Do non-executive directors charge VAT on fees?
How SARS treats a South African non-executive director for VAT, when fees reach the registration thresholds, and what the company needs.
By Achekam · · 5 min read · For Running a business businesses in South Africa
A company appoints an experienced outsider to its board. She attends meetings, chairs the audit committee, and sends a note each quarter asking to be paid her fee. The finance team then has to decide how to process it. Is she an employee? Should there be VAT on the fee? If her note shows VAT, can the company claim it?
These questions come up in every company with non-executive directors, from family businesses with one independent director to larger boards. The VAT answer starts with how SARS classifies the director, and then turns on the director's own circumstances. This article deals with VAT only; how directors' fees are treated for employees' tax is a separate question to settle with your payroll adviser.
An independent contractor for VAT
SARS says a non-executive director of a company is regarded as an independent contractor, not an employee, for VAT purposes.
That classification matters because VAT applies to people carrying on an enterprise, not to employees earning a salary. A non-executive director who is treated as an independent contractor is, for VAT purposes, supplying services to the company in the course of their own activity. So their fees can be taxable supplies, and the ordinary registration rules apply to them.
It also tells the company something: the director's fee is a bill from a supplier, not a salary, as far as VAT is concerned.
When the director must or may register
Whether a particular director charges VAT depends on whether they are registered, and that depends on the value of their taxable supplies.
Compulsory registration. SARS says it is compulsory to register for VAT where the value of taxable supplies made in any consecutive 12-month period exceeded, or is likely to exceed, R2.3 million, or where a written contract shows that taxable supplies in a 12-month period will exceed that amount. The threshold has applied from 1 April 2026.
Voluntary registration. SARS says a person may register voluntarily if taxable supplies are below R2.3 million but have, under certain circumstances, exceeded R120 000 in the past 12 months. SARS notes that the Voluntary Registration Regulation has not yet been updated, but that it is administering applications on the increased threshold from 1 April 2026.
The test looks at all of the director's taxable supplies, not only the fees from your company. A professional who sits on several boards, or who also runs a consulting practice, adds everything together. A director whose total supplies are modest may never reach either threshold, and will simply not charge VAT.
These figures are as SARS published them at the time of writing. SARS's register for VAT page explains who must and who may register, and covers non-executive directors specifically. The thresholds are discussed in more depth in when a South African business must register for VAT and registering for VAT voluntarily.
What the company needs from a VAT-registered director
If the director is registered and charges VAT, and the company is itself a VAT vendor, it can claim that VAT as input tax, provided it holds the right document. A note that says "fee plus VAT" is not enough.
SARS's VAT 404 guide sets out which kind of tax invoice is needed by value. It says a full tax invoice must be issued where the consideration is more than R5 000 including VAT, an abridged tax invoice may be issued below R5 000 (except for zero-rated supplies), and no tax invoice is needed where the consideration is less than R50. The guide quoted is issue 15, up to date as at 17 December 2024, so confirm the current figures with SARS.
A board fee above that level needs a full tax invoice. Ask each VAT-registered director for one, showing their VAT number, before the fee is paid.
| Director's position | What to ask for | VAT on the bill |
|---|---|---|
| Registered for VAT | A valid tax invoice of the right kind | Yes, claimable with the invoice |
| Not registered | A fee note or invoice without VAT | None |
| Unsure | Confirmation of their VAT status | Decide once they confirm |
Recording the fee as a supplier bill
Because the director is a supplier for VAT purposes, the fee belongs in the company's payables, not its payroll.
In Achekam, a business records supplier bills line by line with VAT. A bill without a purchase order waits for approval before it posts, and it can be paid in full or in parts from a chosen bank account. A South African business's supplier bills and purchase orders take 15% or 0% VAT per line, and bills post input VAT to the ledger.
So a VAT-registered director's fee goes in as a bill with VAT at 15%, posting the input tax, once the tax invoice is in hand. The approval step suits board fees well: someone other than the director confirms the fee before it posts.
Directors who are not registered
For a director who is not registered, the bill carries no VAT. Record the line at 0% VAT. Bear in mind that the 0% option on a bill does not say why there is no VAT, so a short note on the bill, such as "director not VAT-registered", helps whoever checks the return later.
If a director with their own practice runs that practice on Achekam, the same logic applies from their side. A business enters its VAT registration number in Settings under Firm Profile, and documents made by the server print it and are titled Tax Invoice only when a VAT number is set. A director who is not registered should not have a VAT number set, and their fee notes will not be titled tax invoices.
A simple board-fee routine
At each appointment, ask the director to confirm in writing whether they are registered for VAT, and to tell you if that changes. Pay registered directors only against a valid tax invoice, record every fee as a supplier bill with the right VAT, and keep the invoices with the board's records.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
