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Is an employer’s recovery of educational fees from an employee a ‘vat-able’ transaction?

Tuesday, 26 May 2015   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

Q: Is the recovery of educational fees from an employee a ‘vat-able’ transaction?

The employer pays for an employee’s study fees. The employee signs a ‘work-back’ contract but leaves employment before the ‘work-back’ is complete. The employer now wants to recover the money from the employee. Does the employer charge VAT on this recovery?

A: The supply by the employer, when the study fees were paid, was not the supply of an educational service.  It was not a taxable supply because it was a either a supply of money or a financial service.  When the employer recovers the money it relates to a debt that arose when the employee left the employment.  The repayment would then not be in respect of a taxable supply.  

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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