14/11/2017
Non Executive Directors of companies must register for VAT.
The value of the fees must, however, exceed the compulsory VAT registration threshold of R1 million in any 12-month consecutive period but NEDs can voluntarily register for VAT as well.
Previously NEDs were subject to employees’ tax (PAYE) because the director’s fees received for services rendered were considered remuneration. However, due to amendments made in 2007 to the exclusions to the definition of “remuneration” in the Fourth Schedule to the Income Tax Act No. 58 of 1962 (the Act), there was uncertainty as to whether the amounts payable to an NED were subject to the deduction of PAYE.
NEDs receiving directors fees exceeding the compulsory registration threshold are required to register as VAT vendors from 1 June 2017. However, NEDs will not be required to account for VAT in respect of directors fees received prior to this date, provided such NED was subject to PAYE.
