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What are the VAT consequences of a company reimbursing an employee for company expenses?

23 February 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

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.

The 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.


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