In 2016 the matter of whether nonexecutive directors were common law or deemed employees for pay as you earn (PAYE) purposes led to some debate with the South African Revenue Service (SARS) and the Treasury. The other debatable issue has been whether those nonexecutive directors should be subject to value-added tax (VAT) to their directors’ fees.SARS noted that it would clarify the matter with an interpretation note or ruling on the VAT and PAYE principles rather than amending the legislation just to deal with this specific instance.On February 14, SARS issued binding general ruling 40 (PAYE) and 41 (VAT) to deal with the relevant tax consequences. These rulings clarify that resident nonexecutive directors are not common law or deemed employees, and no PAYE will apply to them.However, the rulings also confirm that if such a director earns more than R1m, he or she will be liable to register for and pay VAT.SARS then said on February 16 that nonexecutive directors earning fees in exce...
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