SARS-General3

FAQ publication: Treatment of remuneration paid to Non-Executive Directors

17 October 2022

New SARS publication: Frequently Asked Questions (FAQs) on the application of Binding General Ruling (BGR) 40 and 41.

What is BGR 40 and BGR 41?

Binding General Ruling (BGR) 40 confirms that non-executive directors (NEDs) are not common law employees and that no control or supervision is exercised by the company concerned, over the manner in which an NED performs his or her duties or the NED’s hours of work.

Based on the above, the fees earned for services rendered as an NED (hereinafter referred to as NED fees) do not constitute “remuneration” as contemplated in paragraph 1 of the Fourth Schedule to the Income Tax Act and should therefore not be subject to the mandatory deduction of employees’ tax (PAYE) by the company concerned.

BGR 41 clarified that NEDs are carrying on an “enterprise” in respect of services rendered as an NED. BGR 41 (Issue 2) was subsequently issued on 4 May 2017 to clarify certain aspects relating to an NED’s liability date for VAT registration. BGR 40 and BGR 41 both apply with effect from 1 June 2017.

You can read the FAQ publication here.

You can find the VAT Quick Reference Guide for Non-Executive Directors here.

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