Tax compliance services provided to employees—at the cost of the employer—will be subject to value added tax (VAT) by the employer if supplied to the employees in the course of business.
Tax compliance services are not listed as an exempt supply under section 12 of the VAT law and do not constitute “entertainment” as that term is defined. Accordingly, this fringe benefit is a taxable supply to the extent to which it is granted by the employer in the course of making taxable supplies and will be subject to VAT.
However, to the extent to which the employer deploys the services of employees in the course of making exempt supplies (e.g., the issuing of long-term insurance policies), the fringe benefit will not be subject to VAT. A provision of the VAT law provides that the taxable supply by a vendor of any service that is physically rendered outside South Africa is subject to zero-rated VAT. This means that to the extent to which the tax compliance services are rendered outside South Africa (i.e., the preparation outside South Africa of the foreign tax returns of the employee), the fringe benefit will not be subject to VAT.
Read a September 2019 report [PDF 102 KB] prepared by the KPMG member firm in South Africa
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