Binding General Ruling (BGR) 40 (issued on 10 February 2017) 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 (also issued on 10 February 2017) 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.
Following the publication of the aforementioned BGRs, various questions have been received
regarding the liability for an NED to register for VAT, as well as the relevant income tax
implications. The questions and answers below are therefore intended to provide more clarity
on certain practical and technical aspects relating to the BGRs.
Source: SARS
