Q: My client is
employed by a company. He invoices the company for all company expenses he
incurs. When the company reimburses that employee, must the invoiced amount include
VAT? If not, is the invoice reflected as income?
A: Where an employee as agent incurs expenditure on behalf of the employer,
in principle, as VAT is levied on such supply by the supplying vendor, the
invoice can be made out to either the agent employee or the principal employer
in terms of section 54(2) of the VAT Act.
employer as principal is then in terms of section 16(2)(e)of the VAT Act
entitled to claim an input on such invoice subject to the supply meeting all
the other requirements. Please note that section 54(3) of the VAT Act imposes
an obligation on the employee to maintain certain records and that the employer
is provided with the relevant invoice and a written statement with 21 days with
the specified particulars of the supply before the employer may claim the input
tax. We are however unsure how SARS enforces the latter requirement in relation
to employee supplies as agent of the employer as principal.
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.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.