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VAT on the supply of labour

06 November 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

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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