Membership Fees

The income Tax and VAT implications

Introduction

It is that time of the year when the SAIPA Tax help desk receives one-line question: May the input tax be claimed on SAIPA membership fees? As you know by now that the World of Tax does not have a simple `yes’ or `no’ answer. And the answer is it depends. There are several issues that requires the taxpayer/vendor/ employee/employer’s consideration.

There are:

  1. Who is paying the SAIPA membership fee? Is it the employer or the employee – A SAIPA member?
  2. From whose perspective is this question posed? Is it on behalf of the company or is it on behalf of the individual SAIPA member?
  3. There are both income tax and VAT implications.

The following narrative is helpful.

If the company (employer) paid the SAIPA membership fee

From the company’s perspective that hires the accountants, if the SAIPA membership is a condition of employment, then the company could pay the memberships fees to SAIPA and claim it as a deduction against their taxable income. This amount includes the VAT. The company cannot claim the VAT although it pays the membership fee on behalf of the employee. The company is not the member of the professional body; it is the individual that is a member of the professional body. Hence the full amount of the SAIPA membership fee (including VAT) is a tax-deductible expanse for the company when it completes the ITR14.

From the employee’s perspective, if the company pays the membership fees on behalf of the employee, it will be receiving a nil value fringe benefit for the employee. There will be zero income tax implication for this benefit received from the employer. In addition, the employee may not claim the expense against its taxable income when it completes the ITR12. The employee may not claim the deduction simply because it did not pay for it – the company paid the SAIPA membership fee.

If the member paid his/her own SAIPA membership fee

The individual member could claim the cost of SAIPA membership fee against his/her taxable income when completing the ITR12 if he/she is employed as a professional Accountant. If the employee paid his/her own membership fee, then he may claim the input tax only if he is a registered vendor and conducts an enterprise as defined in the VAT Act.  Briefly then, if a SAIPA member is a vendor (a sole proprietor) for VAT purposes (that is, running his/her own accounting practice or is a self-employed accountant with taxable supplies exceeding R1m), then the input tax can be claimed – and only the cost (excluding VAT) of the SAIPA membership fee is a deduction against taxable income when completing the ITR12. In other words, , if a SAIPA member is not a vendor in his/her own right for VAT purposes (that is, not running his/her own accounting practice or is not a self-employed accountant with taxable supplies exceeding R1m), then the input tax cannot be claimed – the full cost (including VAT) of the SAIPA membership is a deduction against taxable income If the individual is employed as a professional Accountant.

Mahomed Kamdar

Tax Specialist SAIPA