Generally, identification, recruitment, or employment of personnel, and recruitment of such personnel would constitute the supply of manpower services, unless there are special conditions.
Under manpower services, payment or consideration is the entire amount given to the employer or supplier of the services, being the provider of the manpower services, “customer.”
Included in this instance are all the charges being made by the supplier to the customer and those being made by the customer to the staff directly as compensations, benefits, or salaries. In the case of visa facilitation services, the consideration just refers to any charge that can be made with regard to the issuance of visas to employees of another person, for example, in the provision of facility for visa services.In some cases, employment visas are issued to a person, i.e., a company, but the employees are managed and controlled by another company.
Manpower services
The most common practices in the identification/recruitment/appointment of candidates and provision of such employees to any business seem to be a taxable supply of services in question under VAT legislation.
In those scenarios, the Supplier has, as a rule, all such employment responsibilities, including but not limited to, payment of salary and providing other emoluments of employment.
Regarding supervision and control, the Supplier may have a general right to monitor the employee’s execution of his/her work in the Customer and to some extent instruct where any employee is placed. Supervision and control also involve determining the extent of duties assigned to any employee and the hours of work he or she works, as well as staff guidance and instruction.
Assume an illustration where a firm, the Supplier, seconds employees to a customer company. The supplier has to ensure that the employees fulfill their individual roles with the customer and that the work is performed well. The supplier must bear some prevailing employment terms.
Value of supply—manpower services
Manpower services supply, in this case, refers to all such amounts being paid (or payable) by the customer to the supplier, either paid in the form of a recharge to the customer or paid to the employees in the form of wages or salaries.
So far as the value-added tax is concerned, the value for tax purposes will comprise the remuneration of the employees, wages, salary, and benefits, along with all the other recharge amounts spent to offer the services.
Example – Manpower Services
Company A retains the employees’ employment visas, for whom the employees work for Company B. Company A supplies these employees to Company B, and thus Company A is stated to provide manpower services regardless of whether the salary and benefits of the employees are paid by Company A or Company B.
The payment for the provision of manpower services is the overall expenditure of Company B, inclusive of the remuneration pay and allowances of Company B workers who, irrespective of the source and amount of payment received, are paid to Company A for the labor provided.
Visa Facilitation Services
The arrangement would not be seen as a supply of manpower services but as a supply of visa facilitation services if all the other conditions are met.
• The customer and the employment visa holder (“facilitator”) belong to the same corporate group but not the same tax group.
• The facilitator does not sell manpower supply as part of his business operations.
• The facilitator is not responsible for any of the obligations related to the employee.
• The facilitator sponsors such employees to work solely and only for and under the control and supervision of the customer.
Corporate group requirement
The facilitator and customer need to satisfy this requirement from a commercial/accounting perspective and are thus in the same corporate group.
The term “corporate group” does not relate to the concept of a tax group under VAT or corporate tax, but rather to companies that have a common corporate structure and common ownership of the companies as provided in Article 9(2) of the Executive Regulation.
The requirement would not be fulfilled, and the supply would be a supply of manpower services if the customer and the facilitator do not belong to the same corporate group.
The customer and the facilitator would not be considered as making a supply if they were within the same VAT group. The activity in this case would not be exempt from VAT.
Insufficient availability of labour services
The character of service the facilitator offers as part of its business shall be considered.
The activities outlined in the facilitator’s commercial or trade license, its registration with VAT, or any of its internal reports are not the only activities that are “business activities.”
The requirement would not be fulfilled, and the provision of manpower services by the facilitator to the customer would not be considered visa facilitation services.
Such a requirement would not be satisfied, and the supply would be a provision of manpower services if the facilitator and the customer are not part of the same corporate group.
The customer and the facilitator would not be supplying if they belonged to the same VAT group. In such cases, the activity would not be VAT covered.
Employment, management, and supervision by the client
Since the facilitator has no role but to act as a sponsor of the employment visas, the workers are subject to the customer’s management and control and must work solely for the customer.
This condition would be fulfilled where workers are hired solely by the client and are managed by them.
Note that this requirement would not be fulfilled, and the supply would be treated as a provision of manpower services if an employee undertook their work for the customer in conjunction with other firms within the corporate group.
Value of Supply: There is no cost
Apart from where one of the sympathetic exclusions is at issue, the supply shall be regarded as a presumed supply where the facilitator renders its customer visa facilitation services gratuitously. Unless the facilitator had reclaimed any input taxes incurred for the purpose of making the provision, it would not qualify as a deemed supply. Subsequently, supplying visa facilitation services would not be VAT-imposable.
The facilitator will be required to reclaim the output tax due, calculated on the overall cost incurred to create the supply, direct and indirect expenses, and any input tax that was reclaimed in a bid to supply the visa facilitating services.
For purposes of completeness, in the context of visa facilitation services, “direct costs” are those costs directly linked with services rendered within this context, such as typing fees, shipping fees, and any other expenses incurred for the issuance of visas. “Indirect costs” is the facilitator’s normal cost of doing business plus overhead expenses such as electricity and leasing offices.
The market value for corresponding services can be used as a reference for the value of the supply in situations where the facilitator is unable to determine the cost of providing the visa facilitation service.
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