South Africa: VAT implication of employee secondments

South Africa: VAT implication of employee secondments

Secondments of employees by companies between entities within corporate groups (including multinationals) may have unexpected value added tax (VAT) implications.


When salaries of seconded employees are recovered from the entities to which they were seconded, the following must be considered:

  • When a foreign employer contractually remains the “employer” of employees seconded to a South African entity—the foreign employer is providing a service to the South African entity and may be required to register for VAT and account for output tax.
  • When employees are seconded between South African group entities—the employer may be required to account for VAT on the supply made to its fellow group entity.
  • When a South African employer seconds employees to a foreign entity—the South African employer may be entitled to apply the zero rate of VAT to the services supplied, subject to certain documentary requirements

The VAT implications resulting from secondments are not directed by “who pays the salary” but rather by the contractual relationships between the employer(s) and employee(s). In considering secondment contracts or agreements and the effects from a VAT perspective, an entity could be exposed to VAT, penalties, and interest when:

  • VAT has not been correctly levied and paid to the South African Revenue Service.
  • An entity has failed to timely register for VAT.
  • The zero-rated provisions have not been correctly applied.
  • The required documentation to substantiate the application of the zero rate was not obtained within the prescribed period.   

Read a January 2021 report [PDF 84 KB] prepared by the KPMG member firm in South Africa

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