A recent court case ruled that Citibank's South African branch (Citibank SA) must pay VAT for seconded employees from its offshore related parties, as their services were considered "imported services" under VAT purposes.
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Details of the Case

Citibank US and Citibank SA entered into an agreement concerning the secondment of employees to Citibank SA, with the agreement stating that the seconded employees were not employees of Citibank SA.

Arguments Presented

Citibank SA argued that the seconded employees were its employees, while SARS argued that Citibank SA was not the employer of the seconded employees and should be liable for VAT on imported services.

Court's Findings

The court found that Citibank SA could not show that it was the employer of the seconded employees and that the payments made to the individuals did not constitute "remuneration" within the meaning contemplated in the definition of enterprise in the VAT Act.

Key Lessons

The case highlights the importance of carefully considering the wording used in secondment agreements, especially where the secondment is between an RSA-based and a foreign party. All tax implications must be assessed upfront before the agreements are concluded to ensure an efficient tax position is adopted.


Legal decisions are based on what the parties involved intended, as written in legal provisions. Citibank SA can't argue against these provisions, which clearly state the intention of the parties regarding employees who are seconded. They cannot claim to have paid salaries to those who weren't their employees because they are not an employer. However, Citibank US's payments are considered fees for services rendered and are subject to VAT under the reverse charge mechanism.