Generally, Value Added Tax (VAT) registered persons generating annual revenue in excess of P1m are construed to be liable to pay training levy to the taxman.
However, if we take a closer look at this regulatory requirement, we will see that not all VAT registered persons are required to comply with training levy obligations. To be specific, only VAT registered persons who are employers are required to remit training levy to BURS. Interesting right? Now that we have got your attention, keep on reading and allow us to help you understand why VAT registered business operators without employees need not to worry about training levy. In this article, words importing the masculine shall be deemed to include the feminine.
To ensure that we are all on the same page, let us briefly have a look at the basic mechanics and principles of training levy. Essentially, training levy is a form of labour tax that is required to be paid to the Ministry responsible for labour. So, one might ask, how does BURS get involved in labour related levies? Basically, BURS being the authorised tax gatherer in the country collects the levies on behalf of the Ministry through the VAT return. This makes it easy to enforce and manage collection of the tax. Technically, the said levy is imposed on VAT registered employers whose annual turnover exceeds P1m. Accordingly, this is the part where it gets interesting and technical. Let us look at the statutory requirements and clarify the technicalities surrounding the levy.
Basically, BURS and the Ministry of Labour’s authority to collect training levy from VAT registrants emanates from Section 3 of the Vocational Training (Levy) Order of 2008. The said order prescribes that, ‘An employer shall be liable to pay a levy to be determined under regulation 4’. Furthermore, the levy is only chargeable on turnover generated by the eligible person, who must be an ‘employer.’ Technically, turnover is construed to be revenue or sales that are chargeable to VAT at the standard rate or 0 percent. Consequently, turnover excludes any exempt supply such as financial services, residential rent etc. Let us now have a look at the qualifying factor that makes training levy obligatory to VAT registrants. In other words, let us further explore to determine who is an employer that ‘shall be liable to pay’ training levy as prescribed by the statute.
In this regard, it is crucial to note that the term employer is neither defined nor further explained. Accordingly, where statutes do not provide a statutory definition of a word, the ordinary meaning of the word prevails. Fundamentally, an employer is basically any person, organisation, institution, or firm that employs people or provides work for people and compensate such work through salaries or wages. This technically means that for one to be an employer, they need to have employees. Consequently, a VAT registered person who doesn’t have employees falls outside the ambit of an employer and is therefore not compelled to pay training levy as per the dictates of Section 3 of the Vocational Training (Levy) Order of 2008. This will apply to those who conduct business through agents or other independent persons who are not bound by employment contracts.
To bring everything into perspective, the above-mentioned law makes it axiomatic that only VAT registered persons who are employers are required to pay training levy. Conversely, a VAT registered person who doesn’t have employees is technically not an employer and therefore not required to pay the said levy regardless of the quantum of the generated turnover.
Well folks, we hope that was insightful. As us the two Yours Truly say goodbye, remember to pay to Caesar what belongs to him. If you want to consult, join our free Tax WhatsApp group or to know about our 9 Tax e-books, send us a text on the cell number below. You can read more tax articles on our website, www.aupracontax.co.bw under the ‘Tax articles’ tab.