FIRSTMATE BLOG: CAPTAINS LOG

Directors Fees and GST24.02.2014

Question
Our client is a solicitor and practises as a sole trader. He is registered for GST.

Our client has also recently taken up a directorship position for which he receives directors’ fees. Withholding tax is deducted at 33% from the fees.

Should our client be charging GST on the directors’ fees?

Answer
Generally, the occupation of company director is a non-taxable activity. A proviso to s 6(3)(b) of the GST Act states that it is taxable if the position is accepted in the course of the person’s own taxable activity. The IRD considers that the proviso can apply only to a sole trader.

The solicitor is GST registered for his legal practice. We assume he will have accepted the directorship in the course of his taxable activity of providing legal services.

Therefore if your client is engaged as a director as part and parcel of the work he does as a solicitor (sole trader) then the directors’ fees will be subject to GST.

Posted: February 24, 2014
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