The South African Revenue Service (SARS) issued Binding General Ruling (Income Tax) 40 and Binding General Ruling (VAT) 41 on 10 February 2017. Binding General Ruling (Income Tax) 40 clarifies the employees’ tax consequences of income earned by a non-executive directors, as well as the effect those employees’ tax consequences could have on the prohibition against deductions by office holders under section 23(m).

Binding General Ruling (VAT) 41 deals with the VAT treatment of the activities conducted by non-executive directors (NEDs) and clarifies whether those activities fall within the ambit of provision (iii)(aa) or provision (iii)(bb) to the definition of “enterprise” in section 1(1).

In terms of these rulings, non-executive directors will generally not be subject to employees’ tax for fees earned in that capacity. These rulings applies from 1 June 2017 until it is withdrawn, amended or the relevant legislation is amended.