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Thread: Contractors and Tax

  1. #1
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    Unhappy Contractors and Tax

    This probably needs more than one thread on different forums but here goes. I am/have worked for a large corporate in Sandton for 2 years. I work through a well known labour broker. My contract says that I am an independent contractor. I am told I am entitled to no benefits whatsoever. My dear tax consultant who is an ex SARS employee has told me that I can only claim the following expenses Depreciation(laptop), medical expenses, income protection policy. I cannot claim ADSL and home office space and expenses(work from home time to time), cell phone, software and license purchases, annual subscriptions, training (UNISA courses) amongst other. All of which I would consider legitimate expenses incurred in the production. The problem explained by my tax lady is that SARS classes me as an employee and as such I can claim virtually no expenses and that the words independent contractor in my contract mean nothing to them. So no benefits and no tax deductions ? Is she correct ? Somewhere along the line I get the distinct impression I am had from more than one source.

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    Gold Member Martinco's Avatar
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    Working for one company for such a long time would put you into an "employee" situation with the tax man. There are specific rules set out which governs a person to be a contractor. I have some documentation that explains this and as soon as I find this I shall post same, but I am sure somebody will beat me to it !
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    Site Caretaker Dave A's Avatar
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    Hans, you need more clients.

    What SARS is trying to avoid is a situation where the tax benefit is such that people would rather be classed as independant contractors than employees.

    If that sounds like a crazy concern - bear in mind that in the days of joint taxation of married couples, people were actually getting legally divorced solely because it was more tax efficient than being married.
    The trouble with opportunity is it normally comes dressed up as work.

  4. #4
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    The rule goes something like the following: If 80% or more of your income is earned from one client, then you are deemed to be an employee and not a contractor.

    I'm in the same boat as you. The labour brokers I've worked for (have worked for 4 different ones in the last 10 years) have all changed the structure of the pay because of this legislation that was changed somewhere around 2001/2002.

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    Diamond Member Blurock's Avatar
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    I understand that if you employ more than 5 people, the 80% rule does not apply?

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