Turnover Tax - Personal Service Providers

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.


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