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Thread: VAT charged on salary between entities

  1. #1
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    VAT charged on salary between entities

    Hi,

    Entity A and Entity B have the same owners.

    Entity A needed an employee for a period of time and Entity B had an employee with spare time available.

    The employee rendered services to Entity A, but Entity B paid the employee's salary. Entity A reimbursed Entity B for the employee's net salary.

    Should the invoice between Entity A and Entity B carry VAT if both entities are VAT registered? If so, how do I explain this is a VATable supply as salaries as such are not vatable and this is a reimbursement for salary?

    Thanks!

  2. #2
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    Hi J7J

    Yes it is a vatable supply.

    In entity B it is revenue, not a reduction of expense.

    In entity A it is a direct cost, not an employment cost or personnel cost.

  3. Thanks given for this post:

    Dave A (18-Apr-14)

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