Query on Independent Contractors and whether they can apply for fixed percentage tax directives. (Refer email correspondence) I have read the SARS employers guide on Independent Contractors and it seems to contradict itself. It says we can apply for a dir
Important:
This answer is based on tax law year ending 28 February 2019.
Answer:
The Guide for employers in respect of employees’ tax, issued by SARS in respect of the 2020 year of assessment, states that the “employees’ tax for an independent contractor” must be “calculated according to the deduction tables or a tax directive”.
In terms of paragraph 11, of the Fourth Schedule to the Income Tax Act, SARS may, having regard to the circumstances of the case, issue a directive to an employer authorising that employer … to deduct or withhold by way of employees' tax from any remuneration in terms of paragraph 2, a specified amount or an amount to be determined in accordance with a specified rate or scale. SARS can however only issue a directive:
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in order to alleviate hardship to that employee due to circumstances outside the control of the employee
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or to correct any error in regard to the calculation of employees' tax,
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or in the case of remuneration constituting commission or where the remuneration is paid or payable to a personal service provider and that directive must be complied with.
This doesn’t include an independent contractor – so a directive can’t be applied for unless there is hardship (unlikely). We are not sure why SARS say they will issue a directive in this instance, but it appears that they will entertain an application.