I am wondering whether a client of mine, a PTY, can qualify for reduced tax as a Small Business Corporation. I understand the requirements, but just wondering about whether they would be deemed a personal service provider in this case. 12E(4)(d) defines t
Important:
This answer is based on tax law year ending 28 February 2017.
Answer:
We accept that your concern arises because “any service rendered on behalf of such company … to a client of such company … is rendered personally by any person who is a connected person in relation to such company …” but you are not sure which of the other requirements of the definition is paragraph 1 of the Fourth Schedule applies – the more than 80% from one client (unlikely) and it is unlikely that the photographer would be subject to control and supervision with regard to the manner.
Your request may well relate to a personal service.
The relevant part in this regard is “... “personal service”, in relation to a company … means any service in the field of accounting, actuarial science, architecture, auctioneering, auditing, broadcasting, consulting, draftsmanship, education, engineering, financial service broking, health, information technology, journalism, law, management, real estate broking, research, sport, surveying, translation, valuation or veterinary science, if—
(i) that service is performed personally by any person who holds an interest in that company, co-operative or close corporation or by any person that is a connected person in relation to any person holding such an interest ...”
The Act does not provide clarity in this regard. SARS states the following in Interpretation Note: No. 9 (Issue 7):
“In general, a personal service refers to a service rendered for which the income derived is mainly a reward for the personal efforts or skills of an individual. In determining whether a service falls within the ambit of a “personal service” as defined, the ordinary grammatical meaning is given to each word in that definition. The words “any service in the field of” preceding the categories of services listed in the definition suggest that a wide interpretation must be applied to these categories. Therefore, the list must be interpreted to include every service in the specified field irrespective of whether it is of a professional nature.”
We agree with you that photography is not specifically mentioned, but don’t agree that this service would be in the field of journalism.
This should enable you to provide the opinion to your client. You may want to approach SARS for a binding private ruling in the matter.