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Thread: Personal Service Providers and PAYE

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    Personal Service Providers and PAYE

    Good Morning everyone

    I wonder if you can advise me please. I have a person who has just registered a company and will be billing me for services rendered on an invoice from his company. He is the only director. Do I still need to deduct any PAYE from him for his services rendered.
    Is there a thing that if you do not have more employees than owners, that he will still be seen as a Sole Proprietor and that I need to still deduct PAYE from him?

    As far as I think I know, I do not have to deduct PAYE but someone mentioned this to me and I do not want to do the wrong thing.

    Thank you very much for your advice.

    Regards
    Stephanie

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    Personal Service Providers (4).pdfBest you read the SARS thing, Stepanie

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    Thank you for your awesome reply.

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    As Clive mentioned, read the PSP document. You can also go to the SARS website and read INTERPRETATION NOTE: NO. 35 (ISSUE 3). To find this doc, go to SARS.gov.za, click on "Legal & Policy" in the little black toolbar at the top of the page, the "Interpretations & rulings" link on the list of links over the banner image, then "Interpretation notes" on the light blue sub menu, then "numbers 21 - 40", and then "IN 35" in the table. Almost as easy as navigating the tax laws, isn't it.

    Or just click here for the relevant document.

    Maybe to save you some time talk to your accountant. But my gut feel tells me your friend will be seen as a personal service provider in SARS eyes. My reasons for thinking this are:
    • From your query, it would appear that he is providing the service himself (i.e. the actual service is not being provided by an employee or sub contractor)
    • He is a "connected person" in the company (i.e. director). SARS will raise its eyebrows if a connected person is delivering the service, especially 100% of the service.
    • He does not have 3 full time employees for the current tax year (this is just an assumption).


    Those are just some of the considerations. Others that may be relevant:
    • If he was providing the service himself, and not through his PTY, would he have been deemed an employee of your company?
    • Will he be expected to perform his duties onsite at your premises? And according to hours that you set?
    • Will he be earning more than 80% of his income from your business? He can provide an affidavit to say otherwise, which you can accept in good faith - but you still need to consider the rest of the points above in coming to a conclusion.


    If any of the above are true, he will be deemed a PSP.

    But I reiterate - chat to your accountant or auditor.

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