CATEGORIES
- (47)Accounting & Financial Reporting
- (1)Accounting for Income Tax
- (1)Application of tax rates, s6(2) rebates
- (1)Assessed losses
- (10)Blogs
- (1)Business Advisory
- (8)Capital Gains Tax
- (1)Capital Gains Tax - Individuals Tax
- (1)Capital Gains Tax Implications of Trusts
- (2)Case study: Home office expense
- (1)Case study: Travel allowances
- (1)Company Formations
- (136)Corporate Tax
- (10)Customs and Excise
- (2)Deceased Estate
- (1)Deductions Pre-trade and prepaid expenses
- (1)Deregistration
- (2)Employer and Employee (PAYE and UIF Specific)
- (1)Estate Duty
- (1)Events / Webinars
- (11)Faculty News
- (2)Farming
- (168)Individuals Tax
- (1)Input - Customs Duty
- (3)Interest
- (18)International Tax
- (1)Nature of the rights of beneficiaries
- (1)Notional input tax
- (9)Payroll
- (2)Practical Payroll
- (2)Provisional tax (Link with other Taxes)
- (4)SARS Issues
- (156)Tax Administration
- (2)Tax Administration Part 2B: Resolving Problems with SARS using the Tax Ombud
- (1)Tax Administration Part 3B Dispute Resolution - Objection and appeal
- (3)Tax Dispute Resolution
- (1)Tax Opinions
- (3)Tax Update
- (1)Tax implications of loans to trusts
- (1)Tax residence
- (1)Tax returns and payments
- (3)Transfer-Pricing
- (1)Trust Income / Gain Allocations
- (1)Trust types and income allocations
- (10)Trusts
- (84)VAT
- (3)VAT periods
- (1)Wear and tear allowances
- (13)Wills, Estates & Succession
- (1)Zero Rated
- (2)eFiling
- Show All
Turnover Tax - Personal Service Providers
- 08 December 2023
- Marita Jordaan
This FAQ article is based on tax law for the year ending 29 February 2024.
1. Background
Working with clients within the entertainment industry who aim to register for Turnover Tax, they operate as independent contractors and receive IRP5 forms from their employers. Their income is listed under source code 3616, with a 25% PAYE deduction.
Concerning the declaration of this income as turnover for turnover tax on the IT12 form, how should these IRP5 forms be managed to prevent potential double taxation?
Furthermore, guidance is sought on the process to reclaim the PAYE that has already been deducted. Is there a method to facilitate the refund of the PAYE amount?
Additionally, is it possible to request a NIL directive to prevent future PAYE deductions by employers? Would this serve as a viable solution in this scenario?
2. The Problem / Facts
Can a personal service provider register for turnover tax?
3. Applicable Law
-
Income Tax Act section 48 to 48C, Fourth Schedule, Sixth Schedule
-
Interpretation Note 17
4. Application of the Law to the Facts
Turnover tax is not available to labour brokers, personal service providers or persons that render professional services.
With regard to the “personal service provider” exclusion, a personal service provider is a specifically defined entity in the Income Tax Act. If an entity qualifies as a personal service provider, it is essentially treated as an employee for tax purposes and it would not qualify for the turnover tax.
Personal service providers are ineligible to qualify as micro-businesses. According to part 1 of the fourth schedule, they are categorised as employees. It appears that the company withholding PAYE has classified the taxpayer as a personal service provider. Consequently, the taxpayer does not meet the criteria for turnover tax eligibility.
Join The Tax Faculty community today by registering for our courses starting January 2024: https://taxfaculty.ac.za/courses