Businesses that are part of the same corporate group must adhere to mandatory compliance requirements. This includes companies that provide manpower services by outsourcing staff to client locations and companies that offer visa facilitation services. The payment for these services is subject to tax based on the place of service principles. However, a recent clarification by the Federal Tax Authority (FTA) has exempted situations where staff are hired by one corporate group member and assigned to another group member from being taxed.
In cases where companies within the same corporate group hire individuals and assign them to another entity within the group, it will be treated as visa facilitation services instead of manpower supply. To qualify for this exemption, the hiring company’s business activity must not primarily involve manpower supply, and employee responsibilities must be transferred to the company where the employees are assigned through a formal agreement. Compliance with these requirements is crucial to avoid being categorized as manpower supply.
If the fee charged by the facilitator for visa facilitation services is below market value, VAT must be imposed on the market value, and if it equals the market value, it is considered the taxable supply’s consideration. Additionally, if the facilitator provides the services for no charge, it is considered a deemed supply, and output tax must be accounted for based on the total cost incurred. Compliance with these regulations is essential for companies within the same corporate group engaged in hiring and deputation of employees.
Mahar Afzal, a managing partner at Kress Cooper Management Consultants, shared these insights. It is important for businesses operating within the same corporate group to understand and comply with these regulations to ensure smooth operations and avoid potential tax implications. For any queries or clarifications, reach out to Mahar Afzal at [email protected].
