A taxpayer is a freelance pilot. He invoiced one of his clients, a few times during the last financial year. They deducted 25% PAYE each time and issued a payslip as well. On the IRP5 they have used source code 3601 for the income which he issued invoices
Author: The Payroll Authors Group of South Africa
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
A person who renders services is an employee if any one of the following is present: 1. Subject to control or supervision with regards to the manner in which the services are performed 2. Person is part of the organisation for which the services are rendered 3. Person has worked for at least 40 hours per month over the last 3 months 4. The person is economically dependent on the employer for who services is rendered 5. The person is provided with tools of trade or work equipment 6. Person only render services to this single employer. The statutory tests as prescribed in Interpretation Note 17 must be performed in order to determine if the person is an independent contractor. These statutory tests are the following: • Are the services performed mainly (more than 50% of the time on average) at the premises of the client, and • Control and supervision of manner in which duties are performed or as to the hours of work If any one or both of the two statutory tests are satisfied, then the person providing the services is independent. Tools are provided by SARS to guide employers to classify the employee correctly (please refer to Interpretation Note 17 for details). Please note that IN 17 also provides a flow chart on the scenarios to be tested in order to determine the status. If all the test prescribed in the Interpretation note, proves that this individual is in fact an independent contractor, then the individual can make an appointment with the SARS audit section to discuss this and SARS will then contact the employer to correct the IRP5 after all the relevant documents have been scrutinized. Alternatively, the individual may request the employer to correct the Tax certificate with the proof that he is indeed an independent contractor.