of employees' tax.

BGR41 stated that it follows therefore that an NED is to be treated as an independent contractor for VAT purposes. He or she is required to register and charge VAT in respect of any director's fees earned for services rendered as an NED, if the value of such fees exceed the compulsory VAT registration threshold of ZAR1m (USD76,000) in any consecutive 12-month period.

A NED may also choose to register for VAT voluntarily, even if the value of such fees does not exceed the compulsory VAT registration threshold.

TAGS: South Africa | compliance | tax | business | value added tax (VAT) | tax compliance | revenue guidance | employees | fees | tax authority | individual income tax | services | Africa

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