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07 Feb 2020

A South African employer is legally required to deduct employees’ tax from remuneration paid to its employees – with the effect that such employee will pay income tax as he derives income. In determining whether an employer is required to deduct employees’ tax, it should therefore be determined whether “remuneration” is being paid to “an employee”.  

What is an “employee”?

An “employee” is broadly defined to include, inter alia, any person deriving remuneration. Specifically included in the definition of an employee is a “personal service provider”.

A “personal service provider” is defined as a company or trust where a connected person in relation to such company or trust renders personal services and:    

  • such connected person would be regarded as an employee of the client if he/she rendered the service directly to the client; or
  • the services are rendered mainly at the premises of the client and subject to the control of the client; or
  • if less than 80% of the income of such company or trust is derived from a single client.

Should, however, the company or trust employ 3 or more third party employees on a full-time basis, the company or trust would not constitute a personal service provider. 

What is “remuneration”?

“Remuneration” is very broadly defined as any amount of income paid or payable to any person by way of salary, leave pay, overtime, bonus, gratuity, commission etc., whether in cash or otherwise and whether or not for services rendered. The definition of “remuneration” further contains specific inclusions and exclusions.

Remuneration specifically excludes any amount paid in respect of services rendered by any person in the course of any trade carried on by him/her independently.

Accordingly, payments made to persons carrying on an independent trade would not constitute remuneration and accordingly, no employees’ tax is required to be deducted from such payments. 

When is a person regarded as carrying on independent trade?

Statutory tests:

  • NOT regarded as carrying on an independent trade if services are rendered at the premises of the client and is subject to the client’s control.
  • WILL be regarded as carrying on an independent trade if employ three or more third party employees on a full-time basis.

If the above statutory tests are not conclusive, consideration should be had to the common law dominant impression test in determining whether an independent trade is carried on. The main aim of such considerations is to distinguish between the acquisition of a worker’s productive capacity (in the event of an employee) or a result (in the event of an independent contractor). 

SARS’s Interpretation Note 17 (Issue 4) of 14 March 2018 sets out in detail the various considerations forming part of the common law dominant impression test. The table below sets out some of the indicative considerations in this regard: 

*Weight attached to each indicator may differ – refer to the common law dominant impression test grid contained in Interpretation Note 17.

*No single indicator is conclusive.


For more info, please contact the author of this post, Alexa Muller: [email protected]



No information provided herein may in any way be construed as legal and/or tax advice. Professional advice should be sought with reference to specific background facts before any action is taken based on the information contained herein. We hereby disclaim any responsibility should any person act upon the contents of this publication without due consultation with reference to specific background facts. Accordingly, no person shall have any claim of any nature whatsoever arising out of, or in connection with the information provided herein.

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