Query regarding VAT
My company is about to enter into a contract with another company to provide few resources on a secondment basis for a fixed fee. Salary to these resources will be paid by that firm only. My question is whether we should charge vat on total amount or should it be charged on the amount excluding salary because salary is paid directly to the employee?
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Dear Sheeba, As per the VAT regulations, an employer and employee relationship is beyond the scope of VAT. An employee would be a part of the WPS system of a company and/or be on the visa of a company. Assuming that the above resources are on your company visa and/or WPS system: In the given case, you are supplying a service to the "other company" for a consideration which is a "fixed fee". The "other company" does not have an employer-employee relationship with the "resources" you are providing. Therefore, the total amount charged by you (including salary of the employee)to the "other company" is the consideration value and will be subject to VAT in its entirety.
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