Q: Client A
supplies labour to client B (similar to labour broking). A deducts PAYE and UIF
from the employee’s remuneration, which is working full time for A. A charges B
the labour (cost to company) and an administration fee. When A invoices B, does
the cost to company also attract VAT at 14% or is it exempt? The admin fee will
trigger VAT at 14%. Please advise as to whether the cost to company (labour
costs) carries VAT on invoicing.
A: Client A is
supplying a service as defined in section 1(1) of the Value-Added Tax Act (the making
available of any facility or advantage). We submit that the full amount (cost
to company plus administration fee) must be subject to output tax. If not, the
amount recovered in respect of the cost (salaries) will be an inclusive amount.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.
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